08/05/2025
Cash Discounting”
Finally, A Way for Merchants to Offset the Cost of Staggering Credit Card Processing Fees.
• Bill owns a very successful restaurant conglomerate doing 20 million in volume per year.
• Joan owns one of the most successful Interior design companies in town, volume 3.2 million
• Butch has an automotive repair shop, volume $750,000
• Mark and Cindy have a very successful landscaping and nursery business, volume $500,000
• Juan is a home improvement handy man
All these merchants are in very different environments but what do they all have in common? You guessed it, CREDIT CARD PROCESSING FEES, That’s right.
Every month they all share the pain of opening their credit card processing statement to confirm the evaporation of 2.5 to 5 percent of the business’ bottom line just to “offer” the convenience to their customers to pay by credit or debit card. Is this fair? Most merchants have been duped into believing that if they didn’t offer merchant services they would lose business, I’ve been in the merchant services business for 10 years and I still know merchants that REFUSE to take credit cards and their business is just fine…even booming. It’s the way we look at it. And now it’s time for merchants to look at it differently as well because in some cases this pricing format soon to be explained will enable some businesses from having to close the doors on their dreams forever.
No matter how big or small your business is you must contend with processing fees if you are going to be in business today. That’s the sad truth. The problem is nobody understands how it works and processors aren’t giving up the secrets, so merchants are in a constant state of trying to control these what seems to be everchanging fees, it’s downright frustrating and not fair. Then there are the non-stop calls to your business from processors lying about them having the best rate, it’s ridiculous. The first thing is to find a professional merchant services relationship manager to help you navigate this crazy ever-changing market, once you find them stay with them! Then determine how you intend to deal with this necessary part of your business. The reality is that you get absolutely NOTHING out of offering merchant services to your customers….
ITS ALL ABOUT TO CHANGE
All types of merchants in all industries are always actively trying to ease the pain of processing usually in the form of some incentive for paying cash. With the best of intentions, they offer cash discounts only to pay more to pay by cash than with credit card, I see this all day every day, so let me explain what I mean.
John owns a business that accepts credit cards and hates paying those monthly fees that amount to about 2.75% of his revenue so he comes up with this great idea he will offer a 5% discount to customers paying cash, Brilliant idea? Not so much, you are probably saying “I’ve seen this before”, Maybe at the gas station or convenience store… yeah its backwards there too. Most merchants as I stated before pay 2.5 to 5 percent to process credit cards so why would a merchant want to pay 5% in the form of a cash discount? See my point? So, let’s fix this paradigm and put the “convenience ” where it belongs.
Cash Discounting
Cash discounting is the method of giving your customers a discount for paying in cash. Its that simple and here’s how it works. A customer walks into your store and wants to buy something from you, you (the merchant) have clearly posted signage that says, “We offer an incentive to all customers that pay with cash”. The incentive is equal to 3.99% discount off your purchase. (By the way this has been legal and in use since the Durban Amendment was enacted in 2010.) Therefore, all posted prices are the “cash price”. If your customer chooses to use his credit card for his/her convivence then there will be a service charge of 3.99% added to his transaction. Simple. And companies that offer this have equipment that will do the heavy lifting for you, so you don’t have to get the calculator out on every transaction. But here’s the point. YOU ARE NOT BEING HELD HOSTAGE FOR PROCESSING FEES ANYMORE! As a matter of fact, you just eliminated up to 100% of your processing fees for good!! And all those dollars you paid for processing are suddenly back in your pocket and the convivence of using the credit card is now the customers decision. And its where it should be…on them.
This program is being highly accepted in all markets, but it does come with some concern from some merchants. The biggest being the fear of losing business. There have been many studies on this and the fact is that most consumers are not concerned with the convivence fee because they have been exposed to it in many other areas. For example:
IRS payments
Utility payments
ATM’s
Apartment rental payments
DMV
Airlines
Automotive
Gas stations,......but many do it wrong!
Customers who may have a problem are few and far between and certainly there are ways to handle them positively.
This program also has some great tax benefits for the merchant as well however I’m not a tax advisor or give legal advice.
Let’s look at one of the examples above: A merchant doing 3.5 million in volume paying 2.75% in credit card fees immediately saves $96,250. And that is straight to their bottom line if they institute cash discounting! Sounds too good to be true? It’s not. It is true, and It is a pricing model now available to merchants in the Mid Atlantic. Even If you aren’t ready to save thousands of dollars instantly you should at least talk with a professional to determine how this program can positively affect your business.
Finally, a breath of fresh air for the small business merchant.
Not all merchant services companies offer this program.
For more information or consultation, please contact:
Pete Schroeder
302.846.0797
