If you want to decrease credit card processing fees at your restaurant, you might be looking at using a cash discount vs. surcharges.
Credit card processing fees are costly. Credit card processing fees can range from 3-8% depending on the card. It can amount to the third-highest annual cost for most restaurants.
This is why many restaurants are looking for ways to offset expensive fees. If you can encourage more customers to pay with cash instead of with credit, you can increase your bottom line. There are two options to do this: implement a cash discount or add a credit card surcharge to your bills.
Let’s look at the difference between using a cash discount vs surcharge to see what is a good option for your business.
What Is a Cash Discount?
A cash discount offers savings to customers who pay in cash. It is a mutually beneficial process for both the customer and the business. The customer feels like they are saving money, while the business reduces its overall credit card processing fees. The more customers pay with cash, the less businesses have to pay.
Here’s how a cash discount program works:
- When a customer pays for their meal, they receive a line item receipt of what they ordered. This receipt include the credit card charge.
- If the customer pays in cash, the restaurant removes the credit charge – saving the customer money on the transaction.
- If the customer pays with a credit card, they pay the full bill and your credit card processing fee is covered.
With this method, you can track what percent of customers pay with cash. Over time, your customers may start to arrive with cash because they know about your discount.
What Are Surcharges?
A credit card surcharge serves a similar purpose as a cash discount. However, with this option, the fee is not presented on the initial bill. It is only added after the customer hands you their preferred method of payment. If they pay with cash, there isn’t a surcharge. If they pay with credit, a surcharge is added.
Surcharges are illegal in many states.
Surcharges are also considered unethical because they are added after the customer submits payment, and they can be considered a surprise fee. The customer is already charged and there’s nothing they can do about it.
Cash Discount vs. Surcharges
When you compare cash discounts vs. surcharges, it’s clear that there are significantly more benefits to offering a discount as opposed to implementing a surcharge.
A few reasons to opt for a cash discount include:
- Customers enjoy saving money, and the discount makes them feel like they are getting a good deal.
- Customers often perceive surcharges as an added cost on their bill, creating a negative perception of your business.
- Cash discounts are legal in all 50 states. Surcharges are illegal in 10 states. Check your local laws before you decide to use surcharges.
- Surcharges don’t account for debit card transactions. They are also harder to set up and may be harder to explain to your customers.
Many businesses use cash discounts and have few (if any) issues with customers. A study found that 99.2% of customers don’t mind paying the added processing fee when presented the option, which means you can implement a cash discount program seamlessly.
If you are comparing cash discounts vs. surcharges when trying to lower credit card processing fees in your restaurant — cash discounts are the clear winner.
How to Set Up a Cash Discount Program
If you are interested in setting up a cash discount system to avoid paying costly credit card fees, consider working with Lavu. Our restaurant POS comes with more than 200 features – including a cash discount program. With just a few clicks, you can establish a cash discount for your restaurant, cafe, or food truck.
Not only are these programs easy to launch, but they are easy for your staff to navigate as well. You can easily train your employees on the new process and how to explain cash discounts to customers.
Set Up Cash Discounting with Lavu
Credit card processing fees are often the third-highest expense for restaurant owners. A cash discount program can lower this cost to make your business more profitable.
If you are interested in setting up a POS system that allows you to offer a cash discount, request a demo with Lavu. See how our system works, and ask questions about how you can use it for your business. Lavu is not only a technology company; we are also a hospitality company. Our goal is to create products that can help you offer better experiences to your customers.
You can also download our free eBook, The Beginners Guide to POS to learn more about how our cloud-based POS system can support a cash discount program and many other features that streamline your operations and increase your profits.