Credit card processing had been more costly for merchants, particularly small businesses with limited budgets and lower revenue than their rival companies.
Interchange costs, often known as swipe fees, are a financial strain for businesses that take credit cards. Swipe fees typically vary from 1% to 4%, and they can quickly transform the profits of small firms into their losses.
Therefore, small businesses search for ways to continue accepting credit cards while avoiding iso credit card processing fees. Recently developed cash discount programs, federally allowed throughout all 50 states, provided a solution to this conundrum. However, there is a significant misconception between cash discount and surcharge programs.
This article will discuss surging and cash discounting ( a free payment processing program), how they differ, and what risks and benefits you should know.
Cash Discount Program
A cash discount is a program is included in retail merchant services in which a retailer offers customers a lower price for a product or service if they pay in cash instead of their credit card. Business owners use this program for several reasons. The main reason for using cash discount is that it doesn’t involve any intermediary such as iso credit card processing. Cash is significantly quicker to process than credit cards with free payment processing. Furthermore, using a cash discount in any business is entirely lawful.
Numerous business owners believe flat rate credit card processing costs to be inconvenient, so they opt for cash payments as a solution. A cash discount program can also motivate clients to purchase more because they receive discounts when paying through cash.
Advantages of a Cash Discount Program
Here are a few advantages of cash discount programs
Get Rid of Credit Card Processing Fees
The most common incentive for businesses to switch to a cash discount program is to avoid flat rate credit card processing fees. Customers who pay by credit card are also responsible for flat rate credit card processing fees. It is a significant cost reduction for small firms, which can be used to grow the company, increase marketing efforts, or just increase their savings.
Offer More Options to your Customers
You simply give your clients two price options when using a cash discount program. Customers who pay in cash get a discount, hence “cash discount.” Customers who pay with their credit cards would be charged a slightly higher fee to offset the flat rate credit card processing fees. In the end, your clients will have several options. You will also get the added bonus of attracting discount lovers!
Increased Profit Margins
Processing fees are primarily calculated based on the percentage of each transaction. The business owners who are trying to make a budget face instability and ambiguity. Cash discount programs solve this problem, allowing you to see your profitability more consistently.
Reduces the Complexity of the Payment Process
Cash discount programs also simplify the payment procedure by free payment processing for all concerned stakeholders. Chargebacks, fraud, data breaches, pricing disputes, and other issues are dramatically reduced when clients are persuaded to pay in cash.
Technological advances have expanded the range of payment options, from mobile banking to card transactions. However, there are certain advantages to keeping existing currency. When clients pay you in cash, you get paid right away. There is no need to wait for the free payment processing to complete. You don’t ever want to deprive your consumers of their freedom to pay with credit, so the Cash Discount Program is the best option for everyone.
A surcharge program requires customers to pay flat rate credit card processing fees if they use credit cards for payments. You can collect the processing fee from your consumers by charging a surcharge to the users of credit cards. It allows you to charge a service or product’s base price without paying for iso credit card processing fees. You can transfer the expense of credit card processing costs to your clients by adopting a surcharge program.
A surcharge scheme does not affect cash payments, digital payments, or debit cards payments. It could only be used for credit card payments subject to credit card processing fees.
The Difference Between Cash Discount Programs and Surcharge Programs
The following are the fundamental distinctions between surcharging and cash discounting:
- Surcharging is illegal in some areas, although cash discounting is permissible throughout all 50 states.
- Cash discount programs do not need businesses to register with major card brands; however, you need to register if you wish to implement a surcharge policy in advance.
- Surcharging is permitted only on credit card transactions, but cash discounting could be utilized with debit, credit, PIN, or swiped transactions.
- Surcharging and cash discounting are retail merchant services that have the same goal of lowering the overall expenses of the business, especially credit card processing fees. Surcharging is a cost with a negative implication, whereas cash discounting is simply a discount.
How to Select The Best Option for Your Business
It’s difficult to choose between cash discounting and surcharging. Several subjective factors must be considered before incorporating either one of these retail merchant services into your business.
Observing what your competitors are doing to counteract increasing credit card processing fees could benefit your business. Is there a certain purchase amount required for using a credit card without incurring a cost? Are they charging a surcharge on card transactions straight out? Have they increased their rates to compensate for the extra expenses? Or none from the abovementioned options?
You don’t want to make a negative impression on your competitors and customers, so carefully analyze your company’s corporate structure before making any changes.
Now is an excellent opportunity to begin any retail merchant services with Savvy Merchant, like a cash discount program or surcharge program. Save money on iso credit card processing fees and quickly recover part of your lost revenue.