Today’s most common payment methods are credit and debit cards, with people relying on paper money less and less each day. With so many cashless options, some merchants and companies still offer a cash discount. However, why do they do this, and what are cash discounts? A cash discount occurs when a company offers discounts to customers who pay by checks or cash, and not with credit or debit cards.
Companies have started to implement credit card processing services, but processing fees come with up to 4% in lost revenue every time a buyer swipes a card. By offering cash discounts, the processing fees are eliminated. In addition, for small businesses to survive and differentiate themselves from big companies, they may offer discounts for customers who choose to pay with paper money.
People love to hunt for bargains. In fact, it is advised that startups use infusions of banknotes to grow their enterprises a lot faster. By offering discounts, buyers will rush in to take advantage of them, and the more traffic, the more sales.
The Advantages of Offering Cash Discounts
Who doesn’t love a discount? Therefore, if you are considering the option for a cash discount program, you should know that it can provide several benefits for your business. You can provide deductions to motivate your buyers to use paper money while you start including the cost of merchant services for credit card processing into the listed price. This will help both your business and your customers.
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Simplifies the Payment Process
Paying with paper money is simple, and everyone knows how it works. Moreover, you will significantly reduce the risk of chargebacks, fraud, data breaches, pricing disputes, or other card complications.
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Eliminates Credit Card Processing Fees
This must be the greatest advantage when choosing to offer cash discounts, as it will eliminate your credit card processing fees. At this stage, small businesses can use the funds they save to expand their marketing efforts and business operations and increase their savings.
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Builds Customer Loyalty
A great advantage is that your customers will more likely become regulars, transforming your enterprise into a success.
Instead of using eCommerce payment methods or other card processors, you can offer a 5% to 10% discount to the customers who pay with cash. While it may look like your business is losing money on these discounts, you should know that you will be saving a lot more by avoiding all the fees related to flat, interchange, or other card convenience or administrative costs.
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Increases Cash Flow
If you are offering discounts, then you won’t have to wait 30 days for card payment. Early payments mean better cash flow for your enterprise, while your customers will be rewarded with lower prices. If you are paid early, you can then reinvest the cash back into the business sooner.
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Keeps Your Profit Margins Constant
Traditional processing fees are charged as a percentage of every transaction. This creates a bit of uncertainty for the entrepreneurs who look to plan ahead. Therefore, cash discount programs eliminate this problem and provide you with a more consistent view of your profit margins.
After evaluating these advantages, it is up to you whether offering cash discounts is the right thing for your business or not. You can find more information here.
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