Cash Discount vs. Surcharching: How to Properly Offer A Cash Discount Program

The costs associated with processing credit card transactions can add up over time. Even point-of-sale systems with competitive flat rates can have fees that cut into the profits of a small business. A working understanding of the differences between cash discounts and surcharges is essential for selling credit card processing. It is relatively easy to implement either type of program with a full-service Clover Station POS system.

The Ins and Outs of Cash Discounts

A cash discount can make customers more likely to pay with preferred, non-card-based methods. If an enterprise is struggling to keep pace with high processing fees, a cash discount or surcharge program may be helpful for lightening financial penalties and recovering a larger share of the costs of covering these expenses. Practically any business can benefit its bottom line by signing up with a payment processing provider that offers consistently low rates.

A wireless credit card scanner such as the Clover Flex makes it easier to complete transactions paid with cash or cards. Clover Networks POS hardware is compatible with a locking cash drawer for secure storage of paper currency, change and checks. Depending on how a business enrolls in a merchant account program, offering discounts for certain types of transactions could further reduce the burden of accepting every major payment method.

How Surcharging Works

Surcharges are fees added to the price of goods or services in states that allow these penalties to be applied to transactions in which customers pay with credit cards. Surcharge charges can only be added to credit card transactions and do not apply to debit cards. These fees correspond to a percentage of the total purchase price before taxes.

Many businesses find it easiest to add a surcharge to all items that is waived when customers present cash, checks or gift cards. Business owners and employees are required to notify customers about this program in advance of payment and clearly detail or calculate discounts or fees on receipts and internal transaction records.

Ways To Reward Customers Who Pay With Cash

Businesses can legally discount cash transactions or non-card-based payment methods. The easiest approach to offering a discount for using cash or other preferred methods of payment involves applying or waiving a nominal customer service fee.

In order for these programs to operate in accordance with the law, it is necessary to generate a detailed receipt that specifies cash discount or service fee amounts. A payment processor pays off these charges on the merchants behalf, reducing the percentage of profits that gets sunk into footing credit card fees.

A business owner or stakeholders should check state laws for specific requirements that apply to cash discount or surcharge programs. In general, business accountants recommend that an operation seeking to incentivize the use of specific payment methods clearly notify customers of the conditions of this program and clarify the amount of a cash discount or surcharge on receipts. A comprehensive POS platform can automatically calculate these discounts, print detailed customer receipts and maintain records of transaction totals along with any applicable discounts or surcharges.