Not all businesses are the same. While a cash discount program may work for one down the street, you may decide it doesn’t work for you.

What Is a Cash Discount Program?

A cash discount is exactly what it sounds like. It’s offering a discount to customers who pay with cash or check instead of paying by credit card. With this method, businesses can avoid most of their credit card processing fees by incentivizing their customers to pay by cash. A cash discount is a win-win for both the merchant and the customer, as long as the customer has cash on hand.  If the customer chooses to pay by card, then they will not receive the discount.  This ultimately affords businesses the ability to be more flexible in pricing their products and services, while maintaining a competitive advantage.

Can Any Business Offer Cash Discounting?

Discounts for cash can now be deployed in 47 states, with a federal judge in February 2021 having struck down a cash-discount ban in Kansas. As things stand, only Colorado, Connecticut, and Massachusetts maintain outright cash-discount bans on their books.

Pros and Cons of Cash Discounting

There are both pros and cons for a business to move to a cash discount program.  Obviously, the biggest positive factor is eliminating almost all of the credit card processing fees, which provides an immediate boost to the bottom line.  Other positive factors include flexibility when pricing products and services.

Negative factors include potentially rubbing some customers the wrong way, those that may not be accustomed to carrying cash.  Additionally, some businesses may not be comfortable with their employees handling a larger volume of cash, this should also be taken into consideration when deciding if cash discounting is right for each business.

Are cash discount programs the wave of the future?

There’s no doubt the pandemic crippled sales and brought hardship to many businesses, and unfortunately, many had to close their doors for good, while others had to impose additional surcharges to stay afloat. While credit cards are extremely convenient for businesses and customers alike, the convenience comes at a cost to the business. By businesses offering customers a cash discount, even a minimal one, it can be advantageous for both the owner and customers. Businesses looking to build a strong customer base, can provide a little extra incentive for customers to pay with cash, and even stand out from the competition, it might be worth the time to consider a switch to offering cash discounts to customers.

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