Tips for Implementing a Cash Discount Program

A cash discount program offers merchants a way to engage in cash discounting, a cost-saving payment processing strategy that offsets credit card processing fees by incorporating them into standard pricing. While it’s legal in all 50 states, some merchants find it more intricate to set up, operate, and maintain compliance compared to credit surcharging. To help you navigate this process successfully, we’ve outlined eight crucial steps to implement a cash discount program.

Step 1: Check for Federal & State Requirements

Cash discounting, like other zero-cost credit card processing strategies, is subject to federal and state regulations. Federal guidelines emphasize transparency, proper disclosure, and non-discriminatory business practices. To stay compliant, follow these general guidelines:

• Display complete and proper signage at the entrance and checkout counter.
• Ensure that receipts clearly show any service fees or discounts related to the cash discount program.
• Verbally offer the cash discount payment option to all customers at checkout.

Noncompliance can lead to substantial fines imposed by federal regulatory bodies such as the Electronic Funds Transfer Act (EFTA) and the Truth in Lending Act (TILA).

Step 2: Apply for a State Cash Discount Program License (if needed)

While cash discounting regulations are generally more lenient, some states may require additional steps. For example, California and Texas mandate that businesses apply for special licenses to run cash discount programs. Research your state’s specific requirements to ensure compliance.

Step 3: Reach Out to Your Payments Provider

Your payment processor can reprogram your system, create a strong cash management policy, and ensure full compliance. Gather information on average merchant service fees, qualifications, requirements, monthly program fees, contract terms, cash tracking features, hardware use, setup/downtime, and state compliance before signing up for a cash discount program.

Step 4: Have Your Hardware Reprogrammed

Your payment services provider will reprogram your hardware after signing up for the program. It’s essential to understand the changes made to both software and hardware and ensure they comply with cash discounting regulations.

Step 5: Set Up a Strong Cash Management Policy

Cash payments increase the risk of errors and theft, making a robust cash management policy crucial. Implement procedures for handling cash transactions, including keeping records, generating reports, and maintaining accountability.

Step 6: Train Your Employees

Provide comprehensive training for customer-facing employees, covering cash register operation, policy explanation, and customer interaction. Train employees to handle cash transactions and display step-by-step guidelines at checkout counters.

Step 7: Update Your Price Tags

Replace printed price tags to reflect the adjustments for your cash discount program. Ensure that all printed materials, such as signage, ads, and flyers, are updated accordingly.

Step 8: Display the Required Signages

To comply with federal, state, and card network regulations, display signages at your store entrance and checkout counter, informing customers about the cash discount program. The signs should convey information about the cash discount percentage, accepted payment methods, ineligibility of debit card purchases, and automatic application of discounts at checkout.

Following these eight steps will help you successfully implement a cash discount program, enabling your business to reduce credit card processing fees while maintaining compliance and customer satisfaction.