Person typing on a laptop

Are Cash Discounts Right for Your Business?

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.

Before you decide either way, let’s start with the basics.

What is a Cash Discount?

A cash discount is when you offer customers who pay by cash or check a percentage off the regular price. This means that the prices you list or post are correct for those who pay by credit card. You are simply offering customers who pay by cash a discount since credit card processing fees are not incurred.

Note: The above scenario has nothing to do with surcharges. Surcharges and cash discounts are often confused. The listed or posted price of a service or product is the regular price. If you charged customers a fee on top of that price, it would be deemed a surcharge. We are discussing cash discounts … a completely different animal.

Consider the Pros and Cons

Before you consider implementing a cash discount program in your business, there are several factors for you to consider.

Pros Cons
Recoup Processing Fees – No matter how convenient accepting credit cards is for your customers, paying the processing fees can get old for you. Balancing that with patients who pay with cash might be a nice way to save on fees.  Preparation required – Some behind-the-scenes work needs to take place before a cash discount program can be implemented. For example, the prices you post or list need to be the right amount for credit card-paying customers. You also need to have signs posted explaining the prices and discount policy. In addition, you will likely need new payment processing equipment. 
Many customers love a bargain – Everyone likes to save money when possible. Just knowing that they’re paying a little less could mean happier and more repeat customers.

You may still have costs – Even if you implement a cash discount, you may have fees to pay. It may not be enough to offset your entire credit card processing costs.

Keep up with your competitors – If you know other businesses in the area are offering a cash discount, it would be nice to keep up with the Joneses. You don’t want to drive customers away because you don’t offer the same deal.

Potentially fewer purchases – If you offer other products, you may notice fewer sales. People paying with a credit card are more likely to buy more. Parting with cash can be hard.

Increases your cash on hand – Sometimes it’s good to have additional cash flow in the business for other expenses. 

Not all customers carry cash – With the popularity and convenience of mobile wallets, many people may not carry cash or a check. Even for loyal customers, they may not remember to carry cash specifically at your business.   

Fewer chargebacks – No business owner likes to deal with disputed or fraudulent charges. Fewer customers using credit cards could potentially mean fewer chargebacks..

Mad customers – Some of your customers who pay by credit card may be upset with the idea of the cash discount. Much of this stems from misunderstanding; they don’t understand that they are NOT overpaying when they use a credit card. They are paying the regular price and those who pay by cash are getting a discount for that method of payment. Right or wrong, if they feel slighted, perception is everything. 

It’s important to make sure your staff understand the cash discount fully. That way, if they are questioned by a customer, everyone is providing the same, accurate information.

Like all your business decisions, it’s a good idea to talk with others about their experiences. Ask fellow business owners why they chose a cash discount program or against it. Then, decide what’s best for your business!

This website uses first party and third party cookies to improve your experience and anonymously track site visits. By visiting this website, you opt-in to the use of cookies. OK