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Cash or credit
Question: I understand that merchants are paying a 1 to 5 percent transaction fee every time I use my credit card. It would seem logical that I could offer cash to merchants and split the difference with them for that transaction fee yet with rare exception they look at me like I had two heads when I make the suggestion. How can I get a cash discount from groceries, big box stores and gas stations? Phil, Saint Louis, MO
Answer: I remember my Mom doing just what you suggest. A lot of times she would ask a merchant for a discount in return for paying cash.
But she only made the offer when she was shopping at a small local store and when she was dealing with the owner. Most employees at large retailers--especially grocery chains, gas stations, warehouse stores, and other large enterprises--don't have the authority to make that kind of deal. Still, you could try again with an owner of a small business near you where you're a trusted customer. Strike up a conversation and see what happens. Even if the owner says no I bet you'll end up learning more about the business, which is usually fascinating.
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1 to 5 percent transaction fee every time I use my credit card
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Merchant doesn't want your money. He just wants his money. He got to figure what is the best way to get *his* money. Which should he prefer? Confederate money? Counterfeit traveler's check? Stolen credit card? Rubber check? Counterfeit green-backs?
Will special price to one customer cause others to pay more? You can't survive on price margin. You make it only on volume. Hence the volume discount. You want special price? You willing to buy more than you need? You will? You got it. You got special price now. You now my number one customer -- ichi ban. More volume you got sooner you can lower prices for everyone, perhaps just in time to save your business -- just in time volume.
Believe it or not small business owners pay for depositing cash as well. Those banks have figured out how to make a profit on everything. The charge isn't as great as credit cards, who in my experience make more on gas than the owner but, like my mother always told me, nothing is free in this world.
The problem is that, by requesting a deal, you're driving up prices for everybody.
Merchants know how much the credit card fees cost, and price their goods appropriately. If you request (and are granted) a special deal, the merchant must raise prices across the board to be able to grant such a bargain.
Asking for special pricing might help you in the short-term, but it will bite everybody in the long term.
That doesn't make any sense. If the fee is being added into the cost for the consumer, and then the merchant reduces the cost because they don't need to pay the fee, there's no reason to raise prices:
If the fee is 3%, and they give a 2% discount for paying cash, the merchant gets the 1% difference and the consumer saves 2%. That's a win-win situation for merchant and consumer.
I thought it's illegal (on a federal level) to get a lower price for purchases when cash is chosen instead of credit. Credit card companies have a knack for being able to finance (on the billion-dollar level) their own Washington DC lobbying interests, therefore they have laws written in their favor.
Bottom line is, if you like a local business, then use the "public option" and pay with cash; it means more money in their pocket, less in the credit card company's pocket.
