With technological advancement, we can see a serious rise in credit card transactions. It is easy for the customers to make payments and allows them to keep their money safe. But what is in it for the small grocery store owners? With the increasing costs in credit card processing fees, it has become difficult for small businesses to accept credit cards.
This has left owners with no choice but to charge customers a service fee if they pay with a credit or debit card. It is one of the only ways for owners to save money. Although people prefer paying through a credit card, the credit card processing costs are so high that they discourage owners from accepting them.
Cash discount programs, however, can provide business owners with a sustainable long-term answer.
This article sufficiently explains the use of cash discount programs and their benefits for grocery stores. It will also mention the basics for setting up cash discounts for your business.
What Are the Cash Discounting Programs?
Everyone benefits from a quick summary before diving headfirst into something new. One cannot just wake up and decide to add something new to their life or business. But worry not; we are here to help you in the process.
A cash discount program provides discounts to customers paying in cash. At the same time, those who pay with a credit card need to pay an additional fee to offset the transactional costs. Cash discount programs are not something that benefits the customers only. They play a big role in saving owners from merchant service fees.
The cash discount program is a gain for grocery store owners. In the program, customers have two options; either pay with cash or a credit or debit card. But this is a problem as most grocery stores are going online day by day, and people prefer ordering and making debit card transactions.
For cash, you need to be physically present and then buy the grocery. Since most people refrain from this, store owners pay a large sum for each credit card transaction.
Cash discount programs are becoming popular among grocery store owners day by day because that way, they don’t have to pay credit card processing fees. This program also encourages the customers to pay in cash as they can save money too. So it is a win-win situation.
How Much Does a Cash Discount Merchant Account Cost?
When accepting credit cards, stores must fork over a percentage of each sale (typically between 2% and 4%) in addition to a regular monthly or annual account fee. The good news is that cash discount programs eliminate the need to pay these merchant fees.
Yes, you heard that right. Unlike payment card networks, a cash discount merchant account is free of cost. The money goes straight to your pocket, and no third party is involved.
It also saves you from the card rules, and there are no restrictions. Your business is in your hands, and you are the one making decisions about the money.
How Does a Cash Discount Program Benefit the Grocery Stores?
A cash discount program has several benefits, and discussing them all in one place is impossible. Grocery stores can benefit from this program on a large scale.
So, we made sure to mention the top benefits below:
No Hidden Fees
By opting for cash discount processing, you can avoid the sly charges levied by major credit card companies. Over thirty percent of your store’s revenue is being eaten away by credit card fees. They do this by charging a fee based on the total volume of transactions processed each month. But with cash payment, there are no additional fees.
An Increase in Cash Paying Customers Leads to an Increase in Merchant Savings
In addition to avoiding the loss of revenue caused by transaction fees, merchants benefit when customers pay with cash because no card rules are inferred. This method allows you to control your transactions and make decisions without pressure from a card company’s rules and regulations.
It increases the stores’ profit as little is lost in paying the merchant fees. The processing fee is added to customers’ bills who choose credit card payments by cash discount merchant services. Therefore, they let business owners save money by doing away with the need for costly payment processing.
Successful Marketing Techniques
If you want more customers to enter your grocery store, you will either have to provide goods at a low rate or come up with offers like no other. And with a cash discounting program, you can enhance your business as more and more customers enter through your store’s door. But the question is, how does this happen?
It’s as simple as anything. When you offer cash discounts to customers, they will prefer your store to others. Everyone wants to save money, be it customers or businesses. And when given an offer, no one likes to lose it. You can come up with different discounts that suit your store and gain from them. But keep in mind that activating the account and programs takes a couple of days.
No Loss Through Chargebacks
A lower rate of chargebacks means less hassle for your store, which is good news if you’re trying to keep things running smoothly. With the service fee included in the bills, most customers pay with cash and avoid credit and debit cards. The money goes straight into your locker or drawer, and you will have to deal with little to no chargebacks as you did before.
No Delay in Receiving Funds
Usually, when customers pay with credit or debit cards, the funds don’t come to the owner’s account straight away. They must wait for at least 24 hours before accessing their funds. And if the weekend arrives, they have to wait till Monday for the funds to be processed.
But with the cash discount program, you can easily access your stores’ funds without having to wait. Furthermore, grocery stores are the busiest places after restaurants on weekends, so there is no need to wait for Monday.
No Frauds, No Loss
With card payments, there is a high chance of fraud. You can get scammed in many ways, and with such technology, it is difficult, but not impossible, to hack anyone’s account. But with cash customers, you can rest assured as there is little chance of fraud. Furthermore, your money will be safe and under your protection at all times.
Unlike other payment methods, you don’t have to stress yourself to set up your cash discount program. All you need to do is search for a trustworthy merchant service provider which provides this program. After that, you need proper cash discount signage. This is for your POS and credit card processing.
Now you can access the program and start your journey with it. There is a very small merchant processing fee you will have to pay. Even the smallest of businesses earn enough to pay this fee, so it is not an issue.
This is because the merchant services provider will take care of every step and train your employees to handle the payments. This will save your store from big losses which may occur due to negligence and lack of knowledge.
Challenges of Running a Grocery Store
Running a grocery store might sound easy, but it is not a piece of cake. Starting your business on a small scale makes you go through several challenges.
There are several reasons for these challenges, but the main reasons are; decreasing profits, insufficient customers, and card payment processing fees. We will discuss a few of these challenges below.
In this age, most businesses gain popularity through social media apps. To enter the race, many grocery store owners start selling their goods online or try to make their name by asking for promotions from already popular businesses. Furthermore, they do weekly giveaways, so people prefer their store.
But in all this, a lot of the stores’ profit is lost, and then there is no room left for more discounts. Also, one negative review has the power to destroy a whole business, and history is full of such stories.
Hiring employees for your grocery store is a big challenge, training them is another. But with the swift changes in the world after the pandemic, you can see that people don’t work for small businesses as the pay is quite less in comparison to the ones big businesses give.
So choosing the right staff is very important for the growth of your grocery store. This will help you increase your sales and save you from customer complaints.
Inflation Facing Grocery Stores
Everyone is aware of the effects of inflation. And grocery stores bear even more pressure. With all this, it is impossible to sell goods at the old prices. Customers often complain about your prices without realizing that the MSRP is typically very close to the price you sell the item for. And the profit you are making is too small to have any impact.
It is important to increase the prices to earn some profit. But doing so increases customer complaints and often ends in unwanted quarrels everywhere. And often, the store owners have to stop bringing in many goods because of the increased prices, resulting in low demand.
There are many more challenges that grocery store owners face on a daily basis. These are just a few of them. But with the cash discount program, tackling these issues can be easier.
How to Set Up the Cash Discount Program
It is important to learn the basics of something before implementing it. A cash discount program is very simple to set up and requires very little effort. But keep in mind that cash discount merchant processing must be done correctly.
Follow the guidelines below to successfully implement a cash discount program.
- Look for a trustworthy merchant who is proficient in the program
- Look through their portfolio to learn more about their program
- If the program suits you, fill out the application form for the program
- Keeping in mind your grocery stores’ needs, select the POS
- Wait for the merchant to deliver your equipment
- Allow the merchant to set up the equipment and train your employees
- Start your journey with the cash discount program
What Are the Requirements for Setting Up a Cash Discount Program?
Managing a cash discount program is simple and straightforward, so long as you follow all applicable federal and state laws and don’t violate the guidelines set forth by credit card companies.
All you need to do to start offering discounts to customers in cash is to get your point-of-sale terminal set up to do so and to put up the appropriate signs and posters around your store to make customers aware of the program.
Alternatives to Cash Discount Programs
There are other ways to save money and boost profits at your grocery store, though cash discount programs are the simplest and safest. One is to start charging more for the items you already sell, though this could potentially drive away some of your regulars. You can also try saving cash by switching to a service provider that charges lower transaction fees. If neither of those solutions works for you, you can always set a minimum card payment limit for your customers. You should evaluate your choices and go with the best one.
What Do Customers Say About Cash Discount Programs?
No program can achieve success if the customers do not approve of it. So is the case with the cash discount program. According to several surveys on the internet, it is right to say that customers love the cash discount program.
They are content as they save money and are encouraged to pay through cash. Running a grocery store can become twice as difficult with the increasing payment processing costs. So the cash discount programs can be a great help.
Furthermore, it also saves the customers from increasing prices and taxes, so they don’t grow out of it. Also, with the customers approving of the program, the grocery store’s sales increase, and they come up with new discount offers that the customers love. So the program has a good reputation among the buying party.
With the unstoppable increase in credit card processing fees, the cash discount program is the new trend in town. It benefits small grocery store owners in several ways and allows them to save the money they previously spent on paying transaction fees.
However, it is important to choose a trustworthy merchant for the program and train your staff on the basics of the cash discount program to avoid fraud. With this, the guide comes to an end. Take on the program and allow your business to grow.
If you want to dive deeper into the subject there are many articles on it within our processing materials library.
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.