Government Rewards Consumers Who Pay With Cash

I am sure most of you know that merchants are charged a fee by credit card companies every time you pay with a credit card. This fee is passed on to the consumer and in turn everyone, including those who pay with cash, pays a higher price for goods and services.

A new bill, that should be signed into law next week, changes all that. You will now be able to pay a lower price if you pay with cash. (Or so they claim). Merchants can offer a discount for one form of payment over another (cash vs. check vs. credit vs. debit). Merchants will also be able to legally set a $10 minimum for credit card purchases. Hopefully the merchants will pass these savings on to the consumer.

This sounds like a pretty good law. I have always been a fan of paying with cash and it looks like I might save even more money by not using a credit card. What do you think?

This post is linking to Frugal Friday.

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  1. Merchants are usually charged a blended fee regardless if you use a debit card or credit card. Agree with you, be nice to save some money by paying with cash, lets hope it gets passed on to consumers.

  2. Alissa H. says:

    What if you use a debt card? is there any fees for that?

  3. I use my card for everything – including the .25 purchases – because of the airline miles. It all has added up to some pretty great trips with free airfare for me. The key of course is to make sure you pay it off each month. So, I don’t know that I’m a big fan of this.

  4. I didn’t realize it was illegal for them to set a minimum on what you could use a CC for! I use a debit cards with the CC function, just because I feel like it’s easier. We did the envelope system for a while, but I prefer debit.

  5. Do you suppose Dave Ramsey was behind this {grins}??

    I’m ALL for it!!

  6. I love it, but I think this will give the retailers reason to raise all the prices next year for credit instead of cutting them for cash purchases. So they will say you are saving and yet they are inflating. They may actually charge us more because they have to go through the trouble of giving two prices. I don’t know how they get away with it but we have some small businesses in our area that will add a surcharge on if you use the credit or debit.

  7. Many of the merchants here have signs on the card machine that say, “Selecting Debit saves us money.” I know one small store in OR where we used to live would charge an additional $.35 is using debit and $.50 if using credit if you didn’t spend at least $35.00. So they are definitely charged more credit than debit.

    As to the point of this post – I find it hard to believe that they’ll pass the WHOLE savings along to consumers. We are credit card users (one card, paid each month, stick to budget by discipline, etc) because we get a great return from our card each year – taking advantage of the money cc companies get from those who rack up debt and pay the company for the rest of their lives. If the cash/credit difference is good enough, I’d be all over it! But if we’re talking a $.02 difference on a $5 item – no thanks.

  8. I get, on average, a $15/month rebate for clicking “credit” when I use my check card. The charges still come out of my checking account (we have no credit card debt). There doesn’t seem to be any indication of the amount of supposed “savings” passed on to the consumer (or guarantee of any at all). Not to mention the fact that a great benefit of check cards is the safety of not carrying around cash. As is seen more often that not, when the government passes a law, things only become more complicated (to put it mildly) and the private citizen is always the one who pays the price…

  9. TheHappyHousewife says:

    Not sure about the debit card. I searched for a while tonight, but then gave up because I got distracted in a conversation, lol.

  10. Though credit is not good, laws like this will hurt the poor. Not every one makes it pay day to pay day, and while credit is not the solution, many other people have no choice.

  11. It sounds awesome at first…. but then when I took a minute to think about it, I’m not that impressed with this being made into law.

    I agree with Anna and AG. Unless the “savings” for cash is significant, I would actually lose money by paying cash instead of using my debit card with the “credit” function. We are a military family stationed overseas, and our bank pays us rebates each month when we use our debit card in such a manner. And considering the number of items I have to order online to get since they aren’t available here, if merchants raise prices as Anna so wisely pointed out they could well do to instill an appearance to the consumer of a lower cash price, I’d actually end up paying MORE for more than half of my purchases in a month.

    Having worked in retail management for over a decade, I’m definitely familiar with the costs to the merchant for using credit card processing companies. But as a consumer, I don’t see any real savings here – I just see potential for a lot of smoke and mirrors on the part of corporations. If corporations truly LOWER their prices for cash, then I’ll be favorably impressed. I have very little confidence they’ll do so, however.

  12. I also use a credit card to condense all my purchases for a month (one for groceries, one for gas) so I’m not a fan. The idea of having to deal with ATM fees or else have a large amount of cash on me at all times is frustrating, and the budgeting will be much harder because I’ll have to manually figure out how much I’ve done for groceries so far, instead of just checking the credit card.

  13. I think this is interesting, but I doubt much of the savings are going to be passed on to the consumer. Unless there is a big difference in prices, I think we’ll stick with our credit cards. As long as they are paid off monthly, I don’t see a problem with using them. Especially when I get $10 Meijer gift cards (where we get all of our groceries!) and $25 Amazon gift cards!! 🙂

  14. Sweet! 😀 I would like to know the answer to the debit one, too, as I use that all the time.

  15. I think all we’ll see is higher prices for everyone. More government regulation means more costs, period. If the merchants even decide to do this, I think people are right in saying they will simply raise the credit card prices, rather than lower the cash. There’s also the issue of how this will work with checkout systems and training people to implement it…. $$$$$ for the merchants, which they will certainly pass on. *sigh*

  16. Amanda Y. says:

    I totally disagree with this! We know merchants aren’t going to pass on the savings. And some of us responsibly use a credit card for the benefits each month and pay it off, only spending what we have cash to cover. This really upsets me!

  17. Amanda Y. says:

    I bet theft and robberies will increase, as people carry more cash which is much more dangerous than a check/debit card or credit card, plus there’s the additional ATM fees for many people (when travelling if not also near your home).

  18. I pay cash for pretty much everything so I’m lovin this bill. Thanks for letting us know about it!

  19. Rebecca says:

    I sincerely doubt we, the cash payers, will see any benefits. As hard as businesses have it anyway with all the taxes and Obama’s health care stuff looming on the horizon, the businesses will pocket whatever the benefits are instead of passing them on. It doesn’t bother me too much since I pay for a lot of things with cash but it sure does hurt those who budget and use their cards for rewards (or those who use their cards and don’t budget…they will have to pay more when they don’t even have the money to pay for it the original costs). Just something else the government is getting into our business with.

  20. Sharon Stoudt says:

    As others have mentioned, we get great rewards for using our credit card because it’s a no-fee card and we pay it off in full every month. I earned free airfare to Paris for TWO after only 2 years of use! I’d be sad to see my rewards get cut, but I suppose the reality is that my rewards are really being paid for with those merchant fees and the interest charged to people who carry a balance.

  21. I also use my credit card exclusively and pay it off each month because of the money back benefits I get. I don’t care for this bill.

  22. Couple of things. First, the article that you cite, above, does not itself cite any sources, like perhaps the online text of the bill, etc. I would have liked to see for myself the actual wording, because….

    The article you cited states this: “But within months, a retailer or restaurant will have the discretion to offer you a cheaper price for paying cash. ” “Discretion” to me sounds like “option.” However, the tone of your own post seems to indicate that merchants would be required to set two prices, cash and non-cash.

    As a small business owner, this bill will be a disaster. The end result for us would be that every customer would end up paying more across the board. That is, we would raise all prices to a level such that the “cash” price would be more than the price is right now. This would be to cover the cost of having a dual-price inventory and billing system. Much work would have to go into implementing such a system, and in the end our customers will pay more either way.

    Pure socialism, telling a business what it may charge for it’s services.

  23. TheHappyHousewife says:

    Here is a link to Senator Durbin’s web page that explains the bill in more detail.

  24. I thought of something else. Since there isn’t a ‘cash’ option for online purchases (unless debit cards are excluded from this law), then more people who want to continue to earn points/cash back/etc from their cards may choose to make even more online purchases. This will hurt local retailers of all sizes. If debit is excluded and online retailers start giving ‘discounts’ for debit over credit, I will be upset as well. I prefer to use my credit card or even a one-time number over my debit card online, since my money is immediately compromised if someone gets ahold of that number.

  25. TheHappyHousewife says:

    I’m not saying I agree with everything in the law, but some online merchants offer a paypal or echeck option. I know of a few online stores who already give discounts for paying by echeck. I believe prepaid credit cards are excluded from the interchange fee.

  26. OK…if a few online stores already give discounts for paying ‘cash’…why on earth does there need to be a new law??

  27. TheHappyHousewife says:

    I guess it gives all those people in Washington something to do with their time. 😉

  28. I see this as another potential g-daddy (government) trying to control us poor “stupid – can’t think for our selves” voters. EDUCATE us don’t rule us! Everyone knows that credit is a bad thing, but it does help with that unexpected hospital bill, vet bill or car expense. No matter how much we plan, there is the inevitable expensive surprise around the corner.

  29. Christine C. says:

    Okay so it sounds like if you use your credit card you will pay what you have always paid, but get a slight discount when paying with cash. Sounds like a nice incentive as we are a “have it now society” which has put everyone in the pinch that we’re in today!

  30. I don’t think I like the sound of this at all. If they want to regulate something it should be the fees that the credit card companies are charging! They have regulated the interest rate maximums, now work on those fees. I personally use my card for the benefits only and would rather get my benefits cut a bit then be restricted about when I can use my card depending on my purchase price.

  31. It sounds good at first, but I think the reality of it won’t be that great.

    Hm..sounds like a typical law/bill from Congress!

  32. This is a tough one. I use cash for groceries and small personal purchases (keeps me within my budget), but use my credit card for most others as I find the purchases easier to track (recorded online vs. possibly losing the receipt). I DO generally ask on larger purchases (particularly home improvement – new A/C unit, new carpet, roofing, etc.) if there would be a discount for paying by check, and sometimes they give 1-2% off since it saves them the credit card fee. But I don’t know that I like the idea of opening that up to all kinds of smaller purchases… seems too complicated, I think.

  33. I’m not in favor of ANY law that yet again expands government to have control over another private sector issue. We don’t need more government regulation!!

  34. I’ve already seen companies offer a discount for using cash over credit. One vendor I am using as treasurer of our local Republican Club, offers a 20% discount for cash. Clearly, this type of forward thinking doesn’t need government entanglement. Why do we need a law to “allow” a business to do this when they can easily set their own policies to do so. And I already know merchants who “illegally” (I suppose) have in-house restrictions on minimum charges. I know of a local restaurant who posts signs that they will not run your card (credit or debit) for under $10 because it costs them too much. They plainly state that if they are forced (by their customers) to comply with the .50 minimum, they will no longer accept any cards. Why has there been a .50 minimum? This same bogus government entanglement. If the govt would get out of the way, there would be a healthy competitive reason for processing companies to offer minimum incentives. The way it is now, the rates don’t vary much from processor to processor…especially on the small business end.

    And to answer the question about debit cards someone else asked, yes, debit cards cost companies just like credit cards. There many be some difference in the processing fees. I don’t know because I haven’t dealt with debit cards in our business.

    As for putting a .50 charge on your card…here’s how this screws the merchant.
    $0.50 Charge
    $0.03 Processing Fee at 4.5%
    $0.30 per item Processing Fee
    Net to merchant $0.17

    Merchants can’t stay in business when they’re being nickled and dimed to death.

  35. Paypal & echeck are not free.

  36. I think people get into their heads that CC companies are evil empires ready to take over the homeland. In reality, they are just companies that sell a service and create business practices that will make their company successful (on the front side, they might be evil on the collections side of things…).

    When a business agrees to take on Visa as a partner, they have to agree to certain terms. The merchant agrees to charge the same to Visa customers and cash customers as a part of the deal– if they don’t want to do that, they don’t have to accept Visa. Visa has to protect their brand. People will not use their product if they feel like their getting the short end of the stick by doing so. If the merchant wants the customer base Visa can provide, they have to pay the price.

    I do not use credit cards (just my Visa Debit), but I do accept them in my business. The government needs to keep its nose out of private business. I’d rather pay the small fee than have the government’s fingers all over it. This is not a national security issue.

  37. Emily M. says:

    I think it’s a good idea. We use our credit card for almost everything and pay it off at the end of the month (we get a cashback reward). I don’t feel I need to use it for a small payment, like $2 or less, although there are times when I’ve had to when I don’t even have that much cash on me. If they imposed a $10 minimum I’d be fine with it–I’d just have to be more conscious of how much cash I have with me.

  38. Emily M. says:

    I would think you would get a percent off your purchase for using cash–or pay a percent of your purchase as a fee for using credit. They don’t need two prices for everything to do either of those.

  39. Emily M. says:

    This will not prevent anyone from using credit when they need to.

  40. Crystal says:

    I agree with this. I can’t see more government intervention leading to anything but higher prices while, all the while, politicians are preaching that they’re saving us money somewhere that no one can see.

  41. Ugh so not a fan of this. I always use my debit card for everything. If I have cash in my wallet i spend it right away. With my debit i only spend when I’m specifically going out to get something. Plus i get rewards for using it through my credit union. This is a digital age seems weird that they would punish those that are moving along with it.

  42. Having worked retail in a family business for years, I can tell you that companies are charged to run debit cards as well.

    We won’t see any discounts, but we might see extra charges for using debit or credit for small amounts.

    I used debit for everything, and I always feel bad when I’m making just a small purchase, even at the grocery store, because I know a fee is charged to the merchant.

  43. I agree: I’m skeptical that merchants will pass along the full amount to the consumers. We use credit cards the way you do, except that we have two cards, each of which offers different rewards. I’m also concerned that this change might discourage credit-card issuers from offering rewards programs at all.

  44. That’s really interesting that businesses would charge you more for paying with a credit card. I love getting the miles/points with my credit card. I’ve gotten free plane tickets and hotel rooms!

  45. I personally would love to see savings with a cash program, however I really do not think that is what will happen. I really think this is another “big government” ploy to control our lives. When will they stop?

  46. I think it’s a good idea, in theory. My husband and I never carry cash, though. We just have a debit card, which to us is just like using cash or a check. I wonder if the law would have any stipulations on those who paid with a check or debit card….that would be nice.

    We limit our credit card usage by keeping them stored in the safe deposit box at the bank unless we’re going on a long trip. Hopefully one of these days when we’re completely debt free, we will be able to get rid of credit cards altogether.

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