Are you currently wondering if a cash discount can apply to debit cards? You’re in the right place. As credit card processing becomes more and more expensive for merchants, it only makes sense that they should want to reduce this expense as much as they possibly can.
One of the easiest ways that this can be achieved is for merchants to opt to seek out avenues that can encourage customers to decide to make a payment via cash or check, which can help to offset the payment processing costs for those that own the business. Still, can these types of incentives be applied to debit card purchases?
If you’re currently wondering this, then rest assured that this is where we come in to lend you a helping hand. In this guide, we are going to be talking you through more about what a cash discount is, as well as whether or not a cash discount program can be applied to a debit card or not.
In the end, you’ll know everything there is to know about cash discount and debit cards.
Just keep reading!
What Is A Cash Discount Program?
Before we get any further into this guide, we first think that it would be a pretty good idea to talk you through what a cash discount program is. This will help you to better understand whether or not they can be applied to debit cards.
To cut a long story short, a cash discount program is a type of discount incentive program that merchants tend to offer their customers who decide to make their payments via cash or check.
Oftentimes, this is done in an attempt to encourage more customers to pay by cash or check in order to reduce the amount of customers opting to use their credit or debit card.
All that being said, when a cash discount program is implemented, it typically will mean that a much higher percentage of customers will opt to pay by cash or check instead of debit, which will then lower the amount of payment processing fees the merchant will need to pay.
Why Do Merchants Offer Cash Discounts?
As you can see from the explanation above, it’s clear that there are many cash-saving benefits that merchants can enjoy by offering cash discount programs. Let’s take a closer look at the main reasons why merchants offer these types of discounts below:
- A reduction in payment processing fees: As we have already briefly mentioned above, the main reason that cash discounts are typically offered by merchants to their customers is in order to offset the amount of fees that merchants are required to pay on debit/credit card transactions.
- A lower amount of chargebacks: Given that the amount of card payments being made will typically be reduced with the introduction of a cash discount incentive, it will also mean that the amount of chargebacks a company has will also reduce along with payment processing fees, too. That being said, if your business is suffering from frequent chargebacks, opting to introduce a cash discount program might be able to help reduce the frequency of them occurring from day to day.
- Helps to encourage more in-person sales: Another reason that merchants tend to begin offering their customers cash discounts is to encourage them to make a visit in store. Given the fact that more and more people are making the decision to shop online due to the convenience of it, it can often mean that physical stores can see a decline in visitors and sales. That being said, when a cash discount is offered to customers, there is a much higher chance that more customers will make the decision to pay a visit to the actual store, rather than shopping online.
Cash Discount And Debit Cards
So, now for the all important question – does cash discount apply to debit cards? As you might have already guessed by now, cash discount programs do not apply to debit cards, or even credit cards for that matter.
Why? Well, the main reason for this is because cash discount programs are specifically created and used in order to incentivise customers to refrain from making their purchases with either a credit card or debit card. Instead, a cash discount is only ever used to encourage customers to pay via checking or with cash in person.
The main reason that this is done is due to the fact that payment processing fees for debit and credit card transactions tend to be very expensive – especially for merchants.
So, in order to help offset the amount of money that merchants often need to pay out in order to support all types of card transactions, a cash discount is often offered to tempt a higher percentage of customers to make their payment with either cash or a check.
Frequently Asked Questions
Who Gets Cash Discount Benefits?
Both the merchant and the customer will be able to take advantage of the benefits that come along with cash discount programs. On one hand, customers will be able to benefit from the discount that is offered to them, while on the other hand, merchants will be able to offset the cost of debit/credit card payments.
How Does Cash Discount Work?
Like we’ve already mentioned in this guide, cash discount is essentially a type of incentive program that encourages customers to make their payments in either cash or check typically via a discount or promotion of some kind. This then helps to offset the cost of the fees required for credit and debit card payments.
What Are The Disadvantages Of Cash Discount?
There are a few disadvantages of cash discounts. The main disadvantage is that many customers often find that credit cards/debit cards are a lot more convenient than using cash or check. In addition to this, cash is much more riskier than credit/debit card payments, as having more cash in-store makes a higher security risk.
The Bottom Line
There we have it. You’ve made it to the end of the guide! Now that you have taken the time to read through the guide above, we hope that we have been able to help give you a better understanding of what a cash discount is, as well as why they do not apply to debit cards.
Just to sum up all that we have spoken about above, a cash discount program is often offered by merchants in order to encourage customers to make a payment in either cash or check. The main reason that this is done is in order to offset the payment processing fees that merchants are required to pay for all debit card and credit card transactions.
For this reason, a debit card does not apply to cash discount programs simply due to the fact that cash discount incentives are specifically created to encourage customers to not use their debit card. Thank you for taking the time to read through this guide, goodbye for now! For more info on how payments work, take a look at our credit card processing content hub.
Paul Martinez is the founder of EcomSidekick.com. He is an expert in the areas of finance, real estate, eCommerce, traffic and conversion.
Join him on EcomSidekick.com to learn how to improve your financial life and excel in these areas. Before starting this media site, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.