Can High-Risk Merchants Use a Cash Discount Program?

You might already struggle with concerns over merchant services if you have a high risk of chargebacks, fraud issues, and other credit-related concerns. You may start to wonder if your business can benefit from a cash discount program. 

A cash discount program can help you offset credit card processing costs. But as a high-risk business, you’ll be subject to higher processing charges. These totals could be twice as much as what others might spend at a time.

The good news is that high-risk merchants can use cash discount programs if they plan them well. You can plan your discount efforts to ensure your work isn’t interpreted as surcharges that might be illegal in some states.

Who Needs Help the Most?

High-risk merchants of all sorts can benefit from cash discount programs. These include:

• Businesses that handle and store highly sensitive personal data, including identifying tax numbers
• Debt collectors, loan providers, and others who offer financial services
• Businesses that sell items that may be subject to cancellations, including travel and event ticket sellers
• Companies that sell liquor, firearms, CBD oil, and other items that may be subject to government regulation
• Investment companies, including ones that offer advising support
• Any entity run by a foreign national, including a business that is incorporated somewhere outside the United States
• Health-related businesses, including ones that sell nutritional supplements, alternative medicine products, and other items that may not have FDA approval

What Will You Get From a Cash Discount?

Your cash discount plan for your high-risk business will entail giving people a discount for paying for items with cash. You could list your prices as ones people will pay when using credit cards. But those customers will get a small discount if they pay for these items with cash instead. The cash discount is reflective of whatever credit card processing charges you would spend.

Understand How It Works

Let’s look at a quick high-risk scenario to see how a cash discount works. Let’s say you run a store that sells CBD-based products. You might have a higher than usual processing charge due to your business selling products subject to substantial regulations by state.

You may pay card processing fees worth about 7 percent of each transaction on average. You could establish a cash discount of about 7 percent in this situation. One way to handle this point is to increase the prices of what you sell by about 7 percent and list them as the official prices at the store.

The customer will see the listed prices at your store and figure that is what you will charge for each item. You can also post a sign at your register or at your entrance stating that the customer will get a 7 percent discount on one’s order by paying for it in cash.

After noticing someone is paying for an item with cash, you can hit a proper key or button on your POS system. The POS setup will reduce the price by 7 percent because that customer is paying in cash.

The customer will be satisfied because that person knows they’ll save by paying with cash. You will also get more cash in your business without waiting for a credit card transaction to move forward.

Now let’s look at what would happen if someone used a credit card instead. The customer will pay the originally listed price on everything in that CBD shop. The customer will not save anything extra by paying for those products with a card. But you will recoup the processing costs because you increased the prices for the products to offset those charges.

The best part is that you’re increasing the potential for people to pay for items with cash instead of their credit cards. Since you’re running a high-risk business, you will spend more due to the added risk of dealing with chargebacks, fraudulent card transactions, and other concerns. But it is easier to handle a cash-based transaction, as that process is seamless and works in moments.

A Few Additional Points

There are some extra points to see when looking at a cash discount program for your high-risk business:

• The process is legal and is not subject to restrictions. It is the opposite of credit card surcharges, which are illegal in some states and have limitations in others.
• Debit, gift, and prepaid cards are not subject to regular credit card surcharge fees. You can offer a discount for these payment options if you wish, but that is not mandatory.
• Be sure your POS setup can support your cash discount program. Most platforms use operating systems that can identify cash discount systems. They can provide a key or button that lets you add the new cash discount for cash payments.
• You can also use a cash discount program for check-based payments. A check won’t go through a credit card processor, ensuring you won’t spend extra to process it. You will still need to process the check, but the risk won’t be as notable.

You will also need to provide info on your business to qualify for your high-risk cash discount program. Some of the things you must provide to a processing team include:

• Your processing history, including a look at whatever chargebacks you might receive
• Details on how much you process each month
• Your personal credit score; you may experience limits if your score is too low
• Where your business is registered
• The methods for how you accept transactions; this includes the card networks you support, any online activities, and whatever NFC payments you can collect

Look At Your Options Today

Check to see how you can start working with a cash discount program for high-risk businesses today. You can use many POS systems that can support cash discounts, plus it doesn’t take much to adjust your prices to cover the discounts. You’ll have an easier time covering those exorbitant processing fees, plus you will handle more cash payments that aren’t as risky.