The attraction of cash discounting.

In my previous post, I gave some general information about cash discounting, what it is, and Visa’s rules regarding it. 
(View prev post) 

So exactly what is the appeal of cash discounting for merchants then? 

First, it is important to understand that EVERY  time you use a credit or debit card, a percentage of the purchase goes to the credit card company that issued the card. Another  portion of the sale goes to the processing company. The fee is charged to the merchant for the privilege of being able to accept your credit or debit card. 

Since each credit card charge varies depending upon card typeInterchange rates and any additional fees or charges in the merchant agreement. These fees can greatly impact the bottom line. 

So potentially, a small business with $250k per year in sales, with an average of 5% processing charges and fees, could incur 12k in charges and fees.

Cash discounting allows the merchant to essentially pass on the costs of these fees to the customer without imposing a surcharge. (which may be illegal)  This allows the merchant to offset or recoup the fees that would be paid to the credit card processor. for each credit card transaction. 

So for a merchant, cash discounting programs can be an effective way to remain whole when accepting credit cards. 

It will be interesting to see how this will all play out, considering that Visa has drawn a line in the sand. 

What is cash discounting?

You may have heard that last month that Visa came out with a bulletin stating that some programs marketed as “cash discounts”  were “non-compliant” with Visa’s rules. One merchant remarked to me that it’s ok – we don’t surcharge anyway. It’s illegal.” 

This merchant was correct. Surcharges on credit card transactions are illegal  here in New York, as well as 9 other states.  But what I needed to stress to him is cash discounting is not surcharging.

So what’s the difference? Generally speaking, a surcharge is a fee that is added to the cost of goods or products simply for the convenience of paying with a credit card.  So a surcharge is specific to using a credit card. So for example, in some establishments (where it is legal) a purchase made with a credit card has a 2% fee assessed toward the transaction. If you had paid in cash, there would be no additional fee assessed. 

However, in cash discounting, a service fee is applied to all transactions. However, should you pay in cash, the merchant will remove the fee for that purchase since you paid in cash.

Visa’s rule are 
A merchant is permitted to offer discounts for paying in cash, however, the discount must be given as a reduction from the standard price.

So according to Visa, this violates their rule as it encourages merchants to add a fee to the normal price, and then remove it at the register if the customer pays with cash, check or debit.

So why is cash discounting attractive to merchants? We will look into that in our next post. 

Below are some helpful links which explain cash discounting and Visa’s bulletin. 

pymnts.com    Visa says…

CC Sales ProVisa declares…

Visa rules and policy

Firewalls – Keepers of the Gate

In this next writing about basic internet security, we will talk a little about firewalls.

It is common that people lump firewalls and antivirus software in the same bucket, however these are two separate items with two separate functions.

To start off, lets take a quick look at the difference between the function of a firewall and of antivirus software.

Firewalls:   These are the “Guard at the gate” so to speak. Firewalls help to minimize damage from spyware by keeping it from gaining unauthorized access to files and software. Firewalls monitors network traffic into and out of a computer or network and decides whether or not to let it in.

Antivirus Software:  Antivirus software would be the “soldiers” of the computer world. Their mission is to seek out and software, files, or programs that can harm or compromise your computer. It can detect harmful programs that are being downloaded or are already downloaded and will quarantine, remove or fix. It will also look for potentially harmful files attached to emails, or being downloaded from the internet and will remove these files and notify the user of their removal.

Now that we know the difference let’s look at firewalls.

There are 2 types of firewalls:

  • Hardware firewalls – This sits between your computer and the internet.

An example of a hardware firewall would be your router. A router may not have a built- in firewall or it may not be enabled so you will want to check with the manufacturer specs to see if it does.

A hardware firewall uses packet filtering to examine the header and decides whether to allow it to move through the system to the computer. It does this by comparing the header to a set of user created or pre-defined rules. Based on this comparison, it will allow or block the incoming traffic. If your computer becomes infected it could disable a software firewall, but it will not infect a hardware firewall as the hardware firewall sits apart from the computer.

Hardware firewalls also can provide centralized network management for multiple computers preventing individual users from having to change any settings.

 

  • Software firewalls – This sits between your computer and a network

 

An example of a software firewall would be Windows Defender.  Software firewalls, which usually come pre-loaded on your computer just as other software applications will only protect the device in which they are installed. They can often be customized, allowing the user some control over the protection features.  They may also include privacy and web filtering controls as well as other options.

The software firewall will run in the background of your computer and should always be running.

So the question becomes do you need a software firewall if you have a hardware firewall?  From what I have researched, you should run both as while they both may have redundant features, a hardware firewall should stop the barbarians at the gate while the software firewall should stop anything that may get through.

While I cannot recommend any specific firewall software, I have provided a link below that reviews the top ten personal firewall software for 2018.

http://www.toptenreviews.com/software/privacy/best-personal-firewall-software/

 

For my next post, we will discuss antivirus software. In the meantime, happy internetting.