Cash has always been the only form of payment until the invention of credit cards. Nowadays, however, almost everyone uses plastic. Why would anyone pay with cash anymore?
The answer lies in the benefits of using cash. For example, you don’t have to worry about being charged extra fees or having your card declined. But why do you get a discount for paying cash?
This is a part of the reason why ‘discounts’ as such are applied when paying in cash, because of the transaction fee of paying with a card, etc.
Cash is still widely accepted because it offers convenience and security. If you want to save money, why not try using cash instead of debit or credit cards? Find out below why you can get a discount for paying cash from merchants.
What Exactly Is The Debate Over Discounts For Paying Cash?
The debate over whether retailers should be allowed to charge customers extra fees for using plastic cards appears to heat up when the topic arises.
A bill passed by the state legislature in July 2018 prohibits merchants from adding surcharges to credit card purchases unless the customer gives prior written consent.
But some industry experts say that the legislation does not go far enough and that it leaves consumers vulnerable to additional charges, therefore getting discounts for paying cash.
A group called Retail Merchants of America filed suit against the law, arguing that it violates shoppers’ constitutional rights. The case is pending.
Retailers argue that the surcharge ban forces them to pass along costs associated with processing transactions, including fraud protection and merchant discounts offered by payment processors like Visa and Mastercard.
They also contend that the prohibition makes it harder for small businesses to compete with large chains because they cannot afford to absorb the cost of the surcharge.
What Is Said About Cash Discounts Being Permitted?
The Durbin Amendment of Dodd-Frank allows merchants to offer cash discounts to customers who pay with Visa, MasterCard, American Express, or Discover.
This is known as the Durbin Amendment because it was passed during the 111th Congress when Democrat Richard Durbin sponsored the bill. In fact, it was signed into law on September 26, 2010. However, the law did not take effect until May 21, 2011.
This law is part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protections Act, which was passed to regulate financial institutions and protect consumers.
This act also included provisions that prohibit banks from charging overdraft fees and require banks to give notice of changes to ATM surcharges.
What Are The Benefits Of Offering Discounts For Paying Cash?
Cash is often the most expensive way to pay for things like gas, groceries, and utilities. So what are people doing about it? Some prefer to use debit cards for everyday expenses, but use cash for special occasions.
Discounts are great because they encourage repeat business and increase sales. They also help build brand loyalty.
Discounts work best when they’re consistent. If you offer a 20% off coupon every month, you’ll be able to save a lot of money over the long term. And if you give away free samples to attract customers, you’ll be able to build up a loyal following.
But don’t just throw out coupons without thinking about what you want to accomplish. You might decide to use discounts to reward your best customers or even to promote a special event.
If you’re looking to grow your business, consider offering discounts to employees. This is a good opportunity to show your appreciation for their hard work.
Another benefit to using cash is that it helps you control your finances. You know exactly how much you’re spending, and you don’t have to worry about overspending because you usually have a certain amount of cash in your wallet.
What Are The Drawbacks Of Offering Discounts For Paying Cash?
Here are a few reasons why you might not want to encourage cash payment options:
1. Cash is Risky
Cash is risky because it’s easy for someone to steal money from you. You don’t know how much cash you’re carrying around with you unless you count it every day. You could easily lose track of where all of your cash went.
2. It’s Difficult To Track Sales
When you use a credit card, you can see your purchases right away. But with cash, you have to wait until the end of the month to find out how much you spent.
Why Do You Get A Discount For Paying Cash?
To summarize, offering discounts for paying with cash can be a great way to boost your bottom line. But make sure you understand the rules before you start giving them out. Otherwise, you may find yourself getting into trouble with your bank or credit card company.
Overall, the reason for more discounts being offered when paying with cash is due to the minute cost of transaction fees from credit and debit cards. We hope that this article has given you a strong insight into the connection between discounts and cash.
Frequently Asked Questions
How Can Cash Discounts Actually Be Offered?
As noted, merchants must notify consumers about cash discounts at least 30 days prior to the date of sale. They must also comply with the rules that credit card companies have set up regarding surcharges and discounts.
Visa released a bulletin stating that many merchants’ cash discount programs are not compliant with the company’s rules.
Under Visa’s rules, retailers are not allowed to add fees on top of the normal price of goods and then provide discounts at the register if the consumer pays cash.
The company says that many merchants are offering cash discounts without following the rules. For example, if a retailer offers a 10% discount on items priced $100 and above, it must charge no additional fees for paying with cash.
If the merchant adds a 5% processing fee to every transaction, the total amount charged on each purchase will be 15%. This is clearly not what Visa wants.
It is always good to take the extra step to get more well rounded in how payments work. You can do that in our credit processing learning 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.