Most convenience store owners find it hard to find a payment method that constantly generates profits. This can be very challenging, especially when there are clear indications that profits have the chance of increasing but are not.
With the growing popularity of digital banking, not many customers pay with cash. Instead, store owners accept credit cards or mobile transfers. Also, debit card transactions are not left out in gas stations or standalone stores.
Understandably, most customers prefer a credit card transaction because they want to avoid carrying cash. However, as a business owner, credit card payments hurt your business more than they help you save money.
Apart from traditional credit card processing fees, when customers pay with a credit or debit card, there is a high risk of fraud. A cash discount program for your convenience store can help you avoid these problems.
Cash discount merchant processing helps you to avoid payment processing costs when a customer pays for goods. When you have more cash customers, you make profits that would otherwise go to credit card payment processors.
Setting up a cash discount merchant account is easy, and there’s no account setup fee. There are cash discount merchant services that are suited to small businesses.
Cash discount programs automatically apply cash discounts to customers when they make a cash payment for goods. As a business owner, the first step to increase profits is using a cash discount program to remove credit card processing costs.
This article explains a cash discount program and how to get started on cash discount merchant processing. We also show you how to personalize the cash discount program by showing you its benefits and the challenges it can solve.
Here’s one if you were looking for a cash discount program guide for convenience stores.
What Is a Cash Discount Program?
Cash discount programs have become increasingly popular because they effectively offset credit card processing costs. A cash discount program is a service that allows a business owner to give discounts to customers who make cash purchases.
Cash discounting helps to save money by reducing the overall cost of goods and services for cash-paying customers.
If you want to implement cash discounting in your convenience store, there should be a notice to inform customers. So, when customers buy goods, they will pay higher if they choose a credit card transaction for payment.
However, the purchase price will be lower if they choose cash payments. With cash discounts, cash customers pay less than the posted price, while customers who make credit card purchases pay the posted prices.
Instinctively, customers who want to save money will pay with cash to buy goods less than posted prices. They will also opt for cash payments to avoid the service fee from credit card processing.
As a result, there will be more cash payments, resulting in an influx of real-time profits for the business.
Benefits of Cash Discounts
Cash discounts work to benefit both the customers and especially the store owners. The following are some advantages of using cash discounts.
Daily Cash Influx
Cash discount merchant processing provides your business with a consistent cash flow. When you give cash discounts to customers, the number of customers paying with cash will likely increase.
Gradually, credit card purchases will give way to more cash payments. Not only does this eliminate credit card processing costs, but it increases your daily income.
The cash discount program is great for small businesses like retail stores because it provides money to fund daily activities. That way, funds are easily accessible when you need them without spending money on payment processing.
Also, cash discounting programs reduce the likelihood of fraud using credit and debit cards. When customers pick up an item, they pay upfront in cash, resulting in an instant increase in merchant savings.
Removal of Credit Card Processing Fees
One of the enemies of profits for small business owners is credit card processing fees. A cash discount program reduces or, in some cases, removes card processing fees. Card-paying customers pay more because of the payment processing fees that credit card companies impose.
As a result, the payment processing fees that could have gone to the merchant as profit will go to credit card companies. The story is the same with debit cards, as cardholders will often pay additional fees for goods.
When using a credit card processor, the processing fee can be anywhere between 1.5% to 3.5% of the purchase price. A cash discount program ensures that transaction processing fees go to your merchant account instead of a credit card processor.
Most customers will not pass up the chance of buying at a lower price when paying in cash. In that case, the additional merchant service fees are removed from the purchase.
Consistent and Real-Time Profits
Using a cash discounting program allows you to enjoy profits in real-time. Also, a cash discount program saves you from debts peculiar to credit card payments. When starting the cash discount program, be clear on the terms.
This helps customers fully understand cash discounts and why they should pay in cash instead of other payment methods. Cash payments will reduce debts, resulting in maximum profit.
You can open a merchant account with many cash discount merchant services. A full-service merchant account benefits your business because it allows for easy payments. When customers make cash payments, the likelihood of complications will reduce.
Ultimately, a cash discount program makes the payment process effortless for you and the customers. Some customers may have initial confusion about such a program, but they will get the hang of it in no time.
Diverse Payment Options
The cash discount program allows your customers to choose from different payment methods. Cash discounting ensures that no money escapes you because people have multiple payment choices.
Either they pay with cash and enjoy the cash discount or pay with a credit card and bear the processing cost.
High Sales Conversion
Another benefit of using a cash discount program is that it leads to higher sales.
Cash discounting is a very effective marketing strategy that will likely attract more customers to your store. Human beings subconsciously protect themselves.
When customers hear words like “free” or “discount,” they think of saving money. So implementing a cash discount program results in sales conversion because people prefer to shop at lower rates.
Challenges of the Convenience Store Industry
The convenience store industry has several challenges that affect its day-to-day operations. The bulk of these challenges center on human labor and product promotion.
Below, we explain some of these challenges in detail.
One challenge that stores face is the inability to balance product prices with market costs in a way that profits them. Many things affect product pricing, such as inflation, operating hours, competition, and stock availability.
You may not always get the pricing right, but a little market research can help. The monthly minimum profits will depend on how effective product pricing is at the end of the day.
Increased Credit Card Fees
Most credit card payments come with a payment processing fee. Either way, the merchant loses up to 1.5% to 3.5% of the purchase cost. Over time, you’ll realize that these fees affect the store’s profit.
When this happens, a loss is inevitable, and a cash discount might just be the savior you need.
Most C-stores believe that marketing is not necessary because they sell everyday items. The average human being finds any reason to avoid spending money. So, you have to engage in aggressive marketing to convince people to buy from you.
Plan a marketing strategy tailored to the stores’ needs and execute it effectively.
With the constant search for hourly jobs, it is becoming difficult to either find or retain employees. The competition has become so intense that employees often settle for the best options. Beyond the paycheck, workers are seeking a good working environment. So when a store falls short of human labor, it results in work inefficiency. This, in turn, affects the customer service experience, which can also affect sales.
Is a Cash Discount Program What Your Business Needs?
A cash discounting program may likely be the next best thing for your store. However, you have to assess your business to see if a cash discount is what it needs. Before looking for the best merchant services in the industry, consider the following questions.
Can Your Business Handle High Cash Influx?
One advantage of implementing cash discounts is that there will be more cash purchases. So, you will have a high influx of cash daily. Can you effectively handle a large amount of cash every day? If your answer is no, you should rethink using a cash discount program. Wait until you develop a working system that will manage the cash flow.
How to Get Started on Cash Discount Programs
Follow the cash discount program guide below to get started on cash discount programs in your store.
- Contact a professional merchant services provider
- Discuss the cash discount programs that suit your business
- Sign up for a cash discount program the merchant services provider
- Get information on how the program works
- Select the equipment that suits your store’s program
- Take the equipment to the store
- Let a representative from the provider install and test-run the program
- Post a cash discount signage on display
- Start implementing cash discounts
- Sit back and enjoy your profits
There are no monthly minimum fees when using merchant services. After installation, the program automatically applies cash discounts.
What Do Convenience Stores Need for Cash Discount Programs?
Cash discount programs require that you have a merchant account. The cash discount merchant account is personalized for your business and syncs with the day-to-day activity in your store.
You don’t need to pay an account setup fee to create a merchant account, and there are no hidden fees. All you need to do is choose a merchant service provider that complies with federal and state law.
Many reputable merchant services help you set up with no service fee included in the cost. After you decide on one, ensure that their services align with the federal and state law on cash discount programs.
You will also need a cash discount signage that lets customers know you offer cash discounts. No technical knowledge of hardware or software is needed to operate the program. It works as a regular POS system and doesn’t rely on manual entries.
Alternatives to Cash Discount Programs
Cash discount processing has a growing popularity in the retail market. However, C-stores can still lower merchant fees with other alternatives; below are some.
Convenience Fee for Card Payments: Instead of using a cash discount program, you can charge customers a convenience fee for credit card payments. The fee is fixed for every transaction and helps to reduce credit card processing costs.
Increment of Product Prices: You can also include your payment processing cost in the price of the goods. The downside to this method is that customers may not buy from you if the competition sells at lower rates.
Customer Reviews About Cash Discount Programs
Moving away from credit card payments may be smart, but customers will often identify a discount that benefits them. Cash discounts benefit customers and merchants alike, so it is a win-win situation.
Most customers say that they prefer cash discounts because it helps them save money. Besides buying goods at a lower price, they also avoid credit card processing fees and debts.
Final Thoughts: Is a Cash Discount Program Worth It?
We cannot possibly overemphasize the benefits of using cash discounts in the retail market. A cash discount program effectively reduces the processing cost of credit card payments. It also protects your convenience store business from hidden fees that payment processors may likely charge.
Cash discounts help the store to minimize or eliminate merchant services fees without increasing the prices of goods. Also, the cash discount program converts the credit card processing fees that would otherwise go to credit card brands to profits.
In the long run, running a cash discount program is worth it because it keeps you in business. If you are still confused, read our cash discount program guide above to make a decision.
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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.