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How a Cash Discount Program Benefits Convenience Stores


There is a common belief that electronic payments such as debit or credit cards will make cash obsolete and that accepting cash is costly to c-stores. However, credit card fees cost c-stores significant profit on each sale. The truth is, accepting cash is cheaper than electronic payments. Cash still needs to be managed properly but compared to a credit card’s processing fee of 2.25-4 percent of each sale, cash only costs approximately 1 percent after implementing cash automation technology. It is recommended that convenience stores utilize a cash discount program to encourage more cash payments to both retailers, and their customers can save money and benefit.

What is a cash discounting program?

The idea of a cash discount program isn’t new. In fact, most consumers are familiar with it if they have ever paid by card at the DMV or other government agency, and many have run across it at gas stations that advertise lower costs if paid in cash. In 2010 Congress passed the Dodd-Frank Law including the Durbin Amendment. This amendment allows merchants to provide discounts to consumers who choose to pay in ways other than by credit or debit cards. The amendment requires businesses to clearly post about the cash discount program to let customers know they can pay less when they pay in cash.

Costs of electronic payments

As previously mentioned, credit card transaction and processing fees can cost a business 2.25-4 percent of each sale. But the costs do not end there. Convenience stores are taking on significant risks when accepting electronic payments like credit and debit cards. Data breaches can cost a retailer an average of $3.27 million according to the Security Intelligence’s 2021 Cost of a Data Breach Report. While data breaches can hurt a c-store’s bottom line, there is also an unquantifiable cost to their reputation and customer loyalty. Lastly, convenience stores constantly worry about chargeback fees associated with credit card payments. Not only do they lose money from disputed sales and incur chargeback fees, but credit card processors might drop a business for having too many chargebacks. So, why would c-stores choose to incur those costs when they can encourage their customers to pay in cash instead?

Benefits of a cash discounting program

1. Attract customers whose preferred or only payment method is cash

There is a significant amount of the US population that chooses to pay in cash. We’ve previously discussed the importance of accepting cash as a viable payment method, and there is current legislation making its way through the Senate to protect a consumer’s right to pay with cash. However, more than 26 percent of the U.S. population is unbanked, meaning they don’t use any banking services at all, or underbanked, meaning they might have a checking account, but they do not use any lending services. This means that cash is the primary form of payment for this group and by implementing a cash discount program, c-stores will benefit by getting more business from this group that can often be disenfranchised by other businesses due to their payment preference.

2. Receive additional revenue from on-site ATMs

One of the main benefits of convenience stores having an on-site ATM is the increased traffic flow to their business. With the addition of a cash discount program at these locations, owners and operators will see an increase in transactions at the ATM which leads to additional revenue from surcharged transactions. The combination of a cash discount program and an on-site ATM allows customers to conveniently take advantage of the program.

3. Save money and pass on those savings to customers

As previously discussed, c-stores incur a significant loss on sales purchased with an electronic payment method. A cash discount program is truly a win-win-win for convenience stores, customers, and ATM operators alike. With a cash discount program in place, the percentage paid by the customer using a debit or credit card covers the fees associated with processing the payment. Then the c-store gets to keep the entire amount of each sale and customers paying in cash save on the sale due to the cash discount.

Implementing a cash discount program at your c-store location benefits your business as well as the customer. However, this means you’ll have significantly more cash in your location. Make sure you’re adequately prepared by downloading our free e-book: “The Ultimate Guide for Retail Cash Handling.”

Find out how we can help with your cash management.

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