In the US those terms no longer apply. Merchants can offer 2 different prices (and many already do) for payment with card vs. cash.
Since Jan. 27, 2013, merchants have had the ability to assess a surcharge on customers who pay with credit. However, if they choose to take this step, there are a lot of rules that must be followed, including:
- Notifying consumers that they’re being charged for using credit, both at the register and on the receipt. On the receipt, the merchant is required to state the exact dollar amount you paid in credit card surcharges.
- Charging customers only what they’re paying to the credit card payment networks in swipe fees (again, this is usually around 1%-3.5% of the cost of the transaction). In other words, merchants are allowed to pass on the fee to the customer, but aren’t allowed to make a profit on credit card surcharges.
- Staying on the right side of state laws. As of August 2014, nine states prohibit retailers from passing credit card surcharges onto consumers. They are: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Oklahoma and Texas.
- Limiting surcharges to credit card transactions. If you pay with debit, the retailer isn’t allowed assess the fee. This includes debit transactions where you sign for your purchase as opposed to entering a PIN. Only credit card users can be hit with a surcharge.
Source: https://www.nerdwallet.com/blog/credit-cards/credit-card-cha...
In Massachusetts at least there's a loophole for gas stations. In fact that's always been the case...
http://www.mass.gov/ago/consumer-resources/consumer-informat...
> Staying on the right side of state laws. As of August 2014, nine states prohibit retailers from passing credit card surcharges onto consumers. They are: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Oklahoma and Texas.
Do you know the rationale for these laws?
http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Displ...
As a Florida resident I can tell you that if there is any enforcement of this, I've never seen it. It's very common to see verbiage like 'must pay x% if using credit' or 'credit cards additional $x', especially in non-chain restaurants. Some gas stations just list two prices. I don't like it, but I am not going to carry cash around so it's just how it is; I was almost denied service at a restaurant once for pointing out that their credit surcharge was not legal.
The problem was the Most Favored Nation clause in the credit card contracts. Merchants could offer cash discounts, but they could not offer discounts to non-Visa credit cards.
Since the antitrust settlements, all four U.S. credit card networks have allowed surcharges. Also, the Most Favored Nation clause only applies to "equal or higher cost" competitors.
Walmart US could fight Visa by adding a surcharge only to Visa cards. Walmart Canada cannot. In 2013, a similar antitrust case was dismissed in Canada.
Also, some merchants cater to a demographic that likes to use cards a lot and is sensitive to convenience; and making that distinction may cost the merchant in terms of customer appreciation.
If you are a large business then cash handling companies that securely transfer, count, and deposit / clear it for you charge the same and even more than many credit card companies.
Cash is only "cheaper" for really small businesses that handle the count and the deposit themselves.
And even then there are some fees because banks can also charge a deposit fee when you bring in unsorted cash.
Square, iZettle and I think PayPal and a few other are doing things in this area, leveraging smartphones, but it's still early days.
I've never been impressed with anything using a cell phone though. It's too clunky of an experience. I get that it might be useful for farmer's market and other very small retail situations, but when I'm going into a retail store, a real POS terminal is better.
I haven't found that to be true at all. Are you speaking about a non-US context?
In the US you can almost universally go to your bank ATM and withdraw cash without a fee. There's also no fees for having a checking account.
Banks treat cash very carefully. If you bring in a stack of cash that they have to count once to see how much it is and then again to verify it's going to take time and they might charge you for that.
They literally said "withdrawal fees."
I don't know of any bank which charges you to deposit cash. I occasionally drop off large stacks of cash and have them count it—there's never been an issue.
Maintaining ATM's and counting and transporting cash costs money, cash isn't free I don't know about US banks specifically.
What other fees? I've literally never paid a fee to my bank for anything. And it's a major bank (Chase).
Because the bank is buying Treasuries at ~1% or so and making money off of your deposits, and is likely only giving you 0% or maybe 0.05% interest.
If you've got $10,000 in the bank, that's basically a profit of $100 / year that the bank is getting from your account.
But that's not a "fee." Obviously banks cover their operating expenses somehow. That doesn't mean they charge me to have an account or to deposit cash (in fact, charging for deposits would be counterproductive).
If you get paid via direct deposit then you almost certainly have many options for getting a free checking account regardless of what city you live in.
> There's also no fees for having a checking account
In the US, people with poor credit are often unable to get even a checking account. This is because banks figure those customers are not going to be profitable since they're not going to use the services they can earn fees on.
"Going to your banks ATM" isn't very convenient 99% of the time unless you never leave town. You end up going to the closest ATM. Especially if you are on foot.
Credit unions have alliances that they can join to use each others ATMs fee free, same with banks. That doesn't change the fact it's often inconvenient to go to an ATM you don't have to pay for and you need to pay sometimes.
Here's a comparison of checking account fees for various banks: https://www.nerdwallet.com/checking-accounts?account_feature...
But there are other reasons for preferring cash. For instance, a bank or authorities cannot quite as easily shut down your business if it runs on cash money, compared to having everything in bank which can be confiscated instantly, on-line.
https://www.cardpaymentoptions.com/fee-sweep/debit-fees-expl...
Frankly I wish more places would offer a cash discount. The rewards program schemes have always bothered me.
But there are a lot of markets where price competition drives down the margins for the "main" product, so that the retailers make up their profits on smaller stuff. I've read that a store selling electric guitars or bicycles makes relatively little profit on those items, but instead, makes their nut on accessories, things that wear out, service, lessons, etc.
Additionally, some small restaurants and shops did the same thing. Usually these folks get charged more for processing credit cards than the large places.
I was going to link to The Good Guys and their "Pay Cash Pay Less" marketing, but it appears they scrapped their cash discount after finding customers increasingly prefer to use electronic payments:
http://www.smh.com.au/business/the-good-guys-scraps-cash-dis...
That's a weird reason. Surely that's the whole point of the discount? If customers preferred paying cash, then no discount would be required.
I think the point of removing the cash discount is they can use the 'extra' 3% margin earned on those remaining cash sales to subsidize lowering their price via credit card to be more competitive. Their business is based on offering the lowest prices, but the cheapest price was cash only. The discount for cash no longer lures customers to come to their stores, so there's no incentive for the store to continue passing on the discount to the customer.
That's what I meant.