Running a restaurant is hard right now. Money is tight. Sales are down and every dollar counts. To help alleviate this financial pinch; raising prices might be the obvious choice. Depending on your restaurant, Cash Discounting might be a better solution. In short, Cash Discounting is passing along your merchant processing fees down to your customers. It isn’t a perfect or easy solution but it could be one that really helps your restaurant.
To do Cash Discounting properly there must be a true discount to use cash to pay the bill instead of using a credit card. If you raise the price for any customer who wants to use a credit card that is called Surcharging. Surcharge is frowned upon and could trigger the suspension or cancellation of your merchant account if you are caught doing it. So the first step to doing Cash Discounting is to reprint all of your menus with a 4% increase in price. Why 4% off? This will be explained in a bit. Second, you will have to create and post signs on the front door and where the payments are taken that tell customers they can save 4% off of their bill if they pay with cash. Lastly, customers will still ask about this new program, especially your regulars. Inform them on why this was a necessary step to keeping the business afloat and train your employees on what they need to say when they are asked. You do not want a poorly trained employee making the new Cash Discount program sound like Surcharging, which could lead to the suspension of your merchant account.
So why 4%? In short, 4% is a good middle ground between the fluctuation in effective rate an average restaurant pays month to month and keeping the restaurant owner from making a profit just off of the Cash Discounting program. The purpose of the Cash Discounting program is to pass just the normal credit card fees from a merchant account onto the customer, deliberating increasing the fees passed onto the customer to get another source of revenue can result in the suspension or cancellation of your credit card merchant account. A restaurant’s credit cards merchant account effective rate should be around 2% to 3% but this will fluctuate each month based on the number and kind of credit cards used to make purchases at your restaurant, along with the average transaction amount that month.
One last thing to note about Cash Discounting, it must be applied equally on all credit cards types you accept, this includes debit cards as well. If you apply the 4% to Visa and Mastercard credit card but not to Amex credit card, this can also lead to the suspension or cancellation of your credit card merchant account. As well as possibly lead to a lawsuit from the credit card company you applied the 4% onto.
Cash Discounting can be a little complex and it might not be for every restaurant but It could be the smart move for your restaurant. To learn more about it or to see how Total Merchant Supply can implement a Cash Discounting program in your place, contact us today.
As always, we are here to help. Let us know if you have any questions.
Total Merchant Supply is a POS Dealer based in NC & SC.