Saturday, February 2, 2013

Are discounts for paying with cash a good idea?

The government and courts are getting involved in the credit card processing industry once again. Please remember that the last time they did this the consumer ended up suffering and the savings were never realized by the consumers. Now the courts are mandating that merchants can offer cash discounts for purchasing. Sounds great doesn't it? Well don't get too excited. It won't be to a merchant's benefit for many reasons.

First....By offering a discount for paying for your products and services with cash, you are actually PENALIZING your customers who choose to pay with their credit cards. It's all about perception. It is your customers freedom to choose if they want to buy from you AND how they choose to pay for it. If they know they will be penalized, they will either lower the amount of their purchase or take their business elsewhere.

Secondly....A merchant who gives a discount for cash purchases is automatically reducing the size of their average ticket, reducing the opportunity for add on sales, and is controling in a negative way what and how much their customers will buy from you.

On the surface it sounds like a really good idea, but think it through: A local Florida restaurant gives a sizable discount for paying with cash. A party of six ate at this establishment last weekend. They had appetizers, dinner, and drinks. They were offered a 15% discount if they paid with cash. Who among us walks around with over $200 cash in their wallet? So in their opinion as a customer, they were penalizing for spending too much and for paying with a credit card. Their calculation is they each paid $2.50 more for their dinners because of the penalty. How do I know this? One of them called me and asked me to help the restaurant owner out because he HAS to be paying too much for his processing. If this restaurant continues with this policy, either this consumer will stop going or will cut way done on what they order at this restaurant. So was this a smart decision on the part of the restaurant owner? Of course not!

If you feel you need to penalize a credit card customer, call ME first. You must be paying too much!

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