We keep hearing that, since the recession, cash is king. But is it really? It’s true that if you pay with cash, rather than using a credit card or financing you get an automatic “discount”, since you aren’t paying interest charges. However, you can accomplish the same thing if you pay with a credit card and then make sure that you pay off the balance before you are charged interest. Some small retailers, though, might be willing to offer you a small discount if you pay with cash, rather than swiping a card. Here are a few other tidbits on paying cash you may not know about.
Payment processing networks (like MasterCard, Visa, Discover, etc.) charge merchants each time you swipe a card. This includes debit cards. Some small, local retailers and restaurants — even though credit card companies strongly discourage it in their terms of service — are willing to give cash customers a bit of a discount since it saves on interchange fees. Many retailers that accept credit cards inflate prices to cover their interchange costs, so it makes sense for some of them to give a discount in order to reward customers that cost them less.
It doesn’t hurt to ask for a cash discount, or ask if one is available at your favorite store. The worst that can happen is that you are told that no cash discount is available.
Where You Are Most Likely to Get a Cash Discount
There are some places where you are most likely to get a small cash discount. This includes some local gas stations, small independently owned retail stores, and service providers (carpet laying, plumbers, etc.). However, you are most likely to see the best cash discounts if you pay for medical services with cash.
Many doctors, dentists and specialists will provide you with a cash discount if you pay on the day of. I have a dentist that offers a 5% discount if you pay with a debit card, and 10% if you pay with cash or check. (The smaller discount for the debit card accounts for the interchange fee the dentist has to pay for the debit card transaction.) In order to avoid insurance billing and the hassles that come with it, you can likely get a cash discount for medical services too. If you have a high deductible health insurance plan and a Health Savings Account, you can save up for things like dental visits and other eligible expenses, paying immediately and getting your discount.
Will You Get a Cash Discount at a Car Dealership?
Car dealers may say that you are getting a great deal because you are paying cash, but one of my friends who sells cars assures me that this is mostly not true. The reason is that a cash discount doesn’t benefit a dealer at all. A car dealer gets the money up front, whether the bank you borrow from provides it or whether it comes from you. The difference is that if you get your financing through the dealer, the bank that actually issues the loan usually gives the dealer a kickback. You are more likely to get a “discount” (by the time you pay interest on the loan it won’t be much of one) from the dealer if you agree to let the dealer arrange financing.
In the end, there is some value in asking for a cash discount. You can save a few bucks, and that starts to add up. Besides, you’ll never know about the discount if you don’t ask.