Cash Discounting vs. Traditional Credit Card Processing

Payment processing has drastically changed over the years to keep up with the ever-evolving needs of merchants and consumers. Today, merchants have more options than ever when it comes to how they accept and deliver payments. One of those big options is having the luxury of choosing between three different forms of payment processing: traditional card processing, cash discounting, and Net Zero Processing Fees™ (which we covered earlier this month).

With so many processing options it can be difficult to narrow down a solution that aligns with your business goals and needs. For example, perhaps you are a small business owner looking to reduce fees or work for a large business that is seeking an increase in sales. Whatever your goals are, if you are only accepting cash payments, you may end up losing the majority of potential customers who prefer to pay with debit or credit cards. Read on for an analysis of each type of payment processing.

Traditional Card Processing 

Traditional card processing charges a fixed rate, monthly fee, and transaction fees. When utilizing a card processor through a bank or specialized merchant services company, it’s important to consider the costs of processing. For example, the majority of credit card processors do not offer a fixed rate, which means you may be charged extra depending on the type of card used during a transaction. During a transaction, a surcharge is applied when customers use a credit or debit card. This is due to the processor needing to make up for the money they are putting into processing debit or credit transactions. Although merchants end up paying the surcharges, consumers prefer the convenience of paying with their credit or debit card.

You never want to have to turn a potential customer away because:

  1. A credit card is the only form of payment the consumer has available at the moment.

  2. You (the merchant) don’t have the payment technology to process credit or debit cards among other reasons.

Cash Discounting vs. Net Zero Processing Fees™

Cash discounting programs help merchants offset their card processing fees. In addition, it also encourages customers to pay with cash. As with Net Zero Processing Fees™ and cash discount programs, merchants are required to declare the program with instore signage, in order to make sure customers are aware of the fee.

As far as cash discounting goes, fees are already applied to the items for sale. For example, when a customer pays with cash they are offered a “cash discount” for utilizing a different payment form. This cash discount automatically reduces the convenience fee applied at checkout and is printed on the customer receipt, just like with Net Zero Processing Fees™ it helps the merchant offset their credit card processing fees. Moreover, you also encourage your customers to pay with the alternative to debit or credit card payments.

The main difference between cash discounting and Net Zero Processing Fees™ is that zero fee processing eliminates all of your credit card processing fees while cash discounting offsets only some of those fees.

What is the difference between traditional credit card processing and cash discounting?

Plain and simple: the difference between traditional card processing and cash discounting is interchange fees. Traditional credit card processors charge merchants an interchange fee that is part of the built-in costs by card providers (i.e. Visa, MasterCard, American Express, etc.). Interchange is the true card cost set by card associations and it varies from card to card. Cash discounting reduces processing fees by passing them on to the customer.

* With Net Zero Processing Fees™, you (the merchant) have interchange but they are canceled out since customers pay the non-cash adjustment.

Types of Card Acceptance

Offering multiple ways to pay allows you to create a customized approach to payment acceptance. When consumers feel they are being supported, it helps your business in the long haul. When working with any type of credit card processing company, the types of card payment acceptance differ depending on the processor. For example, credit card companies offer payment terminals, point-of-sale systems (POS), mobile, virtual, and online payments. The cash discount program doesn’t allow online or virtual payments since a cash program requires the option of in-person cash transactions.

Selecting a Payment Program for Your Business 

Now that you’ve learned more about the different card processing and cash discount programs, you are one step closer to selecting a program suitable for your business. Are you seeking ways to manage your credit card processing fees, customize payment types, or encourage more cash payments? Whatever your reason, you can count on more options as you move forward.

Today, more business owners are choosing to process credit cards, since it goes a long way with consumers because of the convenience. Not to mention you are making it easier for consumers to purchase in various ways (in-person, online, or over the phone). Personalizing your payment processing and giving your customers options will go a long way in managing a smart and successful business. Have questions? Contact us at 800-567-4729 or