Cash Discounting for Businesses: 101

Are you a business owner that is looking to cut down on credit card & payment processing fees? Cash discounting may be a beneficial route to help reduce your overhead, as well as providing your clients with exclusive discounts if they opt to pay cash.

What is Cash Discounting?


A cash discount is a payment option whereby lower prices is offered should someone choose to pay cash rather than a credit or debit card. A business can offer two different prices depending on how someone chooses to pay. The most common example of this can be seen at the gas pump where two different prices for the same gallon of gasoline are offered depending if you pay using a card or cash.


How Common is Cash Discounting?


Depending on where you operate your business, as well as the industry, cash discounting may be a common practice among industry leaders or something that is rarely utilized. It is essential to get insight from other business owners in your field, as well as looking into payment patterns from past clients, do your clients pay primarily in cash, or is it mixed? 


It is important to analyze your current client base as well as what other businesses are doing in your area. If you’re the only business offering a cash discount you may see an increase in business. It is also important to weigh the benefits of a cash option. 


Typically customer spends less when using cash and spend more when paying with a credit card.  It is important to know your numbers, does your business see a dramatic difference in cash vs. card transactions?


What is a Surcharge?


Depending on your state, a surcharge can be added to credit or debit transactions, which is an additional fee charged for the privilege of using a card. It is okay to have this fee as long as at some point during the transaction process the customer is made aware of the cash discount option. 


Something to Think About


If you think cash discounting is something that may benefit your business, it is important to examine the average transaction amount before determining and enacting a percentage fee.

A standard percentage fee is 3%. However, depending on a variety of factors such as the cost of goods & services and other variables in your business/industry, it may be more beneficial to implement a fixed fee.


An example of when / why a fixed fee is not always better than a flat percentage & vice-versa (hint: it all comes down to cost):


If you are a small business owner with a variety of items that range from $3 to $500, that 3% percentage fee will differ drastically based on the final cost:


A 3% fee on a 3$ purchase is only going to add $.09 to the final price, which is $3.09, whereas if the fee was a fixed $.30, the final costs would come out to $3.30.


On the other hand, if you have high priced items/services, it may be more beneficial to opt for a percentage fee:


If an individual makes a $500 purchase with a 3% rate, the total comes to $515, whereas if it were a fixed fee at $.30, the final cost would come out to $500.30.


Contact Boston Payments

For more information about Boston Payments and our different payment solutions, point of sale options, and information on surcharging, cash discounting, and credit card processing, give us a call at 617-752-1806 or contact us online!


Contact Us

More To Explore

piggy bank
Business Finances

Cash Discounting for Businesses: 101

Are you a business owner that is looking to cut down on credit card & payment processing fees? Cash discounting may be a beneficial route

magnifying glass on toys
Merchant Accounts

How to Find the Right Merchant Account Provider

Whether you’re already established as a business or just starting, choosing the right merchant account provider isn’t an easy task. With proper research, you can

Call Now: (617) 752-1806