Research has shown that customers are twice as likely to make a purchase if an item has a discount of at least 20%. If the discount is 50% or more, there’s a 99% likelihood that a shopper will make a purchase. Processing non-cash payments at your business comes with extra fees that can add up over time.
While it’s not practical to offer major discounts for using cash, people are always looking to save money. So, it will still be an enticing opportunity for many buyers.
Before you get started, it’s essential to understand the benefits a cash discount program provides. Let’s explore eight of the most notable.
1. Minimize and Eliminate Fees
This is the primary benefit to consider. The fees you incur will depend on the payment provider you work with.
As previously mentioned, even negligible fees can become substantial. To put this into perspective, let’s assume that your business processed $100,000 in credit card payments over the past month.
The average credit card processing fee lies somewhere between 1.5% and 3.5% per transaction. In this scenario, let’s assume that it’s 2%. This means you would have paid approximately $2,000 in processing fees.
If this was the average level of performance for each month in the year, you’d pay over $20,000 in processing fees at the end of a 12-month period.
2. Increase Available Cash on Hand
Having cash on hand as a business is highly convenient. It lets you handle costs instantly without worrying about delays.
Customers who pay in cash often require change, as well. Cash discounts encourage your customers to use this form of payment. This drastically increases your company’s available cash and gives it more buying power.
3. Attract Additional Customers
There’s no shortage of customers who prefer to pay in cash instead of credit. This is due to many reasons, such as not having enough available credit. Some people feel anxious when using credit cards due to the prospect of accumulating debt.
There are also plenty of people who prefer cash due to its convenience. Offering a discount for cash payments may make people choose your company over a competitor.
Not only will they avoid a card processing fee, but they can also save extra money through the discount. How much you choose to take off a purchase price is up to you. It’s recommended to find an amount that’s enticing to customers without straining your business financially.
Feel free to adjust your cash discounts as time goes on. Eventually, you’ll find the sweet spot.
4. Minimize Chargeback Risks
Chargebacks occur when a cardholder disputes a merchant charge. More often than not, these are the result of a mistake. For example, a customer may have been charged more money than they should.
However, there are also criminals who use chargebacks maliciously. They tend to make large purchases with a credit card and then file a chargeback.
In these scenarios, they often claim unauthorized users made the transactions. Encouraging more people to use cash through cash discounting will minimize situations like these.
5. Establish Consistent Profit Margins
Processing fees make it difficult to establish consistent profit margins. To make matters worse, different cards tend to have different processing fees. Some cards might be 1.5% while others might be 3%.
Cash transactions allow you to forego fees and eliminate this inconvenience. To simplify this process, you can make your cash discount equal to the largest card fee.
For instance, if the highest fee imposed by cards you accept is 3%, you could make your cash discount 3%. This results in no change in income for your company but eliminates card-related complications.
Customers like businesses that accept a variety of payments. Some companies don’t accept cash. There are also many that don’t accept credit cards.
Cash discounts are enticing options for those who would otherwise pay with credit cards. This maximizes customer satisfaction and lets people choose how they want to pay.
Flexible payment options are more likely to attract a higher number of customers. From here, you’ll likely witness your sales numbers improve substantially.
7. Sales Efficiency
Handling cash can be faster than processing cards. Depending on how the card reader connects, they are often slow and take longer than anticipated to function. Some involve navigating through multiple menus.
It’s also not impossible for card readers to malfunction. This could turn a 30-second transaction into one that lasts over five minutes. The longer people wait in line, the increased probability they’ll walk out of the store without making a purchase.
When more people use cash, your lines will move faster and your hourly sales will skyrocket. There’s something to be said about the impact this has on the customer experience, as well. People often avoid stores that have notoriously long lines.
This is true even if alternatives provide lower-quality products or services. Maximizing sales efficiency will keep your customer’s time at your store enjoyable from beginning to end.
8. They’re Easy to Explain
Explaining a cash discount is much simpler than explaining a credit card fee. Most people don’t understand why these fees exist, and it could deter them from using a card.
If there’s no incentive to use cash, they might not make a purchase. The best way to explain a cash discount is to convey that all items at your store are priced with a service fee in mind.
So, if the average service fee is 3%, your items are priced 3% higher than they normally would be. If they use cash, they can circumvent this price increase. Most people won’t have trouble understanding this, but be patient with those who do.
Remind them that they’re saving money by using cash. Illustrate that it’s in their best interest to pay with this method if they can.
Start a Cash Discount Program ASAP
The benefits of a cash discount program are too powerful to ignore. Start one as soon as possible to improve customer satisfaction and boost sales.
Ready to get started? Trinity Payments offers a free terminal for those who sign up for our Cash Discount program.
Merchants can choose between the PAX A80 Terminal and Dejavoo Z8 Terminal. Reach out to a representative today to learn more.