Have noticed this recently at a few gas stations in my area – it will be several cents per gallon cheaper to pay for gas with cash rather than a credit card. Why is that?
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Credit cards have fees. If you pay cash, the merchant avoids these fees. A cash discount also requires you to enter the store (where they sell things like soda and candy, that have a much higher margin than gas)
Credit card companies charge transaction fees. The gas station gives a discount for cash payers because they don’t have to cover a transaction fee when people pay in cash.
When you use your credit card anywhere from 1 to 3% of every purchase goes to the credit card company. So by paying cash they are giving you a break on those fees.
You’ll see this at more than just gas stations, it’s not uncommon for smaller convenience stores having a “minimum purchase amount” required to use credit cards.
The reason for this is the way that credit card and debit card companies make money. For every transaction there is usually a fee of a couple of percentage points of the purchase. So if you go in and buy a soda for a dollar where the store may only be making $0.05 profit, and Visa charges a 3% fee, then the store owner just lost 60% of their profit on the purchase.
Larger companies and chains have the leverage of massive buying power to negotiate these fees down, or even get them waived entirely. So Walmart for example, is paying almost nothing if anything at all for credit card processing, and thus won’t have those kind of limits.
Besides charging interest on late payments, cash advances, etc., credit card companies / networks make money by charging the store/merchant a fee (usually a mix of a % and a fixed fee, something like 2.5% + 15¢); this is one reason as to why they can offer cash back/miles as rewards. Debit cards also have a fee, but a bit less.
This is also why American Express isn’t accepted everywhere, as they charge a higher fee.
Because the owners are morons who don’t understand the costs of cash money because there isn’t a single fee like there is with card payments.
The owners have a limited understanding of how the fees work and are passing the cost on to the customer. There is no genuine reason to do so, the owner may of just been an investor who wanted to own a simple shop however neglected to understand that there may be extra work involved, like checking the totals add up at the end of the day. It might appear superficial but the business could be someone’s life savings
Handling cash costs money too (not just the risk of theft for employees but banking it, counting cash, fraud, requiring change..). In the UK/Europe I don’t think we have the pay at pump system in many places so everyone has to go to the shop.
Im in the US and pay mostly with cash. If I’m spending a lot of money I’ll ask if there is a cash discount. Maybe half the time it works? The dentist is a big one. Small vendors and restaurants even have cash discounts signs.
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