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Every time you purchase something with a credit card at a store (whether it be a grocery store or anywhere else) the store pays ~2-3% of the total transaction to the credit card company. As basically no stores offer cash discounts, this essentially means the store earns 2-3% less money off of customers paying with credit cards than with cash. With grocery store margins as thin as they are, 2-3% is a big deal.
On the customer side, the only advantage a credit card offers over cash is convenience. But is that convenience worth paying 2-3% more on everything I buy? I don't think so. I would happily pay in cash if I received a discount. The max you can generally get as cashback on a credit card is ~1%, and these are on expensive cards for the retailer such as Discover. Essentially the credit card takes 2% of the money and gives you 1%. You're still getting shorted by 2% of your buying power.
The only stores I have seen offering cash discounts are gas stations and some mom & pop stores. It doesn't make sense to me. Shouldn't basic economics mean the stores want to make more money, and customers want to pay less? Even if stores offer just a 1-2% cash discount, they're still increasing their margins by 1%!
I find more benefit than my Amex just being convenient. My Amex offers extended warranty, life insurance, fraud protect, loss protection and rewards. I also get the benefit of the float, I can use Amex to challenge bad charges or service. I get a lot of these services with my Chase Visa as well.
As a retailer I'm not going to have checks bounce, counterfeit money, I don't have to carry the credit risk nor do I have to attempt to collect on slow paying accounts and by accepting credit I will typically have more sales than if I didn't. Also in an all cash business there is more risk in cash mgmt through employee theft or robbery either in store or transporting funds to the bank
Last edited by Lowexpectations; 10-06-2014 at 12:52 PM..
Every time you purchase something with a credit card at a store (whether it be a grocery store or anywhere else) the store pays ~2-3% of the total transaction to the credit card company. As basically no stores offer cash discounts, this essentially means the store earns 2-3% less money off of customers paying with credit cards than with cash. With grocery store margins as thin as they are, 2-3% is a big deal.
On the customer side, the only advantage a credit card offers over cash is convenience. But is that convenience worth paying 2-3% more on everything I buy? I don't think so. I would happily pay in cash if I received a discount. The max you can generally get as cashback on a credit card is ~1%, and these are on expensive cards for the retailer such as Discover. Essentially the credit card takes 2% of the money and gives you 1%. You're still getting shorted by 2% of your buying power.
The only stores I have seen offering cash discounts are gas stations and some mom & pop stores. It doesn't make sense to me. Shouldn't basic economics mean the stores want to make more money, and customers want to pay less? Even if stores offer just a 1-2% cash discount, they're still increasing their margins by 1%!
Or, they could refuse to accept credit cards at all. And then many customers will simply shop elsewhere.
I know of an auction house which lost their ability to take credit cards because they did this. The only place I've ever gotten a discount for paying cash is my dentist.
Or, they could refuse to accept credit cards at all. And then many customers will simply shop elsewhere.
Exactly. But I don't see why it hurts the retailer to have the posted price be for credit cards, and then offer a cash discount. Per Keim's post, this would dodge the stores' agreements with credit card companies.
Quote:
Originally Posted by Keim
The obvious work around is offering a discount for cash. This is a logistical pain. Why do it if your competitor is not?
This should be extremely easy to have cash registers do automatically.
I would definitely change my shopping habits based on getting a cash discount. Right now I charge almost $10K a year. If I received a 2% cash discount, that's $200 in my pocket. We're not talking about small change anymore, are we?
My dad, an economist, asked this question like 30 years ago. I thought he was crazy, then of course instantly realized he was correct. 2 years later cash and credit prices started appearing at gas stations.
Exactly. But I don't see why it hurts the retailer to have the posted price be for credit cards, and then offer a cash discount. Per Keim's post, this would dodge the stores' agreements with credit card companies.
This should be extremely easy to have cash registers do automatically.
I would definitely change my shopping habits based on getting a cash discount. Right now I charge almost $10K a year. If I received a 2% cash discount, that's $200 in my pocket. We're not talking about small change anymore, are we?
Or, you could switch to a rewards card that pays you 2% cash back.
Exactly. But I don't see why it hurts the retailer to have the posted price be for credit cards, and then offer a cash discount. Per Keim's post, this would dodge the stores' agreements with credit card companies.
This should be extremely easy to have cash registers do automatically.
I would definitely change my shopping habits based on getting a cash discount. Right now I charge almost $10K a year. If I received a 2% cash discount, that's $200 in my pocket. We're not talking about small change anymore, are we?
SPEC'S is a huge local liquor store chain that gives a standard cash discount to all purchase cash or debit. It can be done but it takes a huge player in a market willing to give it a try. There are benefits to the merchant that I already posted though that aren't overcome by this
Or, you could switch to a rewards card that pays you 2% cash back.
If the rewards card pays 2% cash back, how is the credit card company covering for their transaction costs and overhead? Clearly by charging the retailer 3%. That's 1% of my money that isn't going into either the retailer's pocket or my pocket. It should be to both of our benefit to negotiate a better deal.
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