I know.

I’m probably the only payment processing representative in the United States that isn’t jazzed up about the cash discounting craze.

As a business owner, I too have to pay credit card processing fees on my merchant account, and it isn’t something I look forward to at the beginning of the month.

But unless you’re a school, a government agency, or in the specialized B2B market, surcharging is likely not the move you want to make if you’re hoping to thrive as the “experience economy” continues to shape buyer expectations.

You may be thinking, “Why are you the only credit card processing company not promoting cash discounting?”

It’s because I have a very hard time advising businesses to move forward with a decision that will hurt their business long-term, even if it will generate significant income for me and my family. It’s not a question of if it will hurt the business, the only question is, how much. I’m not in the business of pedaling a credit card solution because it makes me a bunch of money. I got into business to help entrepreneurs improve their business, not just make money.

I’m not saying we will turn someone down if they demand we set them up with a credit card terminal that will do cash discounting.

I’m saying, I don’t think it’s the answer.

I say that because it:


Generates Anger, Confusion About Your Brand


When a customer walks into your store, restaurant, automotive shop, or salon for the first time, they are there to “test the waters”. They may have heard about your business on Yelp, a local ad, or from a friend at work that mentioned your establishment. They aren’t a “raving fan” yet, they just want to give it a shot. It’s kind of like going on a first date.

With cash being in heavy decline, consumers are relying more on mobile technology and credit cards to track purchases and transactions. The benefit to your business is that people spend 12-18% more money on credit cards in your business than they would if they only paid with cash. Your customers know this too, so when you go to charge them an extra 4% to avoid paying credit card processing fees, it generates an emotion that doesn’t make them want to refer your business to their friends and family. While credit card processing representatives will encourage you to implement this by promising you won’t lose business, they don’t talk about the referrals and positive reviews you won’t get.

Charging a fee to your customers at the checkout will deaden many of the positive emotions they’ve experienced while doing business with you. It will create negative emotions that may lead to confusion, frustration, or even anger.

These are not the parting emotions you want your new customer to have after doing business with you for the first time. It’s like picking the perfect restaurant, making all the right moves on the dance floor on your first date, and then passing gas in the car as you drop your date off at the end of the night. It ain’t cool!

The second reason cash discounting might harm your business is:


Brand Association


What do you think of when you think of credit card fees at checkout?

I think of Chevron.

That’s right. I think of a gas station. I think of greasy door handles, less than refreshing bathrooms, Redbull and Doritos!

By implementing a surcharge, you are associating your brand with impersonal brands that don’t mind passing credit card processing fees on to their customers. And while many of these businesses are probably doing fine, you don’t want your brand to be associated with the gas station experience. Customer in today’s economy are spending more money for experiences, positive experiences.

While a surcharge may mean less overhead expenses to you, it could mean something completely different to the customer. It could mean – rude, anger, confusion, cheap, or unfriendly. These are all emotions you don’t want to be associated with your brand.

You want people associating your brand with the highest experiences they’ve ever had, not the lowest. The gas station has its place in our hearts, but we only go when it’s a must, not when we are seeking joy, fun, adventure, or thrill.

The final reason why cash-discounting should be avoided:


“Experience Brands” Aren’t Doing It


As consumers continue to be nurtured by leading commerce giants like Amazon, Uber, Apple, and Nordstrom, it’s unlikely that they will experience being charged an additional fee at checkout. These brands continue to raise the expectations of the buyer as they seek out unique experiences regardless of whether they are sitting down for a meal or Christmas shopping for their family. And since every competitor is only a keystroke away, it’s a great time to start considering how to revolutionize the experience, instead of deadening the experience with a surcharge.


Why Credit Card Processing Companies Are Pushing It


At this point in the article, you may be asking yourself, “Why is my credit card representative trying to talk me into a cash discount program then if it’s so bad for my business?

Many of the credit card processing representatives are very excited about the new cash discount programs.

Do you know why?

Because they are making 3-5x the residuals per account. They could care less about your customer experience and the quality of your client relationships. Instead of charging you the 2.5% to process credit cards, payment processors are charging 3.5-4% to your customers.

That’s why they are excited about it.

It’s not about doing what’s right for your business, it’s about monetizing your customer base. Something that you should be doing since you’re taking on most of the risk as a business owner.


A Better Way


As a business owner, you’d be in a better position today and long into the future if you chose to increase your prices by 5 to 10 percent to offset credit card processing fees.

Why do I say that?

Because by charging an additional fee at the checkout, the result is that you’ve raised your prices. And you’ve opened yourself up to potentially upsetting a customer, something not recommended in the age of social media where everything negative takes on a life of its own.

You are also capped at a 4% surcharge per Visa & MasterCard regulations.

Raising your prices are 100% under your control as a business owner. You can raise your prices by 5-10% and make more money than you ever would be able to save while also position yourself to invest more capital into improving the buyers’ experience.

By raising your prices, you minimize unnecessary friction, maximize the benefits of accepting credit and debit cards, and maintain full control over how your brand is perceived in the “experience economy.

If you have questions about how to decide if it’s right for your business or how to increase your prices without losing customers, don’t hesitate to reach out!