A Guide to Merchant Cash Advances & Discounts

Hundred US dollar bills

These days, plastic is king. If customers aren’t paying using some form of mobile payment, you can all but guarantee that they’re paying using a debit or credit card. This is because card payments are convenient, quick, and simple to use. So, while these forms of payments greatly benefit consumers, they can have a huge financial impact on merchants, especially small businesses with smaller budgets.

The fact is that credit card processing continues to become more expensive. Accepting credit and debit cards is a true catch 22 situation for merchants. By accepting these forms of payments, businesses have to take on the financial burden of swipe and processing fees.

These fees typically range anywhere from 1-4%, which can have a significant impact on a small business’s profit. Because of the cost of these fees, small businesses have sought solutions to accept cards without having to pay the expensive monthly fees.

There are many options that businesses can choose between, including merchant cash advances, cash discount programs, surcharges, and others. Here’s what you need to know.

What Is a Merchant Cash Advance (MCA)?

A merchant cash advance (MCA) is when a lender provides an upfront sum of cash and the amount is repaid with a percentage of the business’s sales. A MCA is an alternative financing option for small businesses who are looking for another option outside of a traditional loan.

Typically, the funding provider is paid back through a portion of future credit card sales each day. MCAs are a funding option for businesses who need quick funding, as well as those who may not qualify for a traditional business loan. MCAs can also benefit businesses that have a high volume of credit card sales. This means that if your business doesn’t accept credit cards as a form of payment, a MCA isn’t an option.

While MCAs are a convenient option for businesses that need cash quickly, they tend to offer high interest rates and can quickly become extremely expensive.

What Is a Surcharge?

Many people confuse a cash discount program with a surcharge. A surcharge is a fee that is added to the price of a good or service. These fees are charged for the privilege of paying using a credit card. Surcharges are usually based on a set percentage of the order total before taxes.

What Is a Cash Discount Program?

A cash discount program is when a merchant decreases the price for customers who pay in cash. Though often confused with surcharges, a merchant services cash discount program is different because there is no fee added to credit card transactions.

Under the Dodd-Frank Law, businesses are allowed to offer discounts to customers who pay in cash or check as an incentive to pay using an alternative method to credit and debit cards. However, the service fee or cash discount amount must be clearly printed on the receipt.

Cash discount programs work by charging a small fee on all transactions. However, if the customer pays using cash, check, or gift card, the fee is waived. All service fees are collected by the technology provider, who is in charge of paying the credit card fees on the merchant’s behalf.

What to Consider When Evaluating Cash Discount Programs

There are many factors that business owners will need to consider when determining what cash discount program is most ideal. Here are some of the most important details to take into consideration.

  • Equipment – The service provider you choose should offer equipment and technology that accepts all types of cards, including EMV chip cards. With the increase in mobile payments, choose a provider that has equipment that accepts mobile wallets as well.
  • Make sure the provider follows all legalities – You don’t want to do business with a shady provider. It’s critical that you choose a cash discount program that’s offered by a provider that adheres to all state and federal laws. You will also want to ensure that the provider has solid BBB reviews and is in good standing with that agency.
  • Fee Options – A quality service provider should have two service fee pricing options. Fees can be applied based on average ticket size, which means it will be a flat fee, or the fee can be applied based on a set percentage of the sale amount. The fee option for your business is dependent on your average ticket size.
  • Hidden Costs – There are some providers that charge setup and other hidden fees that make them more money. In some instances, you can ask for these fees to be waived. Avoid any cash discount program provider that isn’t entirely transparent in their pricing and fees.

You’ll also want to be sure that the service provider you choose is available to support you. Merchants should have access to training guides, in-store signage, and quick reference guides to make the process seamless for you and your customers.

With the right cash discount program provider, you can continue to accept all forms of payment without having to worry about high fees that eat into your monthly profit.

Looking for a Quality Cash Discount Program? Choose Adept Payments

There are plenty of cash discount program providers. If you’re looking for one that will exceed your expectations, choose Adept Payments. Our cash discount program meets all of the regulations set by major card service providers, as well as state and federal law.

Our cash discount program is designed to help merchants just like you save money while continuing to accept credit card payments. We offer flat and percent-based fee options as well as terminals and POS equipment. Our system is designed to process all card types, including EMV chips and mobile wallets.

Want to learn more? Contact us today at 888-732-3838.

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