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If you’re scrolling through this article, you’re likely a business owner who recently tore open their bank statement only to see hundreds of dollars funneled toward credit card processing fees. Frustrated with paying exorbitant credit card processing fees? Whether you run a coffee shop, burger joint, or retail store, you’re not alone.
These fees can eat into your profits, thus making it challenging to maintain a healthy bottom line.
But there is a solution: dual pricing.
If you’ve been to a gas station recently, you may have noticed cash and credit prices listed on the signage. This is an example of dual pricing. Dual pricing is a credit card processing strategy that allows businesses to discount customers who pay with cash while charging a slightly higher price to customers who pay with credit cards. This small price difference can add up over time and help businesses save thousands on transaction fees.
But how does dual pricing work, and is it legal? And what are the best practices for implementing a dual pricing program in your business? Let’s explore the answers to these questions and more. So get ready to boost those profits by learning how cash discounting can help you save on credit card processing fees.
How Does Dual Pricing Work?
Credit card processing fees can be a significant expense for small businesses, often amounting to 3-8% of their monthly sales.
Let’s go with this example: Da Burgs Burger Joint has an effective rate is 3.6%, which we round up to 4% for simplicity’s sake. The effective rate is the total fees at the end of the month divided by the total amount of credit card payments Da Burg’s processed. That’s your TRUE payment processing rate. The dual pricing model is super easy and transparent.
If you pay with cash, your Cheeseburger is $10.00 flat. If you pay with your card, it will be $10.40. It’s that easy. Both prices are listed on the receipt, and the customer can decide. The extra .40 cents is nothing on a transaction level, but multiplying the .40 cents by 3,000 customers over a month adds up to $1,200.
So the dual price model incentivizes cash-paying customers by giving them a cheaper price. Customers that want to pay with a credit card pay .40 cents more; they may capitalize on their rewards points anyways. So really, it’s a win-win for everyone involved. You get full cash value for all your products and offset up to 100% of your credit card processing fees 🎉
Your point-of-sale solution team can easily set up a dual pricing program that seamlessly integrates into the customer experience, starting as soon as they walk through your doors.
But how exactly does dual pricing work when customers are ready to checkout?
Let’s take a closer look.
Dual pricing programs benefit both customers and entrepreneurs. By participating in these programs, customers can save money on their bills, while small businesses can avoid the high costs associated with credit card processing fees.
Is Dual Pricing Legal?
Some states prohibit surcharging altogether in the United States, while others have strict requirements for implementing surcharges. Although credit card surcharges are banned in ten states, dual pricing is allowed in all 50 states.
What is the Difference Between Dual Pricing and Surcharges?
Dual pricing and credit card surcharging are two distinct methods of eliminating credit card processing fees for small businesses. Although they may seem similar, they function very differently.
Credit card surcharges are an additional fee and line item listed on the receipt if a customer chooses to use a credit card. Credit card surcharges are more complex to set up due to the numerous complicated rules associated with their use; also, surcharge programs are prohibited in ten states and do not account for debit card transactions, so you will still eat the cost of all debit transactions.
Dual pricing, on the other hand, is entirely transparent and the most compliant way to go. Dual pricing programs are less complex from a legal and technical standpoint and more transparent and ethical. It is clear to customers that dual pricing is available from the moment they walk through the door, as dual prices are listed on the shelves, tags, menus, receipts, and signage.
For an in-depth look at the difference between dual pricing and surcharging, check out our latest blog post: Surcharge, Cash Discount, Dual Pricing Oh My!
How do I Explain the Dual Pricing to the Customer?
As a business owner, you might be concerned that dual pricing may scare your customers away or that you will receive an onslaught of angry complaints. That’s a fair, legitimate concern. The easiest way to present dual pricing is by explaining that it’s simply a discount program. Examples include:
“We like to offer a cash price here for customers who prefer to pay with cash.”
“Oh yes! We have a dual pricing program with a 4% difference. Don’t worry; we still offer the flexibility of paying with a credit card.”
“We’re all about transparency and honesty. So we let our customers know as soon as they walk through the door that you save when paying with cash.”
How do I get started?
Dual pricing programs are growing in popularity and will soon be the new normal for small businesses such as restaurants and retail establishments nationwide.
Don’t wait until it’s too late! Stay ahead of the game and offset those pesky credit card processing fees by up to 99% with KokuaPay’s Dual Pricing Program. Schedule a free demo today, and our team will show you how to start saving ASAP.
And hey, we get it – pricing can be tricky to navigate. That’s why we’re here to help. If you need assistance estimating your POS system costs or understanding the factors that impact pricing, send us a message, and we’ll schedule a demo to walk you through it.