How to make a cash discount program work for your business

Lydia’s pet grooming business has taken off with new clients booking daily. So much so, she needs to upgrade her equipment to keep up with the demand. Unfortunately, she finds herself under financial pressure thanks to her rent, rising supply costs and credit card processing fees. This is especially crushing when she’s able to book larger grooming packages, but can’t save any extra revenue for studio upgrades. Sound familiar?

Here’s the good news: There’s an easy way to offset credit card processing fees — a cash discounting program. If you’re asking “What is a cash discounting program and how will it help?” don’t worry. We’ll give you the rundown on the benefits, requirements and more.

Take a look at the topics we’ll cover:

What is a cash discount program?

Some background info: In most cases, when a customer pays by credit card, you — the merchant — are responsible for a credit card processing fee. One way small businesses can offset this fee is by offering a cash discount. This incentivizes customers to pay with cash instead of a card by giving them a percentage off the published price of their purchase. But before you go advertising this to customers, you first need to increase your prices by a few percentage points. By raising the price of each item, the customer discount won’t affect your margins, and you won’t pay any extra fees on the transaction. Even better, if your customers still pay by card, the price adjustments you’ve made help to offset the processing fees.

It’s a win-win. 

Wait, isn’t this the same as a service fee or surcharge?

There’s a common misconception that adding a service fee to a card transaction creates a cash discount, but that’s actually considered a surcharge. For both surcharge and cash discounts, the price published on your menu, price tags or wherever else should reflect the amount owed if the item is purchased with a credit card.

So, what’s the difference?

Surcharge

Customers pay the published price plus an additional fee when paying with a card. 

Cash discount

Customers are offered a percentage off of the published price when they pay with cash instead of a card.

How does a cash discount program work?

Let’s imagine someone ordering a burger at a location that offers cash discounting. This will give you a better idea of why your customers might be more inclined to ditch card payments, while also giving you a look at how the process works on your end.

Here’s the breakdown:

Unlike with a surcharge program, card-paying customers don’t feel an increase, but you still get the extra revenue to offset costs.

Why should I offer a cash discount?

Let’s recap some of the high-level benefits we’ve already covered. When you offer cash discounting, you get to:

• Reward customers for using cash over card payments

• Optimize your pricing by a few percentage points

• Use your increased revenue to offset credit card processing fees

But it’s not just about a better bottom line and tackling processing costs. There are some other major benefits to consider. Take Benji’s family-run Italian restaurant for example. This staple business has been functioning well for decades, with plenty of loyal customers returning weekly for the dinner service. However, credit card processing fees take a toll when customers order just appetizers and drinks. Because most credit card processing companies charge a percentage plus a flat fee per transaction, a higher volume of smaller credit card transactions means Benji has to cover even more fees. With inflation and the rising cost of living, he feels like he’s unable to pay his staff fairly.

By offering a cash discounting program, Benji is able to offer his customers extra incentive for paying in cash over card — which many of the loyal customers are thrilled by — and offset costs even when transactions are still paid by credit card. Not only does the family business have better revenue opportunities, it also has the ability to establish more customer loyalty and take some of the burden off its staff’s shoulders.

What to look for in a cash discount program

If you decide to upgrade your POS system to one that offers cash discounting, there are some other factors to consider. At a minimum, the right cash discount program should allow you to:

Tips for staying compliant and making cash discounting work

Several major card networks, local, state or provincial regulations come into play with cash discounting.

To stay compliant, you must:

• Include any credit card processing fees in your pricing

• Let customers know the cash discount is available to them before they pay at checkout

• Apply the discount to the entire invoice and show it as a line item on the customer’s receipt

• In Canada, you must collect the GST (Goods and Service Tax) and QST (Quebec Sales Tax) on the total sale price before the discount

It’s a lot to think about — that’s why having an expert payment processor in your corner will come in handy. With Heartland at your side, you get everything you need to succeed in one place. We can help you spread the word and ensure customers can see signage explaining how the cash discount works. You can even download the instructions for the proper signage and get started in a snap. We’ll also help you make the offering as clear as possible at checkout with a POS that makes the discount line visible during the payment process via customer-facing displays and on all receipts.

Make every day work better with Heartland Point of Sale

Now’s the perfect time to start maximizing your revenue while offsetting point of sale and credit card fees. Not only will you be able to offer cash discounting and reap all the rewards the program has to offer, but you’ll also get quality tech that allows you to streamline day-to-day operations. Think leveraging menu item pricing adjustment features and making updates in just a few clicks by using the bulk menu editor in the admin portal. No more tedious tasks weighing you down.

With Heartland, you have access to 24/7 live support teams ready to take your call. No robots or hours wasted on service calls — just real people there for you when you really need them. Technology with a human touch: what’s not to love?

Ready to take the next step with us? Learn more and get started today.

Disclaimer: Please note that not all states or provinces permit the imposition of a surcharge, and there are limitations and policies that are specific to certain states and provinces. Legislation has also been introduced in various states and provinces in North America, and the information contained in this blog may change over time. This blog is not intended to be, nor should it be construed as, legal advice. Compliance with state and provincial surcharging laws are the responsibility of the merchant.

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Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at heartland.us