If you own a convenience store, gas station, or liquor store, you probably are concerned with bringing people in and getting them to come back. Colorful signs, free coffee, and sign spinners may not be sustainable. However, everyone likes to save money. If customers think they are getting a good deal, they will come back to the store again and again. Offering a cash discount program is a great way to give customers a break and save yourself expensive credit card processing fees.
What Is a Cash Discount Program?
Cash discount programs give customers who pay with cash a little money off. Credit card processors often charge a small fee for each transaction processed. Merchants in most states are allowed to pass the costs along to their customers. The posted cost of each item is the amount customers will pay if they use a credit card. Generally, the amount of money given as a cash discount is the same as the credit card processing fee. Credit card processing fees are normally from 2% to 4% of the total purchase cost.
Some businesses choose to display the cash price and let customers know they will pay a bit more for the ease of using their credit cards. This is known as a surcharge program. Customers will normally respond better to a program that offers them a discount instead of a surcharge.
There are a few steps you should take to implement a successful cash discount program.
Find Out the Price You Are Paying in Fees
Your agreement with your credit card processing company may give you an average processing fee. A monthly statement will show you a breakdown of all fees the processing company is charging you. Unless you are feeling particularly generous, the cash discount you offer should be the amount of that fee.
Set Prices
When you offer a “cash discount, “ you are just raising the prices in your store. There is nothing to say that all prices must be raised by a uniform percentage. If your processing costs are at an average of 2%, you do not have to raise the price of every item in your store for those who choose to pay with a credit card. It is best to charge a 1.5% fee on low-ticket items and a .5% on large-ticket items. Then the customers for big-ticket items won’t be hit too hard if they pay with a credit card.
You never want to make patronizing your business difficult, or to discourage people from buying large ticket items in your store. If you charge a 1.5% fee for a candy bar, the customer will not even feel it. If you charge 1.5 on a cell phone or grill, the price difference may be significant.
Let Customers Know That You Have a Discount for Cash
Cash discount programs are legal in 50 states. Surcharge programs are legal everywhere but in Massachusetts and Connecticut. Always let your customers know if you offer a cash discount program. You should put signs at the entrance to your business and the register. People should be aware of the price difference no matter which payment method they use.
Everyone loves a bargain. A cash discount program is a great way to get people to visit you again. Look for a processing company that offers processing equipment on which a cash discount program can be set up. Cash discount programs are one of the many things you can do to promote your small business and profit from it.
