On average, businesses lose between 2-4% in processing fees for each transaction they make via credit card. In the early days of credit card usage, this percentage was nothing as the number of credit card payments was low.

However, 80% of people today prefer to pay with plastic over cash, meaning that 2-4% loss can quickly add up. At the end of the day, this can be a considerable amount if you are in a highly competitive industry offering competitive prices for your products and services.

Fortunately, credit card processing companies have devised ways to help businesses offset these costs, one of which is the cash discount credit card processing program.

How the Cash Discount Program Works

A cash discount program is exactly what it sounds like — a program that gives customers a discount for using cash instead of credit card. For instance, say an item is $20. Your credit card processing fee is 4%. To avoid having to pay $0.80 on every $20 purchase a customer makes, you offer customers a 4% discount if they pay with cash. Instead of paying the listed $20, a cash-paying customer would pay just $19.20. A person who pays with card, however, will still pay the full $20.

While a $0.80 loss may seem insignificant, it can quickly add up. For example, say you sell 50 $20 items in a single day, and each customer pays via card. That amounts to a $40 loss per day.

Now, imagine that the item is more expensive at $200. If a customer pays for the item with card, you incur an $8 loss on that item alone.

A cash discount program, such as the one that comes with the free Clover Flex, allows you to markup items to account for the possibility that customers will pay with card. On the flip side, it rewards customers who pay with cash by offering them a lower price. You gain some advantage and your customers are happy as well paying discounted price for your product or service. Customers pay cash instead of credit card and get cash discount. This has become a very popular system especially for large retailers these days. If you are not applying such cash discount program in your retail store, you should consider having one for benefits of your customer and your business.

How a Cash Discount Program Differs From a Surcharge Program

Surcharge programs are based on the same concept as cash discount programs — saving the business owner money on credit card transactions — but they differ slightly in how they work.

Unlike a cash discount program in which the customer saves money by paying cash, a surcharge program tacks the credit card processing fee onto the final sale price. For example, a customer who pays cash on a $20 item would still pay $20. A customer that uses credit card, however, would pay $20.80 (assuming a 4% processing fee) on the $20 item. Cash discount programs are legal in all 50 states in the US, whereas surcharge programs are only legal in 40.

Other Ways To Save Money on Credit Card Transactions

The best credit card processing companies are always looking for ways to help their clients save. Not only should you shop around for low processing fees and rewards programs but also, you should look into providers who are willing to accept credit cards with no monthly fee.

Some companies charge a monthly fee of between $25 and $99 on top of processing fees. After you account for the cost of equipment, assessment fees, interchange fees and other charges, the cost of offering the option to pay with credit may not be worth the convenience it affords customers.

Fees are par for the course when you choose to make credit card payments an option. However, you can minimize them by shopping around for the most business-friendly merchant services provider.

With the right merchant service provider, you can save money in monthly fees as well as helping your customers pay less in each transaction. You will get less number of complaints from your customers and have better profit. Just look for the right merchant provider online and analyze the fees and charges per transaction.


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