Frequently asked questions
Why would I want to implement the Cash Discount Program?
Other than the ability to virtually eliminate your monthly processing fees, the Cash Discount Program can really help those businesses that are most impacted by high processing costs. Consider small ticket merchants like a sandwich or coffee shop. You may have an average transaction size of only $5-8 dollars (sometimes even less). The underlying Interchange cost on a debit card used as a credit card is .05% plus $.22 per transaction before any processor fees. If you accept a debit card on a $5 transaction, your effective rate (fees divided into the sale amount) will be $.2225 divided into $5 or 4.45% before paying any additional fees! Compare that to a business that has a $100 dollar average transaction where their total costs are $.27 so their effective rate is now only 0.027%. The same credit card was used for each transaction, but the overall impact to profit is radically different. Using the Cash Discount Program can mean the difference between a business that is profitable and one that is just squeaking by.
Is it legal to offer a Cash Discount?
Cash Discount programs are legal in all 50 states per the Durbin Amendment (part of the 2010 Dodd-FrankLaw), which states that businesses are permitted to offer a discount to customers as an incentive for paying with cash.
Is this some kind of new program?
No, in fact it’s been around for decades in Europe and is used across the US in gas stations where a cash discount is offered at the pump. Gas stations have been using this program in the US for over 15 years. Many national, state and local governments including the DMV, Secretary of State, Post Offices, Schools, Courts, and the IRS implement a Service Fee.
What do I need to do to make sure I’m using this program correctly in my business?
In order to correctly implement a Cash Discount program, you don’t need to change any of your prices – you simply post signage (that we will provide) that states that all transactions now carry a 4% customer service charge. The proprietary technology is provided by Evo of NY in conjunction with our hardware and processing partners.
Is this the same thing as a Surcharge? I hear that’s only allowed in certain states.
No, the Cash Discount program, while seemingly similar, is actually very different, particularly in the eyes of Visa and MasterCard. As mentioned in the preceding Q&A, the 2013 ruling against the card networks resulted in merchants now being able to implement a surcharge. The surcharge is allowed in all but 10 states (California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas, plus the U.S. territory of Puerto Rico).
Those states claim that a surcharge is not fair to consumers. We find it somewhat laughable that it’s not fair for consumers to pay for the cost merchants incur to provide goods and services while it’s been perfectly OK for merchants to pay for the rewards programs associated with the credit cards that consumers use.
You do realize that right? Every time you see an ad on TV, in print, or hear on the radio that talks up the benefits and rewards associated with a particular credit card, those benefits come in the form of higher Interchange rates that merchants pay to be able to accept those cards. The increase in fees is not borne by the card issuing banks or credit card processors – it’s paid for by you the merchant!
The Surcharge carries with it several stipulations:
Only credit cards may be surcharged – no debit cards
Signage must be posted for at least 30 days prior to implementing a surcharge alerting your clientele
There is a 4% maximum that can be imposed
Surcharging is only allowed in states where the program has not been excluded
With the Cash Discount program, these limitations are not in place, as you are not implementing an additional fee for accepting a credit card, you are providing a discount for those who pay with cash. This is a clear distinction, and one that Visa, Mastercard, and the courts have agreed upon:
In a Cash Discount program, all prices in your store carry a 4% Service Charge. The posted prices are your cash price. Those who pay with cash do not have to pay this fee. This is not a situation where those who pay with a credit card pay more.
As Mitchell Katz, spokesman for the Federal Trade Commission, said in May of 2011: The Dodd-Frank law prohibits a payment card network such as Visa “from inhibiting the ability of anyone to provide a discount for payment by cash, checks, debit cards, or credit cards,” said Katz. “Neither surcharging, nor a cash discount is illegal.”
Is this a semantics argument? We’ll let you decide, but most importantly, Visa, Mastercard, and the courts allow for this distinction.
Won’t my customers be upset by this fee and want to go elsewhere?
While nobody wants to pay additional fees, more and more consumers are starting to realize just how expensive it’s been for merchants to accept credit cards. By charging a 4% fee on a sales transaction, that’s a small price for customers to pay for the goods and services you provide. And (if paying that fee or Implementing the Cash Discount Program) allows you to stay in business and keep your overall costs lower, it’s a small price to pay.
In fact, surveys have shown that over 80% of respondents stated they wouldn’t think twice about paying that amount (only $1.00 on a $25.00 transaction) for the convenience of using their credit card rather than carrying cash. And we all know that fewer and fewer of us are carrying cash these days…and everyone loves the rewards associated with their credit cards.
Additionally, we’ve all become accustomed to paying $2-4 when we use an ATM and this cash discount fee is actually cheaper than the ATM fee for most transactions.
If you explain that the Cash Discount program is a way for you to keep providing quality goods and services without increasing your overall prices, most consumers have indicated they understand and are fine with it. And again, a 4% fee on an individual transaction generally has a very small impact to the consumer, but for you, the merchant, your savings are significant.
I have a high average sale amount and the 4% might be viewed as being too high for my customers to stomach. Couldn’t I absorb some of that fee and still save at the same time?
On a case by case basis, we will work with you to implement a hybrid solution where you charge a Service Fee of anywhere between 1-4% to your consumer and you.
