By now you probably know that, as a merchant, both the law and credit processing agreements allow you to offer discounts to customers who pay in cash. So why wouldn’t you offer such a discount? Who doesn’t love cash?
While cash has its advantages, there is a downside to consider. We’ll show you both sides of the coin.
The Pros
The upside to cash is pretty straight forward:
- Keep all of your money. It’s clear: with cash, you avoid credit card interchange fees. The cash you take in is the cash you keep.
- Everybody loves a discount. Customers appreciate a discount and some may be more likely to return to your business to take advantage of the savings. Plus, you’re providing consistently card-wielding customers an incentive to start paying in cash.
- A discount is sometimes the difference between a sale and no sale. Especially for big-ticket items, the savings could be enough to make a customer run to their ATM.
- Differentiate yourself from big box stores. If you’re a small business, offering discounts for paying in cash is one way to compete with bigger, well-known competitors.
The Cons
Here a few reasons why you may not want to encourage cash payments:
- Cash is riskier. More cash on site means a greater security risk. It’s also a lot easier for cash to go quietly missing from your drawer. Ask any business owner who’s had a sticky-fingered employee counting their register each night.
- People spend more when they pay with a credit card. There are a number of studies out there that all point in the same direction: we spend more when we are handing over a credit card instead of cash. If a customer is not limited to what’s in their wallet, adding a few extra purchases to their tab is much more likely.
- Cash can be costlier to your business. The costs of dealing in cash are hard to quantify. Credit card fees have a definite number attached to them, so you know what it’s costing you to handle credit card payments. With cash, those costs are less concrete. But make no mistake, transporting, counting and preventing cash theft all come at a cost.
- You could anger or lose card-carrying customers. Offering discounts for paying in cash can just as easily be viewed as a surcharge for paying with credit. That perspective can lead to unpleasant surprises at the register for card-carrying customers. Customers caught without cash and unaware of your cash discount offer could become annoyed that they have to pay more, just because they need to pay with plastic. Which is also related to the next point:
- Credit cards are more convenient for customers. More and more people are paying with plastic and generally expect the option to do so without penalty. Considering the point made above, is it good customer service to “add a surcharge” for credit card payments? Your card-carrying customers are not likely to think so.
Consider all sides of this important issue, and remember to view it from the perspective of the customer. You know your customer: what would she or he prefer?
For those of you looking for more information on accepting credit and debit cards, check out Community Merchants USA. This online resource includes a plethora of information to help you add more value to your business through credit and debit card acceptance.
Shutterstock: Paying at register
