There is one problem with this. Most large retailers save more money with credit cards. It's very expensive to handle cash. You have registers, insurance, pick up from those big armored trucks and the cost of simply counting it. Credit cards save them a lot of money. I'm afraid only small businesses might benefit from a cash incentive program, and that won't be enough to have an impact. Not enough would participate.

I'm willing to bet that although merchants are paying a fee to the credit card companies in order to process those transactions, many retailers are still making more - on the whole - from credit card purchases than from cash. When a consumer pays cash, it's a set, finite amount. If they don't have the cash in their wallet, they're not going to buy that extra $5 item in the checkout line. But when a consumer pulls out the plastic, that $10 extra something doesn't seem like so much, because they don't feel its impact so deeply.

So while some smaller retailers may offer those cash incentives, I doubt we'll see larger businesses giving up those extra profits.

I still prefer credit cards for the protection they provide.

There's one place near us with a cash discount, and by "cash" they mean cash or debit card. So you still get the convenience and get to keep your cash safely in the bank. I use cash or a debit card there.

It's true that although merchants lose more for a given purchase using credit, they tend to get more purchases when they take credit cards. And nowadays when everyone in generation Y uses credit cards for everything, everyone really has to keep taking credit cards. My local food coop wrote a long article explaining how it really doesn't make much difference to them which payment method you use, saying that checks and cash aren't as great as you might expect.

I currently use credit cards that give me 3% back on gas, groceries, drug stores and home improvement stores and 1% on everything else. A 3% reward is more than a 5-cent discount when gas is $2 per gallon, so I usually use credit. But if it cost the same or less to use cash, I would make the switch. Most credit card companies are slime, and I'd be happy not to give them 1-2% of my purchase price.

Do you avoid stores that have different sets of prices for cash and card customers?

Quote: " 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"

Hope you can tell me where you get that....I had one that gave 2.5% back, but then they changed it...just steer me in the right direction, maybe I'll find it...

I am not the author but I do have a credit card that gives 5% back on gas purchases. It is a Platinum Visa with Pentagon Federal Credit Union.

Sue

It depends on if the discounts/rewards were more than the 3% that my credit card currently gives.

Aldi, for a long time, only accepted cash, so I paid cash - it was well worth the "discount" of their prices on some items.

And I do a lot of garage-sale shopping as well, and small charity thrift stores that only take cash. If there were a cash discount, I'd use cash - if there were a debit card discount I'd do that.

The one thing I don't do is use a cash-back credit card, because I don't use the credit card unless I absolutely have to - i got into carrying a debt when I was in my early twenties, and got out of it by going cash-only.I'm not going back.

Other countries in the world give discounts for cash purchases so it would not be strange for the US to do so as well. I just wonder if Americans would get used to carrying cash again or if we are just too used to using credit cards.

Its an interesting idea.

I wouldn't shop at stores that give discounts for cash (same as I make a point of never buying gas at stations that provide a "cash discount") - it's just a tricky way of penalizing credit card use, and I make a point of not rewarding that type of practice.

One thing everyone is overlooking is that credit card companies are charging their percentage ON TOP OF THE TAXES! That makes a big difference here in Ontario where PST/GST is 12% of the purchase.

So if someone buys a $1000 item, they pay $1120 with $120 going to the government. The retailer is paying the credit card company 2.5 % of the total price ($1120), not the original price tag. (So the retailer pays the credit card company $28.00 in total). Of the total purchase, the retailer only gets to keep $972.00.

However, if the buyer pays cash or debit, and they get a corresponding 2.5% off, the discount comes off the purchase price before taxes are calculated. So in total the buyer pays $1092.00 that's $975 (item with discount) + $117 (the 12% tax).

Ultimately, the retailer gets to keep $3.00 more. As noted in the comments, most retailers offer a better discount than the fees they're paying, so they might not keep any extra at all. However, the cash discount is probably a better deal for the buyer than whatever rewards they get on their card.

Bottom line: The government and the credit card companies win when you use your credit card.

FrugalZen:
> The Merchant Agreement signed by all merchants who take credit cards has a clause that states the merchant cannot give a discount for cash or charge a surcharge for taking credit cards.

And why can Vis and Masters force the merchants to sign such an agreement? Because they are two, and the merchants are thousands. It would welcome if the antitrust department of the government comes out of hibernation and slaps some fines on the big guys when they abuse their market power.

Peter

Yes...I would ditch the plastic for cash if the incentives were good enough.