What Is Meant by a Cash Discount?
A cash discount is an incentive that sellers can offer to customers when they pay using cash over cards. It’s equivalent to a reduced price when buyers pay a product or service in full or complete a transaction within a certain period without deferred payments.
Cash discounts can come in the form of a fixed amount or a percentage of the actual price—ranging from 1-5% depending on the offering.
A 2019 Federal Reserve survey shows 23% of respondents prefer to pay with cash. This is an opportunity that merchants can take advantage of to reduce swipe fees associated with payment types involving credit cards, all while attracting and retaining loyal customers.
Examples of a Cash Discount
Here are three examples of how small businesses apply cash discounts.
Food Service Industry
Restaurants, cafes, fast food, and other food service businesses offer cash discounts for customers to save money on merchant fees.
Some restaurants use point-of-sale systems (POS) to set up their cash discount program. They can apply cash discounts for their restaurant, café, or food truck with only a few clicks.
For example, when customers pay for their $30 meal, they receive a line item on their receipt reflecting this. But paying cash can give them a 5% discount, and they will only have to shell out $28.50, which appears on the receipt as “total with cash discount.”
Eventually, the restaurant may see more customers arriving with cash because they know of the discount.
Service providers like plumbing services and home contractors can also provide discounts when customers pay with cash instead of using a credit or debit card.
Especially in rural areas, plumbers and cleaners may offer a fixed fee discount when customers pay with cash. This can save their customers up to $50 on large jobs like repairing water pipes or installing new fixtures.
Perhaps the most common example of cash discounts is with independent gas stations. Many charge 5-10 cents per gallon less when patrons use cash rather than credit card payments. Some may even give as much as 20 cents per gallon less with cash payments in 2022.
Benefits of Cash Discount Programs
A cash discount benefits both sellers and buyers.
Buyers get a sales discount that allows them to save money on their purchases and pay off their balance quickly.
Business owners get faster access to funds that eventually cover overhead costs. They eliminate higher service fees and surcharges from other payment methods and avoid bad debts because customers pay upfront or within a specific timeframe. Many enjoy improved customer satisfaction while lowering transaction costs.
Reduce Fees to the Business
Cash discount programs reduce debit or credit card processing fees.
They’re often more cost-effective than standard processing fees associated with credit card transactions as merchant accounts typically only must pay a flat fee rather than paying per transaction.
Cash discount programs are also simple; they don’t require tedious administrative or accounting procedures, and businesses typically only need a point-of-sale platform to apply cash discounts. This means avoiding lengthy checkouts or complex back-end reconciliations.
Consistent Profit Margins
Cash discount programs help business owners maintain a consistent profit margin.
The payment processing fees from Visa, Mastercard, Amex, and other credit card processing companies are different, making it harder to forecast your profit margins.
Cash discount programs take this uncertainty away. The more cash discount amount you apply for multiple transactions, the more consistent your profit margins will be.
Attract Those Looking for a Bargain
Cash discount programs provide businesses an opportunity to attract bargain-seeking customers.
Restaurants, gas stations, eCommerce shops, and other businesses see an uptick in their customers bringing cash. Cash discounts make customers feel like every transaction is a win because they don’t have to pay the full amount. They serve as an incentive for customers to shop more often at your store or become a loyal patron of your service business.
Businesses get rewarded with increased customer loyalty by making patrons feel they are saving money.
Increase Cash on Hand
Cash discount programs provide businesses with a great way to increase cash on hand. They serve as early payment discounts, incentivizing customers to pay the full amount, on their due date, or within a specific time frame.
Businesses can take advantage of the built-in discounts offered in these programs and turn that into increased cash flow. They can manage their customer’s accounts receivables more effectively and shorten the average collection period.
Von Payments Can Help You Offer Cash Discounts
Cash discount programs provide businesses with a great way to attract bargain-seeking customers, improve their bottom line, increase cash on hand, and manage accounts receivable more efficiently. These programs allow businesses to offer discounts on purchases made with cash without additional cost or effort.
These programs also create a win-win situation for both parties involved—businesses can reduce their processing costs while customers are incentivized to pay with cash and save money on their purchases.
At Von Payments, we make it easy for businesses to get started with cash discount programs. Our zero-cost helps you quickly set up discounts tailored to your business needs.
- Reduce your cost on all card types: Eliminate paying for the convenience fee of processing cards. Using this program, you can potentially cut all processing costs and watch money come in almost immediately.
- Easy-to-use platform: Getting started with zero-fee processing is super easy with Von Payments and does not cost you a thing. Our turnkey POS terminals come installed with software that is easy to use and ready to process out of the box. The equipment comes with built-in dual pricing, so you don’t have to worry about calculating the difference between cash and debit or credit card pricing.
- Eliminate processing costs wherever you’re located: Enjoy Zero-Fee processing as Von Payments offer both physical and virtual terminals equipped with this technology. Our Zero-Fee Card Acceptance is fully compliant in all 50 states and is approved by the regulatory counsel and all major card brands, so everyone has the ability to take advantage of it.
Get started today with Von Payments and start taking advantage of the benefits a cash discounts program can bring to your business!