The Five Keys to Evaluating a Merchant Cash Discount Program
1. Legal: Cash discount programs come in all shapes and sizes. Like choosing any vendor, be sure they are in good standing with organizations such as the Better Business Bureau. Be sure that they can detail how their cash discount program complies with state and federal laws. Ask for sample receipts and statements. To clearly adhere to federal standards, the service fee or discount amount needs to be detailed clearly to the customer at the time of the transaction.
2. Equipment:The technology of cash discounting is quickly evolving. Be sure to use a provider that has patent level technology that is programmed directly into the equipment. The most advanced technologies currently are built for specific terminal brands. In these cases, you can easily negotiate for free and discounted equipment. Cash discount technologies are not universal, so be sure to ask a lot of questions when evaluating equipment options.
3. Hidden Costs: As with traditional credit card processing, there are unscrupulous providers who will take advantage of the savings that cash discounting provides. Get pricing clear and in writing. If your sales rep makes a promise, make him/her put it in writing. The concept of a cash discount program is simple. The provider you choose should be completely transparent in their pricing and not charge unnecessary fees.
4. Fee Options: Good providers offer two service fee pricing options either by an average ticket size (flat fee) or a percentage of the sale amount. Businesses with a big ticket discrepancy need the percentage model, while businesses with consistent average ticket size work well with a flat fee. Be sure to know your average transaction size so that you can pick the right model for your cash discount program.
5. Support: For a successful rollout, merchants will need the cash discount supporting materials such as in-store signage, training guides and videos, quick reference handouts as well as a hotline to answer customer questions. A good provider will offer all of these things free of charge, in addition to being on hand to troubleshoot equipment, answer billing questions, or assist with additional training.
Bonus Keys to a successful Merchant Cash Discount Program
• Daily Discount: You should receive your full batch for each day you process. The daily discount attempts to do the accounting and reconciliation with every batch. Cash discount programs that use daily discount are non compliant and should be avoided at all costs.
• Tips: Many technologies have not figured out how to account for tips. As previously discussed, it is a requirement of the cash discount program that the convenience fee be displayed to the consumer at the time of the transaction. Since the tip is added to the transaction post swipe, the convenience fee cannot be adjusted when the tip is reconciled at the end of the servers shift. If your business takes tips, e sure to ask if your provider has a solution for tips.
• Beware of 100%: Slick marketing hucksters will state that you can eliminate 100% of your credit card processing fees. This assertion is dishonest. Any program that promises to eliminate 100% of your fees, by law, will not be a compliant cash discounting program. Depending on volumes, most merchants can expect an 80 to 90% reduction in fees.
• Trial Period:10 to 15% of businesses that try cash discounting ultimately come to the conclusion that it is not the right program for their business. Many legitimate programs recognize this and will offer a trial period of 30-60 days. The best providers will even roll you back into a traditional merchant account with competitive fees and no termination costs.
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