It’s no secret that restaurants and bars run on pretty tight margins. For small businesses, credit card processing fees can quickly become a major expense. That’s why, in an attempt to offset those fees, many establishments have started offering cash discounts to their customers in an effort to encourage payment via cash or check.
When you implement a cash discounting program for your restaurant, the prices listed on your menu are your cash prices (ie. the advertised price is with the discount already applied for cash-paying customers). Customers who choose to pay with a credit card will have a small additional fee, or surcharge, added to their bill.
While cash discounting for restaurants is perfectly legal, businesses that choose to pursue this strategy should proceed with caution. Failure to effectively communicate the discount for paying cash can cause frustration and irritation for customers who might feel they’re being overcharged.
Before Starting a Cash Discounting Program
- Check to make sure you are getting the best possible credit card processing rate. This could help you cut costs without having to involve your customers at all.
- Understand the legalities of cash discounting / credit card surcharging in your state. Both are legal in Missouri and Illinois (where we operate), but in states where surcharging it illegal, restaurant owners will want to pay particular attention to how they’re communicating the program. Please check for any local regulations, as well as any specific requirements from your credit card company.
- Notify your customers of your cash discounting program via social media, email/SMS marketing, your website, your menu and in-store signage. Your server can also notify guests about the policy. Make it clear that your advertised prices include a cash discount — after all, no one likes a surprise bill!
- Make sure your POS system is programmed with a preset discount button you can use for cash sales. Receipts should also clearly indicate a discount has been applied.
- Keep in mind that there are legal limits on how much the surcharge on credit card-paying customers can be and keep your fee reasonable. You must universally apply the fee to all types of credit cards. The surcharge can’t be placed on debit card users.
While many customers won’t notice a small additional fee, some will. Consider your clientele and the possible risk of upsetting them to save a few cents on each transaction. Those cents add up, of course, but losing a valued regular could be much more costly in the long run. And while these programs are legal now, current litigation could create barriers or deem them illegal in the near future, meaning these efforts might not be sustainable.
Another thing to keep in mind? Many bars and restaurants are moving away from cash altogether! There are many benefits to going cashless in today’s economy.
Looking for ways to reduce your credit card processing fees? Curious how the right restaurant technology can improve your profit margins?