“I went from paying over $1000 a month in processing fees to about $60-70. I was able to spend the savings on marketing to grow my shop” - Rafael, Elite Auto Detailing

Introduction:

With new Surcharging laws in Canada now going viral, merchants are looking into credit card pricing programs that now eliminate the fees they end up paying.

More popular then surcharging (in US market), is the cash discount program. This program helped businesses survive the last few years by freeing up thousands of dollars in the business so they could pay other expenses and grow the business.

With that said, here's how cash discounting works 👊

Business owners are seeking ways to reduce the cost of credit card processing, as it becomes increasingly expensive. One way to do this is through cash discount programs, which incentivize customers to pay in cash or check and thus reduce payment processing costs.

This has been done manually for a while, but new technology in terminals like Clover, Pax or Newland allow merchants to automate this process making it much easier to run the program business wide.

What is a cash discount?

When choosing to forgo credit or debit payments in favour of cash or check payments, businesses provide a discount to their customers.

Merchants can entice customers to pay in cash by providing a discount on the listed/advertised price. By including a service charge on the price tag, cash payments can offset payment processing charges associated with card payments.

What are the distinctions between a cash discount and a surcharge?

Merchants give cash customers a discount on the listed price (cash discount), while those who pay with a card are charged an extra fee (surcharge).

When a customer uses a card, the listed price is the amount they pay. Those paying with cash, on the other hand, pay less than the listed price.

A business may charge a surcharge on a product by charging card-paying customers more than $10.00 at the register, or a cash discount on the product by charging cash-paying customers less than $10.00 at the register.

Because they sound similar, the distinction is extremely significant in order to follow the law and card company regulations, as mixing them up may result in fines or having your merchant account closed down.

Let's look at cash discount programs in more detail now that we've cleared that up.

Why should the business care?

Lower charges

There are several advantages for retailers that choose to implement a cash discount program. The processing fees being automated into the price (with our terminal software) allow the business owner to offset 100% of their expenses for transaction/percentage fees.

See a case study example of that here

More cash payments are being made.

Many customers prefer to pay with cards, so providing a discount will undoubtedly incentivize more cash payments. This will accelerate the processing time, as card payments are eliminated. In addition, a reduction in card payments in favour of cash significantly reduces the risk of fraud.

Improving chargeback management.

Choosing a cash discount program can help lower chargebacks as card payments become less frequent. Chargebacks will also decrease if you've been struggling with a large number of them.

Increase the number of visitors

No one can deny that customers are enticed by businesses advertising “sales” on their regular prices. Customers want to save as much money as they can, and while a cash savings may be small, it is sufficient to draw people in and increase purchases.

Why wouldn’t every business adopt a cash discount program, given all of the advantages it offers both merchants and customers?

Slow down, it may not be the best option for every company. Or, at least, it might not be. It might be too good to be true.

What are the issues with cash discount programs, and which kinds of businesses should avoid providing one?

You need to create signage

It is crucial to advertise cash discounts in your signage if you are providing them, so that all customers are aware that they will receive a discount if they pay in cash rather than using a credit card.

Don't worry. This is something Dough does for you :)

Furthermore, an effective sign would briefly explain the percentage that is reduced from the listed price when customers pay with cash.

The program should be implemented through technology.

Running this program compliantly (with the card brands and law in Canada), the terminals need to be updated and run cash discounting software.

This software automatically isolates the credit card processing fees and the end result is seeing $0 fees on your bill at the end of the month for processing fees debited from your account.

Dough provides the technology to your business and helps with implementation/setup so you can start saving 100% of your fees.

Is cash discounts appropriate for your enterprise?

While cash discounts can offer several benefits, they aren’t always the best option for every business. In our experience, merchants that have an average ticket size of $1000 or greater tend to see better results on surcharge or interchange plus pricing models.

Interested in a quote?

Dough is one of the first providers in Canada to assist small businesses get started with Surcharge or Cash Discount programs. Having sold the same program in the states as well, we have a unique set of experience helping businesses like yours get started today saving 90% of their annual processing expenses.

We'd love to learn more about your business and provide a quote for these programs (while also updating your processing equipment)!

• Leave us your information over at getdough.co in the form. We will reach out with more details and look to set up a time to chat (we like meeting merchants, call us old school).