As credit card companies continue to tighten their reins on consumer credit, more and more retailers are offering customers discounts for paying cash for merchandise. The main reason for this is that despite the recent credit card bill passed by Congress that addressed many of the practices associated with credit card issuers and users, the merchants were left out in the cold.
Unfortunately the part of the bill that would allow retailers to offer discounts to debit-card users and put an end to restrictions that payment networks such as MasterCard and Visa place on retailers who charge less for non-credit-card transactions did not end up in the final version of the bill.
"The extra charges the establishment has to pay for the use of a credit card are kind of hidden inflaters in the cost of the product," said Sen. Richard Durbin (D., Ill.), who is pushing the measure with Sen. Christopher Bond (R., Mo.). Small banks and credit unions, which stand to lose revenue if consumers cut back card use, are pushing back, along with the rest of the card industry. Retailers seeking the change "do not want to pay their fair share for the significant benefits they get when accepting debit and credit," said Trish Wexler, a spokeswoman for the Electronic Payments Coalition, a group representing bankers and credit card networks. Source: Wall Street Journal
Indeed, almost lost in the hullabaloo is that retailers pay charges -- usually equivalent to 1% to 2% of the customer’s purchase -- to the card issuer for the privilege of using card payment networks. So when consumers pay with cash, businesses are spared those fees. And since contracts between card issuers and merchants prevent most businesses from charging a premium on customers who pay with plastic, they can't pass those fees along to you. (Merchants say the fees get built into retail prices, resulting in higher costs for all shoppers.) Source: Smart Money
If you are able to pay cash for your purchase, it may be worth your while to ask if a cash discount is available. These discounts are not always advertised but that doesn't mean they don't exist. Smart Money is reporting some recent discounts being offered:
| Category | Sample Cash Discounts |
|---|---|
| Electronics | At 1-800-Plasmas, save 2% on flat-screen TVs when you pay by check, money order, certified check or wire transfer. XoticPC knocks 3% off the price of laptop and desktop computers when you pay by check, money order, certified check, wire transfer or PayPal eCheck. |
| Gasoline | Pay for gas with cash at Arco to avoid the stations’ 45-cent convenience fee for debit and credit transactions. (The exception: use an Arco Debit MasterCard, and you won’t be charged the fee.) |
| Jewelry | Save 15% to 20% on watches and jewelry at ItsHot.com when you pay by cash, bank transfer or wire transfer. |
| Vacation lodging | The Palms Cliff House Inn, a luxury bed and breakfast in Hilo, Hawaii, offers a 5% discount on room rates to guests who pay their balances in cash. |
| Various | Try eBillme’s ShopDebtFree.com -- which lets shoppers pay online from their bank accounts -- and earn a rebate of $25 to $50 from participating retailers. For example, Comp-U-Plus.com and ShoeBuy.com are each currently offering $25 back on purchases of $100 or more. |
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Some analysts believe that this trend may grow to the point where credit card companies may be forced to lower the fees they are charging retailers.
As credit card companies continue to raise fees on retailers, there is more motivation than ever before to offer discounts for shoppers paying cash. Look for convenience stores to take the lead on cash discounts, as many already offer lower gas prices for cash purchases. As other retail channels offer cash discounts, the credit card companies may get enough pressure to reduce fees for retailers. Source: Nielson Wire
At a time when credit card users are getting gouged with limits going down and interest rates going up, this could be a double victory for the consumer. You save on the discounted merchandise as well as on the interest you won't be paying.
If you are unsure whether paying cash is truly the cheapest way to go, the Wall Street Journal wrote an article about cash vs credit for holiday purchases. While the holidays are over, you can still use the list of both the pros and cons of credit vs cash for various types of purchases to assist you in making your decision.
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Comments
Even though there may be money to be saved with cash transactions, I don't think carrying large amounts of cash is such a great idea in today's world...
I wish there were more local merchants that would offer this!
While truthful that a discount of 3% may be offered many businesses that are not online may want cash to do tax evasion especially mom and pop. The internet merchants may have less fraud risk than a retail store who handles checks and cash and has to use armed security guards and so a credit card is worth the 2% fee but the retailer will lobby congress to get the a reduction in fees while trying to maximize profit.
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