Cash Discount Program
HOW IT WORKS
Cash discounting works by giving a discount to all customers who choose to pay with cash instead of a credit card or debit card. Customers who choose to pay with a credit card will pay the marked amount because the processing cost is built into the cost of the product. This allows the business owner to get the full payment from the customer and not incur any credit card processing fees. READ BELOW to see an example of how a merchant cash discounting program works.
CASH PAYMENT
A customer in a convenience store walks up to the register with $20 worth of goods. She notices a sign next to the register explaining that a 4% service charge is added to all store sales. By paying with cash, she gets an instant cash discount of 4%.
The attendant scans all of her products which come to a total of exactly $20.00.
The customer informs the clerk that she is going to be paying by cash, which makes her total $20.00.
Realtime payments made in the form of cash will end up saving the customer some money. Using a credit card may result in simpler and faster payments, but they would be charged a small fee or surcharge for doing so.
A discount to customers paying with cash is given to the customer. It essentially rewards them for paying with cash. So, while credit card companies may prefer your customers to pay with cards, they will actually be rewarded for using cash.
CREDIT CARD PAYMENT
A customer in a convenience store walks up to the register with $20 worth of goods. She notices a sign next to the register explaining that a 4% service charge is added to all store sales. By paying with cash she gets an instant cash discount of 4%.
The attendant scans all of her products which come to a total of exactly $20.00.
The customer informs the clerk that she is going to pay with a credit card, and the total price of the goods changes, so she will be paying a total of $20.80.
The customer inserts their card into the terminal to pay for their goods, and is charged a total of $20.80 to cover the cost to accept credit.
The customer completes the transaction and leaves having paid $20.80 for $20 worth of goods, knowing that she could have saved 80 cents had she paid with cash.
The cash discount program allows the customer to pay with a credit card, just like normal. The difference is that they get the choice whether to incur the fee that would normally go to you, the business owner, or use cash for a discount.