One of the biggest expenses a restaurant has is credit card processing fees. Each month, restaurants pay somewhere between 3-8% of their sales on credit card processing fees. But, there is a way to avoid these costs. It’s through cash discounting. 

What is cash discounting?

Cash discounting is a program that rewards customers when they pay in cash instead of with a credit card. By offering an incentive to customers so they don’t use their credit cards, a cash discount program helps restaurants avoid paying expensive credit card processing fees. When offering cash discounts, a restaurant can offset up to 99% of their credit card processing fees. 

How does it work?

Cash discounting is relatively easy to set up. It takes place during customer check-out and can be seamlessly integrated into the customer experience. 

  1. When a customer is ready to pay, they are presented with a bill which includes a line item for a non-cash adjustment. 
  2. The customer can choose to remove the fee by paying with cash. 
  3. If the customer chooses to pay with a credit card, they pay the full amount of their bill. If the customer chooses to pay with cash, they save money on the transaction. 

Cash discount programs benefit both customers and restaurants. 

Customers have an opportunity to save on their bill. Restaurants avoid expensive credit card processing fees. Plus, restaurants benefit even if customers choose to use their credit card. Restaurants avoid the extra expense of the payment processing fee by passing it onto the customer through the non-cash adjustment.  

Related: 20 Cost-Saving Tricks for Your Restaurant

What’s the difference between cash discounts and credit card surcharges? 

Cash discounting is not to be confused with credit card surcharges. While both attempt to eliminate credit card processing fees for restaurants, they do not work in the same way. 

Credit card surcharges are not on a bill when it is presented to a customer. The fee is added once the customer chooses to pay with a credit card. Cash discounting is fully transparent. The fee is added to the original bill, and the customer can choose to remove it by paying with cash. 

  • Surcharges provide an additional fee to customers when they pay with a credit card. 
  • Cash discounts provide a discount for customers when they pay with cash. 

The difference between the two programs isn’t only in how they are presented to customers.

Credit card surcharges are more complex to set up. There are many complicated rules for using surcharges. Plus, surcharge programs don’t account for debit card transactions, and they are illegal in ten states. Cash discount programs don’t come with the legal or technical complexities of credit card surcharges, and it’s more transparent and ethical. 

Are cash discount programs legal? 

While credit card surge charges are illegal in ten states, cash discounting is legal in all 50 states. 

The Durbin Amendment protects cash discount programs and makes it simple and easy to remain compliant. The federal guidelines require restaurants to disclose the details of the program to customers through signage and receipts. This requirement isn’t a hurdle for implementation; it’s actually a best practice. When customers are fully informed, they can choose whether or not they want to participate, and they often do. 

What do customers think about cash discount programs? 

One of the number one hesitations restaurants have about using cash discounting is concern about what customers will think. But, studies have shown that customers are receptive to cash discounting programs. 

A study found that cash discounting was not an issue for customers 99.2% of the time.  

When cash discounting programs are transparent, many customers recognize the benefit of the program and choose to use them. There are a few reasons why. 

  • Customers are already familiar with cash discount programs. Cash discounts have been commonly used at gas stations for years. 
  • Many restaurants and hospitality businesses are already using cash discount programs. Starbucks, Hilton, and over 30,000 businesses have used or are using cash discounting. 
  • Customers understand the changing economy. Most customers are aware of the expense cost of credit card processing fees and the rising costs of goods and labor for restaurants, and many are open to doing what they can to support restaurants in their community.  

Plus, cash discounting is on the rise. Many national chains and independent restaurants are embracing cash discount programs. As programs are implemented in more and more places, the program will become a norm for customers. 

How does cash discounting work with a POS?

For cash discounting to be seamless for both customers and restaurants, it’s best to integrate it directly in a point-of-sale (POS) system. This makes the whole transaction easier on both employees and paying customers. 

Lavu’s patent-pending Cash Discount Program easily integrates with our restaurant POS. Customers are presented with a non-cash adjustment visible on receipts, table-side tablets, or self-ordering kiosks. From there, customers can choose how to pay and easily complete their transaction. 

Related: Top Restaurant POS Systems: The Comparative Buyer’s Guide

How does cash discounting work with payment processors? 

Cash discounting programs aren’t set up through payment processing systems. Programs are part of a restaurant POS system, so restaurants don’t need to work with their payment processing merchants to implement a program. 

By using a processor-agnostic point-of-sale system, like Lavu POS, a restaurant can use any payment processing provider while using a cash discounting program. 

Related: Processors and Gateways: The Magic Behind Credit Cards Explained

Learn Even More about Cash Discounting

To learn more about the ins and outs of cash discounting, check out this full interview with Lavu’s CEO, Saleem Khatri on the Merchant Sales Podcast. Listen in as Khatri and the hosts discuss why cash discounting is one of the best new opportunities for restaurants and how it can help restaurants keep more money in their business.  

Bring Cash Discounting to Your Restaurant  

Cash discounting programs are gaining traction and going to become the norm in restaurants across the country. As Lavu’s CEO, Saleem Khatri says, “This is a phenomenon that is going to be gradual and then sudden.” 

If you want to be ahead of the curve and start offsetting up to 99% of the credit card processing fees at your restaurant, schedule a free demo of Lavu’s Cash Discount Program (CDP). Talk to our team to see how you can start saving today. 

If you need more help in estimating restaurant POS system costs or factors that impact pricing, schedule a demo with our team so we can walk you through Lavu pricing.

Or, download our Beginner’s Guide to POS Systems to get more information about what to look for while choosing the best POS for your business. Download it for free today.