By: Kim Callaway, PATH Payments
Merchants have long looked for ways to oﬀset the costs of processing credit and debit cards. Some simply increase their prices to cover the cost, while others have implemented programs to discount for cash sales. Gas stations have been oﬀering cash discounts for years. Now, cash discounting programs are popping up in all industry types, as merchant services providers become knowledgeable on how to properly implement these programs.
Card brand rules and consumer protection laws have discouraged the practice of “surcharging” for credit card sales, and even prohibited that practice on debit cards. But that all changed with the Durbin Amendment to the Dodd Frank Act several years ago. Payment card networks can no longer restrict merchants from oﬀering customers discounts for using one payment method or another, provided the discount program is clearly disclosed.
Here is how cash discounting works.
The merchant adds a ﬁxed-price, or percentage mark-up on all of their products and services. They then oﬀer an equal discount to customers choosing to pay by cash. The merchant pays a small monthly fee, generally from $29 to $39 per month for the service, and all interchange and processing related fees are taken from the mark-up. No more big monthly hits to your bank account for credit card processing fees!
There are speciﬁc disclosure requirements associated with cash discounting, but they are much simpler that the strict requirements imposed by the card brands to do “surcharging”. You don’t have to notify the card brands that you’re doing it, and the mark-up charged is not limited by the card brands either. Not all merchant services providers oﬀer cash discounting, as there are detailed procedures and systems required to do it legally and eﬃciently. Merchant training on how to represent the program to customers is also critical to its success.
Could cash discounting be a good idea for my outfitter business?
The outﬁtter industry may be well suited to this approach, as customers that book trips, hotels and adventures online are becoming more accustomed to booking fees and resort fees. Working with the various reservation system companies that service the industry will also be a key factor in integrating cash discounting successfully. Cash discounting may not be for everyone, but the option to eliminate credit card processing fees from your bottom line may be a good choice for you. Just be aware that if you don't do this "by the book," the card brands will be looking to challenge the use of "cash discounting."
If you’ve been getting phone calls from marketers oﬀering “free” merchant services, cash discounting is what those calls are all about.
About Path Payments:
A message from the author: We’d love to share more about this new approach to merchant services and how it could benefit your business, as well as clear up any confusion. Call Kim Callaway or email for more details.