Should You Offer a Discount to Your Cash Paying Customers?

213546_credit_payment_3Under the terms of a $7.2 billion settlement reached last summer between credit card companies and retailers, retailers will be allowed to impose a surcharge on customers paying by credit card. The amount of the surcharge depends on how much the retailer pays in processing fees, but it can range from 1.5 to 4 percent of an item’s the purchase price.

If you are running a small retail operation outside of the states that have prohibited such a surcharge, then you may be the debating how to go about easing the fee burden of payments made by credit card.

Some retailers have opted instead to offer a discount or other incentives to their cash paying customers. But is such a move right for you? There are definitely some benefits over here, such as that shoppers may be more receptive to either receiving or opting out of a discount than they would be to choosing whether or not a surcharge is worth it. A discount just has a nicer feel to it.

Moreover, you may not want to totally alienate your shoppers who pay with credit. Many studies point to the fact that people tend to spend more when they pay with a credit card as opposed to cash.  A surcharge, even a small one, could be enough to discourage a credit purchase and any “extras” that may have been added to it. Credit cards are also more convenient for customers. Today, most people paying with plastic generally expect the option to do so without penalty. You could quickly elicit the angst of customers caught without cash and who may be annoyed that they have to pay more for pulling out the plastic.

So, the bottom line to this is that there are definitely some key benefits to offering a discount to cash paying customers instead of tacking a surcharge onto credit card purchases. But, you really have to be in touch with the needs and attitudes of your customers. If all else fails and you are unsure which way to go, you could always just as your customers or test out the response to each strategy.

Over to you… Do you run a retail business? How have you responded to the new credit card legislation?

Comment via facbook
Attention Business Owners: Get Unsecured Working Capital For Your Business Here