What is a Cash Discount Program ?

As a business owner, you are always looking for ways to streamline your business, offer better products, attract more customers, and minimize expenses. If so, you may also be considering a cash discount program – accept cards without fees. It’s easy to understand why you would be looking into this option since you are probably tired of losing between 2% and 4% in cash processing fees every time you ring up a sale. However, before signing up with one of the companies that offer this service, it is worth it to take the time to understand exactly what these programs are and how they may benefit your business. 

Have you encountered a business that offers a cash discount program?

You may be scratching your head trying to come up with a business that obviously offers a cash discount program and has been doing so for decades without finding the right answer. It’s easy, and it’s something you frequently use: gas stations.

Gas stations have been allowing their customers to get cheaper gas every time they drive up to the pump to get some gas. There, you can see two prices, one for cash payments and one for payments with a credit card. You are used to things working out this way and have never questioned this policy. The question is: why not use it in your own business?

So, what exactly is a cash discount program?

Simply put, a cash discount program is a type of credit card processing through which a business passes the cost of accepting a credit card to those customers who prefer to pay using either a credit or debit card. By implementing a cash discount program in your business, you are allowed to continue accepting all major credit cards without having to absorb the 3% or 4% they charge you in fees.

It works like this:

Your customer enters your business, picks out the merchandise they want to purchase, and walks up to the cash register to buy their items. As their merchandise is being rung up, the customer is either informed by the salesperson or read a sign by the register informing them that they have the option of paying in cash for their purchase for the exact amount of the products they are buying. If they prefer to use a credit or debit card, they would be charged an additional 4%.

Let’s say the total for the items was $20. The customer paying in cash would pay exactly that amount while the customer who prefers to pay with a card would pay $20.80.

Are businesses legally allowed to pass these charges on to their customers?

Yes, they are. In all 50 states, businesses can pass fees on to their customers. This has been spelled out in the Durbin Amendment, part of the financial reform act of the Dodd-Frank Law.

By implementing a cash discount program, businesses can forget about processing fees while giving their customers the option of paying in cash and avoiding them as well. Also, these programs offer free terminals to businesses depending on their monthly processing volume. These terminals are specifically designed to work with the cash discount program. Also, they do not carry any hidden fees while allowing businesses to continue accepting all major credit cards.

I am Finance Content Writer. I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank.