By Samir Kadi, MTech Distributors
Cash, check, credit card,
debit card, mobile and online. Today there are a multitude of ways to pay — which
is convenient for the younger, tech-savvy generations.
However, one of the most
common complaints of small retailers like convenience stores, bars and single
location restaurants is the high cost of accepting credit and debit cards. Payment
options become even more complicated — for merchants and customers alike — with
recent innovations in cashless payment technology.
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New Cash Legislation Protects Consumers
New cashless payment
innovations could disenfranchise approximately 14 million unbanked consumers.
Some cities and states, like New Jersey, Philadelphia and Massachusetts, have passed
legislation protecting cash usage within their jurisdictions as cashless
retailing continues to develop. Although exemptions exist for mobile device
applications, car rental companies and other purchases, the laws offer
protections for a large portion of American consumers who may be discriminated
against for their lack of access to card or cashless technology.
On the other hand, a
recent settlement on a long-running court case in New York regarding
surcharging offers some protection for merchants who have been suffering under the
burden of credit card processing fees. The settlement will allow New York
retailers to pass surcharge fees on to consumers as long as the additional
amount is disclosed in monetary terms, according to Newsday.
California, Florida and Texas are among some of the states that have overturned
surcharge bans, allowing retailers to share or pass on the burden of using
plastic. While surcharge fees are controversial, cash discount programs are
legal in all 50 states.
Cash Discount Program Vs. Surcharge Fees
Surcharge fees are often
confused with cash discounts, creating uncertainty as to the application and
legality of cash discount programs. The 2010 Dodd-Frank Law, in the Durbin Amendment, states that businesses are
permitted to offer a discount to customers as an incentive for customers to pay
by alternative methods. The distinction is best explained through the posted
price of an item or service. “Merchants can provide a lower price for cash
acceptance…However, merchants are not permitted to post a price for
cash and then charge a higher price for cards,” according to a Visa
representative.
Cash
Discount Programs: Better For Business Owners And Better For Customers
It is hard to dispute the benefits
of a cash discount program for both retailers and their customers. Benefits
include:
- Reduced fees for merchants. The most obvious benefit for retailers is the ability to reduce or eliminate credit cards usage fees. With a cash discount program in place, merchants are able to reduce fees that cut into their profit margins and consumers avoid credit interest fees on small purchases.
- Simple for merchants and customers to understand. Since all items in the store are priced with a built-in service fee, that is deducted if consumers pay with cash, a cash discount program is easy for customers to understand.
- Merchants retain more profit. Merchants are able to retain more profit by reducing processing fees and with less customers using cards, they are also able to reduce credit card charge offs.
Credit card processing can
be a challenge for small businesses owners with limited budgets and thin profit
margins. With a cash discount program, merchants can give customers the option
to pay a discounted price when they pay with cash; reducing costs for both the
customer and the business owner, while still catering to consumers who prefer
plastic.
Samir Kadi is the CEO of MTech Distributors, LLC. Specializing in solutions for merchants, MTech provides
ATMs, merchants services and everything related to payments that a merchant
needs to grow their business, increase revenue and surpass customer
expectations. A graduate of City University of New York-College of Staten
Island and successful entrepreneur, he also owns TECHataClick and ATM Routes for Sale. Connect
with Kadi via email
or on LinkedIn.
