Would you get rid of credit cards if stores give more discounts to customers who pay cash ?
I am sure you have encountered a store or gas station that has a set of prices for cash customers and a different set of prices for credit card customers. Usually the credit card customer has to pay a small surcharge. Under a new measure being considered in the U.S. Senate, retailers may be given the go ahead to give more discounts to cash paying customers. Would this encourage consumers to ditch the plastic?
Currently, credit card networks levy a small fee on merchants for every transaction. Usually the fee is around 1.5% to 2% of the transaction. Some smaller retailers may have to pay more and each card network has its own rules. The credit card industry has always tried to get retailers to charge the same price to cash customers and credit card users. When everyone is charged the same, merchants earn a little more profit on cash payers. Also, unscrupulous merchants who do not report all of their cash receipts to the IRS earn even more due to skipping taxes. So there is definitely an incentive for merchants to want more cash sales.
I have found that I tend to go to merchants who accept credit cards without a surcharge for the convenience and also the rewards. For example, there are two gas stations next to my house that are a block apart. One of them always has a cash price that is about 2 to 5 cents cheaper per gallon than the other station. However, if you pay by credit card the two stations give approximately the same price. I always go to the one that does not have a cash price because I get 5% back on gasoline purchases on my credit card, so it is not worthwhile to drive an extra block to the station with the cash price and pay cash. Another reason that I prefer merchants that take credit cards is that I just do not like to carry too much cash around. If I lose my cash I simply lose it without recourse, but losing a credit card is not as bad since the card can be cancelled.
If this measure does pass, I do not think merchants will be giving discounts that are extremely spectacular to cash payers since their cost for credit card transactions are fairly small. However, if the transaction amount is large enough it may be worthwhile for the consumer to pull out cash instead of plastic. For example, if you are buying something that costs $2000 and the merchant is giving a 5% discount to cash payers and your rewards credit card only gives 1% cash back, then it might be worthwhile to pull out the cash to save $80.
What do you think? Do you avoid stores that have different sets of prices for cash and card customers? If you always pay cash do you think it is unfair that credit card accepting merchants are making a little more profit off of you?
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any bank, card issuer, airline or hotel chain.