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The Green Sheet Online Edition

March 14, 2022 • Issue 22:03:01

Saving merchant fees - Part 1: Cash discount explained

By Nikki Estes and Shubham Garg

You likely know the credit card companies set merchant fees that are added to the sale amount. Originally determined by card types, another factor that determines a merchant’s rate includes whether the credit card is present during in-person transactions or whether it processes as card-not-present in online, over the phone or when keying in the card after a failed POS swipe. Additional determining factors are card volume and average ticket amount. Mobile and virtual terminal payments earn a different payment fee structure as well.

What can businesses do to save on merchant fees?

Businesses should explore a cash discount program (CDP) to see if it fits an enterprise's goals and payment processing needs. Not all business types will want to implement such a program, but CDPs are growing in popularity among business owners as awareness of them increases.

Cash discount and surcharge programs stem from the same intention: to alleviate the hefty fees the credit card companies, like Visa and Mastercard, impose on SMBs. However, the programs operate differently in accordance with regulations set by the card companies. Understanding the differences between these programs will help you match the businesses you serve with the right programs.

Merchants benefitting from cash discount programs include those who mostly utilize processing hardware, like Clover, and midsize retail and ecommerce businesses that regularly have lower transaction amounts and process over $5,000 in transaction volume per month. With the right partner, high-risk businesses can also profit from CDPs.

What is a cash discount program?

A CDP enables business owners to save on merchant fees and provide their customers with discounts. And offering a CDP helps you enhance merchants' processing ability and close more leads.

In a CDP program, the business owner rewards customers who choose to pay their bills through cash, debit, ACH or check. Using a CDP in business or consumer payment transactions will discount the final price of the product/service, passing on savings from the company to the purchaser.

CDPs enable business owners to:

  • Attract more customers
  • Retain more profits
  • Keep 100 percent of revenue
  • Eliminate merchant processing fees
  • Incentivize cash and ACH payments
  • Enjoy next-day funding
  • Avoid disruption in business flow
  • What does a CDP look like? 

Businesses using CDPs, whether online or in person, need to make it clear that paying by cash or ACH will provide consumers with significant savings. To convey this to consumers, the pricing should be explained and posted prominently, in accordance with card brand guidance as well as all applicable laws.

When displaying dual pricing, one price represents the product's full price before the cash discount is applied; the other denotes what customers pay if they choose to pay through cash, check or ACH. To be in compliance with CDP guidelines, a restaurant, for example, can add a label to their menu and a sign at their register that briefly and clearly explain the program.

To run a compliant CDP, it's essential that you, as a service provider, understand the guidelines set forth by the card companies and help your merchants adhere to them when implementing the program and when creating their signage, which should be clearly visible to consumers in all online, mobile and in-person environments. The signage stands as a valuable asset in lessening confusion and developing transparency for business owners and their customers. 

What if a merchant in my portfolio could use a CDP?

If you have already set up a merchant account to process credit card transactions, return to them and explain the benefits of having a CDP. This will demonstrate that you are evolving with fintech solutions to keep entrepreneurs and consumers happy. If your merchants and their consumers are happy, feel satisfied that you provided them with technology and savings to retain those relationships. end of article

Nikki Estes guides "Singers of Solutions" on the iCheckGateway.com team, educating the ISO, ISV, and merchant audience with creativity on customized payment technology. She and Shubham Garg, a humorous, prolific wordsmith, support the iCG mission to edify businesses and empower consumers through payments automation, bringing sophistication to the heartbeat of every business with simplicity. Contact them via email at pr@icheckgateway.com or by phone at 239-349-2880.

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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