How do I set up a cash discount for my customers?

Three separate sets of rules sit over this decision, and they come from different places. The Reserve Bank of Australia sets the payments-system rules around surcharging and confirms in its own published FAQ material that a business may offer a customer a discount for using a particular payment method. The ACCC administers Australian Consumer Law, which requires that prices are not misleading and that where a single total price applies, it is stated. And your own card acceptance agreement with your bank or payment provider sets contractual terms on how you may price by payment method.

That last one is the step businesses most often skip. Acceptance agreements differ between providers, and the only reliable way to know your position is to read your agreement or ask your provider directly. We publish the sources for the regulatory side on our cash-discount guide rather than paraphrasing them here.

Because this is a pricing and compliance decision, treat what follows as a practical sequence rather than legal advice. If a discount is a material part of how you will trade, confirm it with your payment provider and, where the amounts are significant, with your own adviser.

The sensible ceiling for a cash discount is what card acceptance actually costs you, because above that the discount stops paying for itself. Take your total card processing costs for a recent month, divide by your card turnover for the same month, and you have your real blended cost as a percentage. That figure — not a number a competitor uses — is the reference point.

Then account for the costs cash carries too. Cash has to be counted, reconciled, secured and banked, and someone's time does that. A discount that ignores those costs looks better on paper than it performs in the till.

Round numbers work best at the counter. A flat amount is easier for staff to apply and for customers to understand than a percentage that produces awkward cents, and it is easier to sign.

A cash discount asks a customer to change how they pay, and most customers no longer carry much cash. If the nearest machine is a walk away, the discount is a nice sign rather than a change in behaviour — the customer pays by card and the offer does nothing except cost you the printing.

This is the part of the setup that an ATM answers. A machine inside the venue puts cash in a customer's hand seconds before they pay, and it removes the reason to ignore the discount. It also keeps that withdrawal inside your business rather than sending someone up the street to a competitor with a machine.

Under free placement the machine costs the venue nothing to have. The operator funds the terminal, the cash float, the connectivity and the servicing, and the venue receives a share of every withdrawal. So the same decision that makes the discount work also adds a revenue line, and neither one requires capital.

Give it a full trading cycle before judging it — a month at minimum, and longer if your trade is seasonal. The number to watch is the share of turnover taken in cash, compared with the same period before the discount started. If that share has not moved, the problem is usually visibility or access to cash, not the discount amount.

Watch your card processing costs in the same period. A discount that shifts trade to cash should show up as a lower card volume, and the two figures together tell you whether the offer is paying for itself.

Review the offer whenever your provider's fees change. From the Reserve Bank's announced timetable for surcharging, card acceptance costs are a moving target over the next couple of years, and a discount set against last year's costs may be either too generous or too small to notice.