Cash "Discounts" on purchases

[OldShooter]

It is in violation of the vendor’s contract with the cc. Venders can add a convince fee, but not a percentage.
...

Sorry, that was in the bad old days. You can chase down the details of the most recent class action suit to get the details on the new rules.

 

[The Cosmic Avenger]

It is in violation of the vendor’s contract with the cc. Venders can add a convince fee, but not a percentage.

That is not true, actually, as convenience fees are legally considered a surcharge on the listed price that is only applied to credit card transactions, which is prohibited in card agreements (and by state law in seven states).

Since the Durbin Amendment passed almost 10 years ago, banks and processors are no longer allowed to prohibit credit card transaction minimums or cash discounts in their card agreements. The key is not the amount or percentage, but the advertised price. Merchants are allowed to offer a discount off of the listed price for paying with cash, but they are not allowed to charge more than the listed price (surcharge) for credit card transactions. The method of the discount is not part of the regulations or card agreements.

There is a lot of confusion about this, partially because in most places it is not subject to state law, but a matter of the merchant's credit card contract, and so the average business owner interprets it however they see fit...unless a customer (or maybe competitor) complains to the card provider. Therefore, as the article below points out, there are many examples of posted policies that are actually prohibited, leading people to think those policies are actually allowed.

This article explains it really well, with a lot of specifics and citations: https://www.cardfellow.com/blog/cash-discount-eliminate-processing-fees/

 

[RenoJay]

Having run a number of businesses, I do not believe the specialty butcher business has high margins. I’ve become much more aware of how lucky I am in relation to the majority and don’t sweat when a small business does this as long as they disclose it before I do my transaction.

 

[triangle]

As a consumer who is against duopolies like $MA and $V I am quite happy to see cash discounts being given. If the actual CC transaction fees were passed on to the consumer there would be more pressure to reduce the fee or otherwise more room for competitors. A win for the consumer and merchant.

I realize that electronic transactions can not be processed for free, but with modern technology I suspect there is a lot of room in between the fees that MA/V/DFS/PayPal charges and what some other companies could offer.....Where we would be discussing basis point differences instead of whole numbers.

 

[DektolMan]

Here in CT we have a pizza place we go to that excepts cash only. It is posted on their website, front door and counter. As a former small business owner that excepted cards I can't blame him. It takes money right out of you bottom line and most businesses like myself just raised prices.


If you don't like that policy then you can always take your business somewhere else.

 

[HadEnuff]

I've been on both sides of this...as a deliverer of services, I enjoyed the benefits of making it easier for my patients to pay me "right now" with a credit card, but it did bug the hell out of me to pay the fees. It cost me a fee, but there was a benefit. One thing I found, at the end of my career, is that as a merchant, you don't know what fees you've agreed to. As the CC companies compete with each other, offering bigger kickbacks to the customer, they would pay that out of the merchant's hide, without the merchant knowing that that he/she is paying 3.5%, or 4%....

As a customer, I enjoyed getting 1 or 2 % back. Of course, any kickback I got for paying business related bills with my CC I always declared as income, so I paid my proper share of taxes. I'm sure everyone does this.

 

[Aerides]

Many studies have shown the credit card industry that people spend more when they can use a card. And spend even more with the "prestige" cards. The transaction total goes up when money doesn't actually come out of the wallet.

I know if I'm running a store, I'd rather pay 3% on a sale of $120, than zero on a sale of $100.

But yeah, a small pizza shop? Not so much incentive. Or a service business, or any fixed price type thing where upselling is not a thing.

 

[jazz4cash]

We have a few off brand gas stations that are cash only and priced well below the competition but when you add all the easily accessible discounts it is considerably cheaper to go elsewhere. In addition to 1-5% rewards there are discounts from every grocery chain, 10 cents off Thursday, car wash discount, etc. They are all cumulative.

 

[gwraigty]

As a customer, I enjoyed getting 1 or 2 % back. Of course, any kickback I got for paying business related bills with my CC I always declared as income, so I paid my proper share of taxes. I'm sure everyone does this.

No, not everyone does this. In general, credit card cash back rewards aren't taxable income for consumers. They're considered a reduction on the purchase price. For a business credit card, it works a little differently, and not the way you're doing it. More details here:

Are Credit Card Rewards Considered Taxable Income

Business purchases are completely different than personal purchases, however. If you have a business credit card, a good general rule of thumb is that any rebates on those business purchases are subtracted from the costs of your purchases, reducing the amount that you can deduct from your taxes. This is not technically taxable income, but the net result does increase your tax burden.