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B2B Vault Episode 63: How to get an ATM in your Business?
B2B Vault Episode 64: What Is The Cash Discount Merchant Program?

Written by Allen Kopelman

March 31, 2022

Video Transcription

Hey, everybody it’s Justin Owings with B2B Vault: The Payment Technology Podcast with your host, Allen Kopelman, and we’re providing educational information about business payments, FinTech, or financial technology, decentralized finance, and the technology businesses need in today’s world. And in today’s episode, we’re going to be talking about what is a cash discount program. So Allen, go ahead and take it over, but All right. Thank you, Justin. So today, we’re going to get into what is cash discounts? So I have a lot of merchants who are, you know, constantly inquiring, you know, how can I do this cash discount program? How does it work? Then they’ll bring up, you know, surcharge, and they’ll say, how can this help me save money in my business? And that’s what it’s all about. So let’s get into the, you know, what’s going on with cash discount. So how can you pay zero or close to zero for credit card processing? There are only three ways to do the surcharge program, and we’ll explain what that is.

Cash discount program or stop taking credit cards. So, I mean, credit cards have been growing. I entered this industry in 1998, and it’s been growing and growing and growing. And during the pandemic, electronic payments soared and increased more than ever because people were didn’t want to handle cash. There was no reason for that, but they didn’t want to hand, they didn’t want to handle cash so that, you know, the payments industry, especially like unattended payments, QR payments, noncard, present payments, you know, really took off. So more people are paying with a credit card than ever before. And especially like in the business, the business sector, a big increase, not just in credit card payments, but also with ACH to collect invoices and different things like that. So there’s been a big increase in electronic payments. Although I say plenty of people still pay cash. So how does the, we’re going to talk about, you know, the surcharge program and then next we’re going to talk about cash discount because these are two separate programs. And then we’ll get into the, like the legality of everything also later into the podcast. So lets so surcharge, the way that works is credit cards get charged a fee, but then debit cards, not just the ones where you put in your PIN, but any debit card that has the visa, MasterCard logo that’s attached to a bank account does not get charged the fee under the surcharge program. So that’s the difference. And if you’re in the surcharge program, you have to give your customers a 30-day notice.

So you got to put signs up stating that we’re going to start doing this in 30 days and the date. If you’re going to do it on your website, you got to put a notice up on the website that you’re going to start doing this. Many businesses, especially business to business, where they’re collecting payments from other businesses, do it, but they don’t pass. Like the whole fee. They’ll do like one and a half percent or 2%, and then offset that, which we’re going to talk about later more with ACH because, if you’re paying on a website, you can’t hand them cash, or you can’t hand them a check just going to ask you, how can you accept? How can you do a cash discount on a website? Right? So the way to do it is. We’ll get into that later. Right? We’ll get into it later, but you’re instead in person. It’s cash or credit card, you know, or maybe pin debit, but in or online, it has to be ACH, or you have the option. Like you can mail a check-in. So, you know, and a lot of businesses will do that. Oh, we’re doing the surcharge program. If you don’t want to pay the surcharge or the cash discount, or you don’t want to pay the service fee, then mail a check. So, you know, people are not really into mailing checks. And then a lot of bigger, a lot of businesses will do ACH. Got it. So that’s kind of like that’s a surcharge. So the surcharge, and now we’re going to talk about cash discount and always, you know, give the example of cash discount back to the gas stations because gas stations been doing a cash discount forever. Right? You go to the gas station, and 80% of them have a cash price and a credit price. Although there are quite a few gas stations now, there’s no cash like you roll into Costco. You can’t, and there’s no cashier there. And there are a lot of gas stations. I saw a video on Facebook where this guy said he pulled into a gas station. Everything, no, there was no attendant, right There Wasn’t anybody inside. So he says, pulling into the gas station. He’s like, wow, you walked inside. And then everything was inventing machines.

So there was a soda machine in Tennessee. Yeah, soda machine, there was a coffee machine. There were several, you know, several drink machines, snack machines, etc. You got to go to each one and get whatever you wanted. That’s all that was inside the store. So that was kind of crazy. I don’t know how they handle something like cigarettes, or They don’t sell It. Yeah. They probably don’t sell it. Yeah. Because the only way you could do that is maybe if it had some like Scanning Tech, scanning technology with the driver’s license and took your picture and stuff like that, but who knows, you know. Still, you know, technology, you know, in today’s world is taking, is taken over. It’s taking away jobs from people, and businesses are being forced into this because, you know, we have inflation prices going up, the price of gas going up, and all that. And now I saw some real, I What The guy from Applebee’s said, gas prices, go up. We can pay lower wages. What makes sense? You said that the owner of Appleby. Yes. Wow. That’s crazy. That guy needs some. No, that’s not right. I mean, I would say, like a lot of businesses are giving employees, you know, extra money in their checks and things like that. I Know. Well, it’s complicated right now. And businesses, especially food. Like I want to eat at a restaurant recently. One that I always go frequently, you know, near my house. I want to tell you, and I think the prices are almost double. I agree; from a year ago. Yeah. Breakfast for my family of five was about 60 to 70 bucks. That’s crazy. For Breakfast. And now we go, yeah, 130. No, that’s Crazy. I can’t, and we can’t do it anymore. No, it’s crazy. The prices are getting out of control. Same thing. Like you go to the grocery store. It’s double. I felt I didn’t even have an empty tank in my car, and it was almost 50 bucks. I bought three egg and cheese breakfast sandwiches on Saturday. Yeah.

How much did that cost me? Probably 30 Bucks. Exactly crazy. That’s too much money, and you’ve been to the NYU marina deli. She’d go check that place out. Okay. That’s cool. Shout out, Shout out to the, So let’s talk about the cash discount and how it works. Basically. The is adding a small fee, so we’ll make it easy math. So the bills are a hundred dollars, the cash discount is 4%, which is the max. And so the bill comes to a dollar four. So if you pay cash, only pay the hundred, Right? If you pay with a credit card, you’re paying a dollar, and then basically, the business is saving all the money. So it’s a surcharge, not saving all the money, right? You’re saving part of the fees, right? With a cash discount, you’re saving almost all your fees. There are small fees you have to pay because of the tip. If you’re in a place where there’s tipping, the fee is already added on. Then you’re putting the tip or, you know, you might have a small monthly fee for equipment or something like that. So the question does people like it if you go into the gas station and buy something. You pay with cash, does, does the attendant know to like, not charge you for, I don’t know how they, I mean, I’m sure there’s a lot of gas that a lot of businesses now we get, I get at least two or three phone calls a week from existing clients that say, Hey, we want to switch to the cash discount program. They know we offer it. They see it. They get the newsletter. It’ll be in the next newsletter. That’ll be going out shortly. We’ll be talking about cash in the account. They’re going to have businesses that need to save money. So they got to save money somewhere. I mean, you can’t. Your landlord’s not lowering your rent electric. Bill’s not going down. You are spending more money on gasoline and more money on products you have to sell in your business. So w this is one of the ways that you can slow down the, slow it down, slow down this, you know, whatever. Well, down the slamming of the fees, I guess. Well, no, you gotta, you have to do something. I mean, you, the raise prices, right.

What you’re going to have to do. Yeah. But can you keep reprinting the menu or reborrowing up everything in the store sometime? It’s just easier. Hey, okay. We’ll do a cash discount. That’s going to, you know, slow to tie down. Most Prisoners I go into don’t even have menus Anymore. Yeah. A lot of restaurants, no menu. They just scan a QR code. Look at it. They’re not even reprinting the Piece Of paper. It’s a piece of paper. Right. They throw it away somewhere. Some restaurants have laminated menus, which I, I, I like. They have it because maybe they have older clientele. Depends on your clientele. You could have scanned the QR code order and everything if you have a younger clientele. Not even have a waiter, But honestly, yeah. Okay. You have that technology available to you. But if your website can’t, if you can’t navigate the site and you can’t use it or order your food, Yeah. Then it’s worthless. And it also depends on your menu. Is your menu that complicated? Do you have the kind of clientele that says, oh, I want the Greek salad? I want the FEDA off the side. No olives, no onions. Like, I’m just saying it depends on the clientele on your menu. If it’s an easy menu, maybe you can do it. But you know, as I look back at 2008, 2009, right? The category in restaurants called fast and casual didn’t even exist. I don’t know what that means. Fast casuals, like Chipolte, walk to the thing, order your food, go sit down, and pay no waiters. Let’s see. I haven’t, and this shows you how far out of touch I am with, like, going to eat food because I’m vegetarian. Right.

But I’m just saying when you think about it, as Ivan went to when my daughter was in college, she was in Gainesville university of Florida. Right? Go Gators. And no, I remember going there, and there were a lot of restaurants that kind of converted to that style where you came into the place, you ordered food at the counter, and then they just had a food runner. Bring it out. We went into pizza shops like that and this Chinese restaurant like that. There was, yeah, it was crazy. But the, you know, because they look at all these restaurants that popped up. Moe’s Chipolte’s, go to the shopping center right down the street from the office. There’s one there’s what’s over there. Gyro place, order at the counter smoothie place, order at the counter. Right? How many places do you order at the counter? There’s only even the hamburger shop you order at the counter. They’re all ordered at the counter. And then you go to sit, and then you go to these fast food places today. Right? It’s fast food places, man. It’s I guarantee you, 90% of the customers are going through the drive-through 10% maybe go inside. But also out of the people going through the drivers are, they also have now order in the app. And then, and then, you sit in the parking lot and like send them a message. I’m in the parking lot. I don’t like those guys. Do you know? Why are they pulled right in front of you when you’re in a drive-thru? Yeah. It’s, It’s crazy.

They run out of a better system for that. Yeah. No, like Wendy’s has it. And you have to go park in a certain spot, and they come to bring your food out to you. I don’t eat fast food, but I see it when driving. I like to observe what businesses are doing. Just like we talked about in another podcast. We talked about the olive garden, all these parking spots outside stuff. Yeah. And it’s efficient. Yeah. So, you know, what kind of businesses can you surcharge and cash discount, retail stores, nonprofits with donations. You see it, and you go on the biggest donation platform, you know, these donation platforms fund me. They have a little button pass, and you can pay the fee so that the nonprofit gets a hundred percent. We have similar software to that noncard, present merchants where they’re taking credit cards over the phone, sending out an invoice, sending you to a payment link, and passing the fee. And then we were talking about ACH, electronic check, alongside that, or the business will pay for the electronic check, which is much cheaper for them. You know, you want to pay with a credit card, you can pay the two, three, 4% what, however, whatever they’re choosing, whatever custom fee that they pick for their business. And we let customers do that. We don’t say, oh, you have to charge this fee. We have suggestions, you know? And then the rest of it is, you know, based on, you know, the average ticket they have. And also, you know, that they’re going to set up ACH, you know, like companies with bigger tickets, we’ll set up ACH, but there are still people that want to put everything on a credit card because they’re getting miles, cash, back points, et cetera. So there are all different ways to do it. Invoicing, invoicing, using QuickBooks or whatever financial software you have workarounds, adding it on as a line item on the invoice, and then giving them the option. Oh, you want to pay the service charge? If you use a credit card, if not, then we’ll accept a check or wire us the money or whatever you want to do, but it’s available.

These programs are available for every kind of business. Real quick, everybody, Justin is checking in. I want to remind everyone to follow us on Instagram, Facebook, Twitter, tic-tac at B to B vault; check out the website, B2B vault.info. There’s a form there. If you have any you know, suggestions for show topics, or if you’d like to be a guest on the podcast, fill out that form. We’ll get back to you. And if you are interested in subscribing to the channel itself, you know, we’re on every DSP that you can imagine. So that means Spotify, Apple, Google. I heard radio, Stitcher, Pandora, Amazon Music, overcast podcast delivery network. I don’t eat whatever it is. Go ahead and find it. Yeah, Yeah, no. I got an email today about a new network. So they wanted us to come on. It’s like, oh, claim your badass. Yeah, exactly. So I don’t know, but we’re out there. So back to you, dude. Alright. Okay. So back to the discussion. So people always ask, how is it legal, this cash discount program? They don’t understand. Some people even say, oh, I called my bank and asked them my bank about it. My bank said, no, you can’t do that. Banks will be very, very conservative when it comes to this. But I can tell you, I’ve seen just about I, without banks, I’d say pretty much 90% of credit card processors offer these programs.

Okay. So how is it legal? This all started in 2010. We had the Dodd-Frank act, which contained his Durbin amendment as the Durbin amendment was this whole thing. And they had all these hearings with the fed and the this and the that. And it started with two guys with a camera shop. And there was another case with somebody with a beauty salon, and then it ended up, you know, and then Walmart got behind it. Okay. And the Senator Durbin guy. So hence the Durbin amendment. And they put, you know, so the maximum is supposed to be 4%, but you know, people even under, what is it, what You got to Explain the Durbin amendment. So the Durbin amendment changed how ha how debit cards were going to be charged in interchange. So that before that, there were all kinds of interchange rates for debit. They changed it to 0.05% and 22 cents per transaction. I disagreed with that at the time; you added a small ticket interchange, which was like 1.5 and like a nickel. And if you have like a $14 average ticket in your business or less, the 1.5 and nickel was way less than this 0.05 and 22 cents, because this is 22 cents is the killer that I was going to send your Plane two senses. That’s a Lot. Right? Cause then you’re paying a transaction fee on top of that, of anywhere from eight to 10 cents. Right? So that guy’s losing out almost on 50 cents a dollar. Well, I’ll tell you what, like we saw coffee shops in our business portfolio where their average effective rate was 2.5%. And it went to like seven, 8% because of this rule. So I disagree with this rule. I complained about this. I contacted senators, house of representatives, people contacted visa, and MasterCard made a stink at it at a meeting where they were at the meeting. I said, yeah, you should put this back. If they want to help businesses, they should re-instate the small ticket interchange. But what they did was, before 2010, they promoted a small ticket interchange.

They got fast food places and people with low tickets and convenience stores to start taking credit cards. Cause this was a desirable rate. Then after 2010, they stuck it to everybody. Now the who saved money with this 0.05 and 22, Walmart Publix, the food stores, you know, the lore at large retailers. Many of them even made promises, oh, we’re going to lower our costs. They didn’t do anything. So, you know, they didn’t do anything, but they’re the ones who say money because you come into the grocery store on a hundred dollar ticket, they’re only paying 0.05 and 22 before they were paying 1.5% and a transact. They didn’t get these 5 cents. They paid like 1.5 and 20, right? But this is 0.05, and 22 cents was way less on a hundred dollars. They’re saving tons and tons of money in these food stores where people are using a ton of these check cards and debit cards. So that’s when it all started. And it started very slowly with surcharging. People started to do surcharging, but then there were a lot of states that had made it illegal in those states. That’s been reduced to two or three states. When it first started in 2010, there were about 15 or 20 states where it was against the law in the state, but then cash discounts came about out of this Durbin amendment. Right? So there’s cause it, part of it, and the Durbin amendment. Also, one of a few things in there was good. That one where it was merchants could set a 10-hour minimum to take a credit card. So that was kind of good for our gents. You didn’t have to take a credit card from somebody for a dollar, a cup of coffee. You can say, no, you have to give me gimme cash. So that was, that was one thing that was in there. The other thing was there was a cap on how much businesses could charge on this surcharge or cash discount fee, which was 4%. And then the, you know, so those things, you know, that those things kind of, you know, that kind of set everything in motion, but then there were several lawsuits. It was a lawsuit from a beauty salon. And then there was a massive lawsuit in the Supreme there, several ones to the Supreme court. But one of the big ones was the one where Terrence, Clarence Thomas made a ruling, and we’ll, you know, it’s on our website, and he ruled that it’s outstanding. Cash discount. It’s it’s fine. And it was a huge lawsuit between American express and the state of Ohio.

Yeah. American Express tried to Sue the state of Ohio, saying it was illegal for them to charge a fee for American express. But one thing is, is the way the state of Ohio did it was wrong because they charged one fee for visa and MasterCard and a different fee for American express; not allowed to do that. It’s one fee for all cards. So, you know, you know, whatever it was, but the case was pivotal. And then also the ACL you came out and another article was that 2018. And they said, Hey, why should people in the poor neighborhoods pay for pay extra like businesses should, shouldn’t be forced to raise their prices. They should just do the cash discount program. The ACL, you said, it’s good. The cash discount program is good. So people who are under-banked or only pay with cash and don’t have a lot of money and don’t use credit cards get a discount. So there’s a lot of, you know, there’s been a lot of things about cash discount and surcharging, and I can tell you there are big businesses that use it, small businesses that use it. Today, with what’s going on in the economy, there’s pretty much no reason you shouldn’t be using it. Some businesses don’t feel comfortable with it. But, I feel like this is a question that you get asked. Yeah. All the time they go, how’s it legal? I’m like, everybody’s doing it. Gas stations have been doing it for years. Right. Go to the gas station, and the government does it when you pay like a government bill. Yeah. They charge you. Universities have been doing it. Education has been allowed to do it. They were doing it before the Durbin amendment, all these places. So it’s nothing new. It’s just now gone mainstream, you know, the PO it’s, it’s gone mainstream, you know, why should merchants consider these type of programs, save money.

That’s number one, save money, you know, do it the right way. You know, is there a downside? Sure. You know, you might p**s off one customer here and there, but there are also some other equipment options now to have a terminal. And let’s say you have somebody who doesn’t want to pay the fee. You could hit the buttons and waive the fee. Then you know, you have like two merchant accounts in the machine. So it differs from the second merchant account. So for the couple of people that complain, I can tell you, we have this in like some bars and some small Russ at some restaurants, you know where the average ticket’s like 40, $50. Nobody says a word, customers. They know the business is struggling. When I go out now, I’m prepared to leave for the ticket, right? Like, I mean, it’s a lot of stuff. It is going on. COVID the economy, gas wages, people now finding a good job. Like, I mean, there’s so much; one thing that’s bad now is that inflation is outpacing wages. And that’s big, I mean, but that’s not new either. No, but it’s something that has happened before and then has gone away. Like it’s happened. And then it’s going away. You know, we had a huge amount of inflation, and then inflation went down. Wages didn’t go up. No, but I’m just saying the, for Us, the real problem. Do you want, the problem is in flight, you have to control. We could get into a whole economics discussion. This is a huge economic discussion, but wages haven’t been increased for like 13 years. Well, I w I, I don’t want to look At it. You go ahead.

I’ve been doing it. No Wages, but I’m saying, is this the main factor that needs to be controlled? Okay. Is inflation is inflation. And the biggest expenses people have are housing and fuel. Okay. So if you can drive down the price of fuel and drive down and keep housing in check, you know, people have a better chance. You can’t just keep re-force raise wages, but you know, businesses have been forced that with COVID, okay. We’ve got to pay people more money to come to work and things like that. Prices are just going up and, you know if you went out to eat twice a week, maybe now it’s once a week, you went out to eat twice a month. Maybe it’s once a month. Definitely. So it’s getting difficult, and businesses have to think about how they can save money. What are they going to do? Automation, you know, the only way, you know, they have to reduce, you know, reduce expenses. So they’re going to reduce expenses with automation. You’re going to see more automation, which we talked about in another podcast earlier about technology. As the service industry goes, I’m all for automation. Yeah. But I’m just saying in cash discount is another way businesses can help to say help, you know, save money. Maybe, I can tell you, like we don’t get it. Once a business starts doing cash discounts. I’ve seen one, and I don’t see sales drop off. We’ve had a couple of businesses where we’ve watched their sales increase because they were what I call the credit card suppressor. Like they took credit cards, but they didn’t advertise it.

I’ll give you an example where this guy has a sporting goods business. Right. So one day he says to me, he goes, oh, I want to do cash discount before cash discount. They would do 15 to 20 grand a month of credit cards. Now it’s like 50, 60 grand. The guy’s like, oh, I should’ve done this years ago. I was like because he was a credit card suppressor. There were no signs up saying he took credit cards. You had the credit card machine under the counter. You know, it was like a hidden deal. He took it when he had to. Now he said, when people come in, they buy extra stuff because now they’re buying all the stuff at the front, you know, that impulse buys, you know, and he’s increasing his set. He increased his sales, what he did. Yeah. And that’s what happens in some businesses, because there’s a lot of businesses, you know, that, that they prefer cash. Right. And when they start doing cash discounts, they find like, Hey, some people are, haven’t been shopping at my business because I didn’t take credit cards. Or I didn’t; I didn’t advertise that. I took credit cards. And it helps you get paid faster. Like in the B2B sector, you got to look at the time value of money. Is it better to sit and wait for someone to mail you a check if you’ve got outstanding invoices? Or is it better to get, take the credit card, let them pay the fee? Right. And you know, get your money faster. Businesses have to look at cash flow time, the value of money, and all of those factors with their, you know, with their business. And that’s why, you know, we’re doing this podcast on cash discount and surcharging it. These programs work for businesses. So how does the business inform their customer? So let’s say you’re a restaurant and the hospitality sector, or a bar, you have to put something on the receipt. So people know, like, oh, there’s a service charge. If you pay by cash, you don’t pay the service charge. In a retail store, put signup and sign by the register. If you’re doing something online or doing the surcharge program, you need to put a notice up on the website. So people know. And that’s what we talked about before on the website offering ACH so that they can do that. So cash discounts, surcharges, and great programs to help businesses save money. If you want to save money, go to the website https://npsbank.com/, or you can leave a comment underneath one of the posts we have for the broadcast.

Oh yeah. Yeah. We can set up a consultation and explain the programs to you in more detail and go over how it all works. And you can get set up with this in your business because it’s important, you know, businesses to save money, to save money. It’s essential. And maybe we’ve input a link. We re I wrote a book. We have an ebook. You get a link to the ebook on how to pay zero. Yeah. How to pay zero. And then it goes into, you know, quite a bit of detail. So thank you for listening to the podcast today. Carpe diem, catch us on Spotify, Apple, YouTube, Stitcher, follow us on social media. B2B vol watch for some of our fun videos on Tik talk. We’re going to try to do more tech talks and reels to promote the podcast. I think it’s kind of fun stuff. I don’t know. Justin says he won’t dance. If you want Justin to dance, leave a comment under one of the posts on one of them. I’ll do it there. Okay. Okay. One hundred likes on FA on where, where do you want on Facebook? One hundred likes on Facebook, on the cash discount podcast. And Justin will do a TikTok dance. All right, let’s go dance for 15 minutes straight. Oh, let’s go. Alright. Carpe diem, where out.

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