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Guide to the Cash Discount Program for Retail

If you’re a small clothing retailer, you probably struggle with maintaining a proper profit ratio. Most customers prefer using digital methods to pay for their purchases, so you have to pay for the credit card processing fees. 

Credit card processing fees are generally a portion of each sale. However, some companies even impose separate monthly charges. Over time, these costs can start adding up.

If you have a large operation, the costs may not seem like much. However, due to this, smaller businesses can see significant cuts in their profits, affecting the overall cost-to-profit ratio. They keep looking for ways to reduce credit card processing expenses. 

Cash discount programs are one way to bypass these expenses. If complete bypass isn’t an option, they can pass these service fees on to the customers. Let’s look into the details of the program and determine whether it’s a feasible option for your business.

What Are Cash Discount Programs?

Cash discount programs require a business to list product prices, including the service fee for credit card transactions. Customers can get a discount if they use cash for the purchase. In this way, the business encourages people to make cash payments. The discounts can go up to 4% of the total price. 

The program may seem too good to be true, but it’s acceptable in all states. These programs started with gas stations to try and maximize profits, but these days they’re pretty popular in other industries. 

Retail businesses, especially newer ones, have much to gain from these programs. They use cash discounts as a marketing strategy to attract more cash-paying customers. 

If your customers want to use a credit or debit card, they can still do that. Your business will offer the service, but the customers will cover the processing fee for the credit card transaction.

Common Issues in the Clothing Retail Industry and Digital Payments

Guide to the Cash Discount Program for Retail

Clothing retail stores have been experiencing quite a decrease in their profits. Customers have started to spend less, especially compared to the last two years. 

The raw materials are far more expensive, and there’s a lack of an experienced workforce. Cash credit programs can’t cover all these problems, but they can help. 

Shift to Online Markets

Most customers prefer buying things online rather than in brick-and-mortar stores. Of course, a portion of customers still buy things in-store, but it’s considerably less. 

Small businesses relying on in-store sales are bound to see lesser customers. That’s especially true since large corporations offer mass-produced articles at significantly lower prices.

Small businesses shifting to the digital marketplace must invest in web design, back-end development, logistics, etc. All this takes significant money, and there’s no guarantee they’ll be able to generate any profits. 

Limited Reach

The online platforms are filled with thousands of retailers, which makes it harder for small businesses to make a difference. People are less likely to trust a new business, making it harder to earn any profit. Thus, you have to invest in effective marketing to attract customers. 

Return Policy Abuse

Clothing stores see tons of people abusing their refund policy. People buy clothes, use them and return them for their money. Some people go so far as to buy multiple products just so they can return them. Often, these clothes can’t return to the rack, so they go to waste, which further adds to overall losses. 


The post-COVID era already had high chances of recession and inflation. However, the current global political situation has worsened the situation. As fuel costs rise, suppliers have started raising the costs of raw materials. Plus, workers also demand more money, forcing retailers to raise prices. 

The worst part is the decrease in consumer demand. People buying clothes always wait around for a sale or price cut. Since raising prices diminishes demand, businesses have to resort to sales, decreasing profit margins.

Why Should You Offer Cash Discounts?

Cash discount programs are a great way to attract new customers while increasing your profit margin. Here are a few reasons the program will be a good idea for your business:

Greater Profits 

The cash discount program lets you increase your profit margins by passing on the payment processing fees to your customers. If customers don’t want to bear these charges, they can become cash customers. Since you don’t have to pay any processing fees for the cash, it will help you generate more revenue for the same product. 

No Need to Worry About Increase in Payment Processing Fees

Payment processors like VISA and Mastercard can always increase transaction fees. These increases cut into your profit margins. Plus, different merchants can have different transaction rates. For example, accepting an American Express card can be more expensive than a VISA card. 

Fortunately, that’s not something you need to worry about if you use a cash discount program. You can pass these costs on to the customers so they will take care of them even if increases occur.

Access Funds More Easily

You need a merchant account to process card payments. The POS system has a payment gateway to ensure the customer has enough funds to confirm the transaction. 

Once that happens, the merchant account deposits the funds to your account (after deducting the transaction fee). However, the deposit isn’t instant. The merchant account does it in batches, so it may take a day or two to receive them. 

Cash discounting encourages people to pay in cash, so you access your money more quickly. You don’t have to wait for any period since you receive the money after every purchase.

No More Chargebacks

Guide to the Cash Discount Program for Retail

When customers use their credit cards for payment, it gives them complete control of the transaction, increasing the likelihood of fraud. The customer can dispute the transaction, initiating a chargeback process. 

If the chargeback process says that the transaction is fraudulent, merchants must refund the amount and pay a chargeback fee. Thus, they end up losing money and the product. On top of that, they have to pay a fee out of their own pocket.

The dispute can be based on someone else using their card or them just not wanting to pay money. You can avoid this issue with cash. Customers paying in cash can’t dispute the transaction, so there’s no way for you to lose money from the sale.

More Customers

Everyone loves a good sale, and the cash discount signage will attract people looking for a good deal. So, cash discount programs are a great way to market yourselves to a broader audience. When more people try out your store, they’ll likely recommend it to their friends.

Things to Consider Before Implementing a Cash Discount Program

Cash discount programs are great, but you need to consider your business before implementing any program. Here are a few things to help you make the right decision: 

Cash Inflow

Once you implement a cash discount program, you’ll see a rise in cash transactions. So, the first thing to consider is whether you want cash. Storing cash is a bit risky if your store is in a shady area, and handling a lot of cash also comes with its challenges. 

If your store is in a safe neighborhood, you should have no problem with the cash. You just need to arrange a way to safely transport the cash and an efficient way to track the cash purchases. 

Customer Base

Clothing retailers are bound to get repeat customers. Therefore, considering how your regulars pay for their purchases is also a factor. 

If they prefer paying by card, they might get annoyed at not being able to avail of the discounts. Though, that’s a relatively simple concern. 

If you have a good rapport with your customers, they’ll shop with you despite this problem. Just ensure they get the best service and products. 

Setting Up a Cash Discount Program

Cash discount processing doesn’t need special hardware. You can reprogram your existing software to apply a discount on cash transactions. To avail of the program, you’ll need to find a merchant processor offering cash discounts. 

We recommend going for one that’s experienced in the field. A representative will help you understand everything. Once that’s done, you can apply for the program, and they’ll give you the necessary equipment. 

You can have them install this equipment in your store and teach you how to operate it. If you don’t want to change the entire equipment, check with the existing merchant processor to see if they offer the program. Some work on your end will include the following.

Calculating Processing Costs

The merchant processor you sign up with will help you calculate the costs. Afterward, you need to update the cost of your inventory to account for these costs. 

You can post both the cash and card prices. However, it’s far better to just go with the credit prices. That way, customers can’t compare the difference, and the discount is a pleasant surprise at the counter. 

You also have to be careful about adding these costs to the prices. That’s because if the prices are too high, it’ll deter the customers. 

Try to switch things up so that articles with the least profit margins have an increase in their prices. Alternatively, keep the prices the same if you already have an acceptable profit margin. 

Are There Any Special Requirements for Clothing Retailers?

There are minimal cash discount program requirements. Most conditions come from credit card companies, so go through those carefully. Otherwise, you could end up paying a fine. 

The most prominent of these requirements is the placement of the cash discount signage. You need to advertise the cash discount before implementing the program. Afterward, all your receipts must show that the prices include service fees. Be sure to clarify that debit card payments don’t count as cash payments.

Consumer Response

Guide to the Cash Discount Program for Retail

Most business owners avoid implementing the program because they fear losing customers. However, that’s rarely the case. Instead, the discount offer attracts folks looking for a good deal. 

Others don’t mind as they’ll still use their credit cards. There are rarely any issues at the counter because the program is based on positive affirmations. Retailers don’t tell the customers they’ll charge more for the card. They say they’ll offer a discount if the client uses cash. 

Alternate Methods to Decrease Processing Fees

If you’re still wary about cash discount programs, there are other alternatives to lower processing fees. They won’t eliminate the processing fees, but they’re a good start. 

Setting a Minimum Card Limit

You can set minimum card usage limits to cut down on processing fees for small purchases. Just remember that this doesn’t extend to debit cards. 

Opting for Merchant Accounts With Lower Fees

Do your research and find a good merchant that’s offering reasonable rates. However, you can’t just look at prices. Go through customer experiences and other forums to ensure the services are up to the mark.

Simply Raising Prices

You can consider raising prices to include the processing fees if nothing works. However, that might drive the customers away. Plus, if you’re going to raise the prices anyway, you might as well use the cash discount program to cut your customers some slack.


Cash discount programs allow retailers to pass the card processing fees on to the payments. However, customers can use cash to get a discount at the counter. The program is excellent for cutting down payment processing costs. If you do it correctly, you can build a loyal customer base. 

You’ll need a good merchant processor to help run the program. You can sign up with them, and they’ll take care of the technical things like reprogramming your proof-of-sale system. After that, just post the signs and start making some money!

As always, take your learning further with our credit card processing toolkit here