In the modern era, there are several ways to ensure payments –through debit cards, credit cards, cash, online, and mobile. The multitude of options makes it easier for the younger generations to ensure seamless transactions throughout. However, the integration of complex payment technologies requiring an overhaul of current software as well as hardware applications can challenge the ability of the business owner to keep the business viable.
One of the most frequent complaints that most retailers around the world have (including convenience stores, single-location restaurants, and bars) is the increasing costs of accepting payments through debit or credit cards. Fees related to credit card processing can already cut into thin profit margins for most business owners out there delivering services of various types.
Lately, a settlement on some long-running New York court case with respect to surcharging can serve to be a game-changer for the merchants who have been handling the overall burden of fees associated with credit card processing. As per a recent article, the settlement will be allowing the retailers of New York to get through surcharge fees on the respective consumers. This holds true until the business owners will be disclosing the same in monetary terms.
Texas, California, and Florida are amongst other states that have overturned the concept of a credit surcharge ban. This has allowed retailers to pass on or share the overall burden of paying the fee. As surcharge fees continue to remain controversial, cash discount programs tend to be legal in all of the 50 states in the United States of America.
Understanding Cash Discount Programs for Service Businesses
Surcharge fees mostly get confused with the concept of cash discounts. This has led to the creation of ample uncertainty with respect to the legality and application of cash discount programs in businesses. As per the Dodd-Frank Law of 2010, it laid out the Durbin Amendment. In the given amendment, it was stated that businesses are given permission to come up with a proper discount to the customers in the form of an incentive for the consumers who are paying by alternative methods.
The difference has been best explained with the help of the quoted price of the service or item. As per a representative from Visa, merchants can offer customers the option of paying a discounted price while paying with cash. This helps in eliminating the storewide service charge while reducing the costs for both the business owner and the customers.
Better for Customers, Better for Businesses
Once you have understood the difference, it becomes hard to conflict the differences of the cash discount program for both the retailers as well as their consumers. Here are some benefits to understand:
- Elimination of Credit Card Processing Fees:
One of the major reasons why businesses in the modern era switch to the dedicated cash discount program is because it helps them in eliminating a majority –in some cases all of the fees associated with credit card processing. The customers who will be paying through a credit card will be paying for the fees associated with credit card processing. This turns out to be a major savings for small-scale service businesses. These businesses can consider using these funds for expanding operations, improving marketing operations, or simply increasing their overall savings.
- Offering Customers More Choice:
When you are working with a dedicated cash discount program, typically you are offering your customers two options for prices. Customers who will be paying through cash will be paying a lower price. This is the reason it is referred to as the cash discount. Customers who choose paying with the credit cards will have to pay a slightly higher price for covering the overall processing costs. The customers, therefore, will ultimately have access to more options. You will also receive the benefit of gaining the attention of bargain hunters.
- Keeping the Profit Margins Constant:
Conventional processing fees are typically charged as a percentage of the transactions. This helps in creating ample uncertainty and volatility for business owners who look forward to planning ahead or being on a budget. The utilization of cash discount programs helps in eliminating the given issue. Therefore, you can look forward to having a highly consistent view of the overall profit margins.
- Simplifying the Payment Process:
The use of no-cost cash discount programs can ultimately help in making the entire payment process quite simple for the involved parties. When customers are given encouragement to pay in the form of cash, you can significantly reduce the overall risks associated with pricing disputes, chargeback, frauds, data breaches, and other issues.
- Improved Cash:
Right from the option of contactless payments to mobile payments, the advent of modern technology has helped in increasing the scope of payment options. However, there are still some benefits when you move forward with the concept of holding some good-old cash. At the same time, you would not like to deprive your customers of the option to pay with the help of credit. This is the reason why cash discount programs tend to be the ideal solutions for the involved parties.
As per the Visa guidelines, it is stated that the price for the given merchant list in the retail store should be meant for credit card payments. At the same time, it is acceptable to provide a discounted price in case the payment has been made through either cash or check. The price that is provided to the customers who will be paying through credit cards should be the quoted price. As a matter of fact, as per the law, the credit card processors out there cannot restrict the ability of the merchants to provide a cash discount.
It is crucial that the cash discounts are made available to the members of the public who would like to leverage its benefits.