Cash, check, credit card, debit card, mobile and online. Today there are a multitude of ways to pay — which is convenient for the younger, tech-savvy generations.
However, one of the most common complaints of small retailers like convenience stores, bars and single location restaurants is the high cost of accepting credit and debit cards. Payment options become even more complicated — for merchants and customers alike — with recent innovations in cashless payment technology.
New Cash Legislation Protects Consumers
New cashless payment innovations could disenfranchise approximately 14 million unbanked consumers. Some cities and states, like New Jersey, Philadelphia and Massachusetts, have passed legislation protecting cash usage within their jurisdictions as cashless retailing continues to develop. Although exemptions exist for mobile device applications, car rental companies and other purchases, the laws offer protections for a large portion of American consumers who may be discriminated against for their lack of access to card or cashless technology.
On the other hand, a recent settlement on a long-running court case in New York regarding surcharging offers some protection for merchants who have been suffering under the burden of credit card processing fees. The settlement will allow New York retailers to pass surcharge fees on to consumers as long as the additional amount is disclosed in monetary terms, according to Newsday. California, Florida and Texas are among some of the states that have overturned surcharge bans, allowing retailers to share or pass on the burden of using plastic. While surcharge fees are controversial, cash discount programs are legal in all 50 states.
Cash Discount Program Vs. Surcharge Fees
Surcharge fees are often confused with cash discounts, creating uncertainty as to the application and legality of cash discount programs. The 2010 Dodd-Frank Law, in the Durbin Amendment, states that businesses are permitted to offer a discount to customers as an incentive for customers to pay by alternative methods. The distinction is best explained through the posted price of an item or service. “Merchants can provide a lower price for cash acceptance...However, merchants are not permitted to post a price for cash and then charge a higher price for cards,” according to a Visa representative.
Cash Discount Programs: Better For Business Owners And Better For Customers
It is hard to dispute the benefits of a cash discount program for both retailers and their customers. Benefits include:
Reduced fees for merchants. The most obvious benefit for retailers is the ability to reduce or eliminate credit cards usage fees. With a cash discount program in place, merchants are able to reduce fees that cut into their profit margins and consumers avoid credit interest fees on small purchases.
Simple for merchants and customers to understand. Since all items in the store are priced with a built-in service fee, that is deducted if consumers pay with cash, a cash discount program is easy for customers to understand.
Merchants retain more profit. Merchants are able to retain more profit by reducing processing fees and with less customers using cards, they are also able to reduce credit card charge offs.
Credit card processing can be a challenge for small businesses owners with limited budgets and thin profit margins. With a cash discount program, merchants can give customers the option to pay a discounted price when they pay with cash; reducing costs for both the customer and the business owner, while still catering to consumers who prefer plastic.
Samir Kadi is the CEO of MTech Distributors, LLC. Specializing in solutions for merchants, MTech provides ATMs, merchants services and everything related to payments that a merchant needs to grow their business, increase revenue and surpass customer expectations. A graduate of City University of New York-College of Staten Island and successful entrepreneur, he also owns TECHataClick and ATM Routes for Sale. Connect with Kadi via email or on LinkedIn.
