CEO, National Retail Solutions (NRS). POS, NRS Digital Media, NRS Pay, NRS Funding, NRS Purple, and NRS Petro: Helping retailers succeed.
There are some stark numbers when it comes to the rising costs of credit card processing fees.
First, processing fees have increased by around 60% since the beginning of the pandemic, and the average American family now pays an estimated $1,000 more a year for goods due to increased prices as a reaction to these fees.
According to NACS, if the largest credit card companies increase their fees this year, merchants could potentially pay an additional $502 million annually in fees.
The Rising Tide Of Credit Card Fees
Over the years, credit card processing fees have shot up, and for small players in the retail space, this spike can be a hard pill to swallow.
For larger retailers, the sting of high credit card fees isn’t as sharp thanks to their vast volume of transactions which allows them to negotiate better rates with credit card companies. But the little guys? They tend to get stuck with the bill, watching as a slice of their earnings vanishes with every swipe.
According to David Fench, National Retail Federation senior vice president of government relations, as credit card fees have risen, retailers coughed up an eye-watering $126.4 billion in credit card fees, marking a 20% surge from the year before.
While big-box stores might shrug off these fees, for independent retailers, it’s more than just numbers on an expense sheet; these escalating fees threaten their very survival and growth. Facing a seemingly rigged game, some small retailers are now eyeing alternative strategies, seeking a fairer play in a landscape dominated by credit card giants.
Ways To Navigate The Fee Jungle
Faced with growing card fees, small retailers have for the past decade often turned to cash discount programs, offering lower prices for cash payments to avoid the fee and save the customer money, a practice legal across all states as long as cash and credit prices are clearly displayed.
Beyond cash discounts, some retailers opt for surcharge programs, adding a bit extra to the total when customers pay with a card. It’s not for everyone and isn’t legal everywhere. There’s red tape, too; retailers must notify credit card companies and customers, and not all customers appreciate the extra charge on their receipt.
Additionally, savvy retailers negotiate with or switch to more affordable credit card processors to trim down those fees. This is a crucial step in an environment where credit card fees steadily rise, ensuring they keep their expenses low, doors open and the lights on.
The Cash Discount Dance
Now, let’s zoom in on cash discount programs. Rather than a knee-jerk reaction to high credit card fees, this can be a thoughtful strategy to keep more money in the till. When a customer pays cash, the retailer doesn’t have to fork over a slice of the sale to the credit card company. This way, the small bookshop or the corner cafe can keep prices fair and still make a decent living. And who doesn’t love a discount? Especially in a small town where every dollar counts.
But it’s not all roses and rainbows. Implementing a cash discount program has its challenges too. Due to industry regulations and compliance standards, retailers must ensure customers get the gist. So, your cash and credit card prices must be clear as day. Disclosure is required at the register area, shelf labels must disclose pricing differences. No one likes a nasty surprise at the checkout. Also, your data and sales reporting must be clear, and taxes still apply—even for cash payments.
And while it’s a straightforward concept, it requires a shift in how things are done around the shop. The price tags, the billing system and even the staff must sync with the new pricing dance.
How do customers feel about it? Well, I find it’s a mixed bag. Some appreciate the discount and happily pay cash. Others might see it as a roundabout way of penalizing card payments. It’s always a delicate balance keeping the business afloat and customers happy.
But in the grand scheme of things, I believe that a well-executed cash discount program could be a step towards a fairer, friendlier retail landscape.
Small Steps, Big Impacts
The cash discounting movement is more than a savvy business tactic—it’s a statement. Small local retailers say, “We’re here and want a fair shot at success, too.” And it’s resonating. When a customer chooses to pay cash to snag that discount, it’s not just about saving a few bucks. It’s a small act of support for the local businesses that make a neighborhood vibrant and unique. The dollars retailers save on transaction fees when customers pay with cash can go a long way. Maybe it’s a fresh coat of paint for the store or perhaps an extra day’s pay for an employee.
Furthermore, when a retailer adopts a cash discount program, it sparks conversations. Conversations about the real cost of credit card convenience and who bears the brunt of it. It nudges people to think about where their money goes and who it supports. And in a way, it invites customers to be part of a solution. I find this to be a community-centric approach that can foster closer bonds between businesses and the folks they serve.
Keep in mind, though, that there is a learning curve as retailers navigate the legal and operational nuances of cash discounting. But as more retailers jump on the cash discount program bandwagon, it sends a message: A call for transparent and fair fee structures that support, not suffocate, the small business ecosystem. And who knows? This little ripple in the retail waters could provoke a wave of change in the long run.
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