A primary focus of many business owners is on reducing expenses – should you offer a cash discount to save on credit card fees?

Sure, we admit that paying the credit card processing fees on your revenues can add an expense, but there are some risks to your business. Here are a few things to consider when deciding whether or not to offer a cash discount…which is actually another way of assessing a surcharge for credit card payments.

In many states you can’t surcharge. (Want to know which ones?)
Will a cash discount push your customers to pay cash, but limit their spending?
Will your employees be more tempted by cash to steal from the business?
What is the right discount? We recently saw a sign at a retailer for 4% cash discount. This is far more (hopefully) than they are paying in credit card processing fees. (If you are paying more than 3% you should contact us.)
Is the cash really cash? Counterfeit bills are more and more popular, and not just with larger bills of 50s and 100s, according to the US Secret Service they are most commonly found on the Twenty Dollar Bill (as well as fives and tens, too.) Of course, when you deposit this to the bank, you will be shorted the value of the counterfeit bills.
Why add a safety and security risk of having more cash on hand? Businesses with larger volume of cash are targeted for robberies and should be taking extra precautions with security systems, drop safes and other measures to protect the business, the employees, physical property and financial assets.
Are you trying to avoid paying taxes? Savvy customers may want to know why you want to risk accepting large sums of cash.
Did you talk to your CPA about the impacts to your business if you do this? (Read more on some other things to ask your accounting professional.)
Do you want to have us review your account to make sure this would be a good idea for your business?

Offering a cash discount program and the surcharging of credit cards all run risks to a business; sometimes those risk are unforeseeable. Each of the considerations listed above should be taken seriously.

In some cases, it might take a few months to realize the impact and if the result is a loss of customers, the battle to win them back is difficult.

We have seen businesses lose not only customers to other local competitors, but also key staff members who didn’t want to be part of a declining company – one that wasn’t focused on customer service. In short, a cash discount might seem like a way to save money on credit card fees, however, the long term opportunity costs may override those savings. We are happy to discuss this with you to help you evaluate the options. Just reach out.

~ Mary Ann