How To Create a Cash Discounting Program

How To Create a Cash Discounting Program
While many consumers prefer contactless payment methods like credit cards or mobile wallets, many still opt to pay with cash at times. Here's how some business owners are creating cash discounting programs and why.
by Deborah Findling Nov 29, 2023 — 3 min read
How To Create a Cash Discounting Program
This article is for educational purposes and does not constitute legal, financial, or tax advice. For specific advice applicable to your business, please contact a professional.

Although credit cards were the most used consumer payment method in 2022, a recent report by the Federal Reserve suggests the use of cash isn’t going away anytime soon. While cash comprised 18% of payments made in 2021, 93% of the Fed’s survey’s respondents said that they carry cash on them and don’t expect to stop using it in the future. Overall, the amount of cash that respondents said that they keep on them has increased by $5 from 2021, averaging $73. As a business owner, providing a range of ways for consumers to pay can help ensure you never miss a sale, and further optimizing the options you offer can delight your customers and support your business’s growth.

Here’s why some business owners are creating cash discounting programs and how you can create your own.

Should you create a cash discounting program?

While contactless payment methods like credit cards and mobile wallets continue to rise in popularity, many consumers still opt to pay with cash at times. According to a 2023 PYMNTS survey, 81% of consumers carry and use cash. Offering the option between credit card and cash payments lets your customers decide which method they prefer when it comes to paying for goods and services at your business.

Ultimately there will be pros and cons to accepting cash or credit at your business. Consider how your customers prefer to pay and how you can offer those options while growing your own business sustainably. 

How to set up a cash discounting program with Square

If you are a Square seller looking to implement a cash discount program, you can do so in a few steps:

  1. Update your pricing: You may want to update your pricing to recoup the cost you will incur on a credit card transaction. For example, if an item is $10 and a customer pays with a credit card, there could be an additional 2.6% processing fee that you will have to pay on that transaction, which comes out of the $10 the customer paid for the item. In this case, you may price your good at $10.27 to cover the cost. For customers who pay in cash, perhaps you offer them a discount on the item and charge $10 exactly, passing the credit card processing fee savings on to them and also creating a simpler transaction with a ten dollar bill.
  2. Market the offering: Create signage or provide updates on your digital surfaces to market your cash discounting program. Be sure to communicate what you are offering clearly.
  3. Create a discount through Square Dashboard: You can create and list a discount through your Dashboard and enter the percentage discount you’d like to offer in exchange for purchasing with cash. You can then apply this discount when customers pay.

Remember to train your staff so they are aware of these changes and know how to apply the discount to the appropriate transactions. Think about creating a small list of frequently asked questions so that your team members can reference answers easily if customers ask about the program.

The difference between surcharges and cash discounting

Credit card surcharges are fees added to a transaction by a business, typically to cover the cost of processing. These surcharges are subject to state and local laws, and often they can be applied only to credit cards, not debit cards, gift cards, or prepaid cards. Cash discounting, on the other hand, can help offset processing fees by discounting a good or service if your customer uses cash as opposed to a credit card. While this isn’t always ideal depending on factors like the size or type of transaction, it’s an alternative to surcharging for both the business and the customer.

Cash discounting may help serve your cash-forward customers and also offset costs you might incur with a typical credit card transaction. However, it can also be difficult to communicate these nuanced price changes and your reasoning for them to customers who pay with cash for a discount. When you are deciding about how to build a cash discounting program and whether it is the best fit for your business, think about who will be responsible for which costs and the best way to balance your pricing and customer relationships. 

Deborah Findling
Deborah Findling is an Executive Managing Editor at Square. She also writes about investment, finance, accounting and other existing and emerging payment methods and technologies.


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