Accepting Cash to Avoid Processing Fees? Why Cash Discounts Are a Must

Did you know that 82% of businesses that fail cited that cash flow problems were a factor in their failure? Cash flow details the amount of money coming in and out of the business.

What some small businesses don’t realize is that credit card processing fees can add up and negatively impact your bottom line. To avoid these fees, you can offer a cash discount program.

Keep reading to learn more about these options.

Traditional Credit Card Processing

Traditional credit card processing can cause your fees to pile up and ultimately lower your profit margin.

When a customer makes a credit card purchase at your business, you aren’t the only player involved in processing the transaction. Credit card processors, associations, and issuing banks are also involved.

A processor will carry information and authorization requests between a credit card association and the merchant. Associations like Master Card and Visa are those who make credit cards.

Credit card issuing banks are those that issue credit cards. All three of these pieces are the middleman in the process. They all collect part of the profit when a transaction gets made.

A 4% processing fee is normal for each credit card transaction. Even though you make the sale as a merchant, the middlemen’s payments come out of your pocket.


Payment processing fees are also known as surcharges. These are the fees added towards the price of a service or good along with the existing tax.

In the United States, 40 states allow surcharge fees to customers who pay with credit cards. Kansas, Maine, Colorado, California, and Florida are among some of the states that prohibit surcharges.

Cash Discount Processing

You can avoid processing fees through a cash discount program. With a cash discount, there is still a credit card processing fee that satisfies the middlemen, but you don’t have to pay it.

All processing fees through a cash discount program are transferred to the customer. Cash discounts work because you provide your customers an incentive to pay with cash instead of a credit card.

The fee is transferred when you add a small service fee to customer transactions that are paid for with a credit card. When a customer pays with cash instead, the fee is lifted.

Cash discount processing is approved in all 50 states. To work with this discount, you’ll need to provide a customer notice at all entrances and points of sale.

This notice will inform them of the cash discount and service fee if they choose to use a credit card.

0% processing eliminates all fees through a cash discount program. Contrary to popular belief, your business will save money because service fees are often ignored by customers.

Offering a Cash Discount to Benefit Your Business

Some companies think that since customers don’t carry a lot of cash that they’ll lose business with a cash discount program. However, businesses lose a lot more money paying the middlemen through processing fees.

Cash discount programs are legal in all 50 states, so implementing them into your business should not be a problem. When you do, you’ll be able to make all of the money spent from a customer credit card.

For more business financial advice, check out the other posts on our blog!