The first experience I had with the difference cash makes when you’re bargaining was when I was trying to get a desk as cheap as possible. The seller wanted about $20 more than I was willing to pay (or actually had). I pulled cash out of my pocket and explained that all I had was right there, and the stack of dollar bills got his attention: he said that, since I could pay cash, he’d give me a $20 discount.
The Cash Discount
Furniture dealers aren’t the only people who offer discounts when you’re willing to pay in cash. I’ve found that any time I was buying from someone who could actually negotiate prices, offering to pay cash on the spot always gets you a better deal. There are several reasons why:
- For most businesses, accepting cash is actually cheaper than any other forms of payment. There’s no need to pay credit card fees or take a stack of checks to the bank when you’ve got cash in your hands. The only businesses where cash isn’t necessarily any less expensive to process are those that are particularly big. Think Walmart: the cash that comes in still has to go through an administrative process to make it back to Walmart’s bank account, but it cost much less for them on a percentage basis than a small mom and pop store.
- There’s no chance that the seller won’t get all of his or her money when dealing with cash. Unlike checks, which can bounce, or credit card payments, which can be stopped, cash means that you’ll get paid no matter what.
- While I would never recommend irritating the IRS, there are some sellers that prefer cash because they can ‘forget’ to report it on their taxes. It’s a bad idea, but it does happen.
All of these reasons add up to the fact that offering cash is one of the easiest ways to get a discount on many purchases.
The Psychological Factors
When you’re dealing with cash, everyone involved can wind up acting a little differently than if you are dealing with other forms of payment. You may be more reluctant to hand over your cold hard cash than if you were using a credit card or even a debit card. Sellers respond to cash, as well: they’d very much like to get your cash into their hands. That can make for several considerations as you bargain.
It’s especially important to know, going in, how much you want to spend. It can be useful to have only that much cash on you — or at least only show that much to the seller. Depending on how hard of a time you’re having negotiating a price downwards, actually bringing out the money can be helpful. That tactic works best with someone not particularly experienced with bargaining — think garage sales, rather than a business owner who routinely negotiates prices.
Of course, using cash means that you do have to plan ahead a little more, especially for big purchases. That’s not a bad thing for your finances, of course, but it does mean that you may need to swing by the ATM before you go anywhere.
Let me ask you. How often do you pay cash, and are you comfortable carrying a big stack of bills around anymore?
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Hard cash in hand works wonders . Back in 1994 , I sold my Victorian home in Massachusetts [ the neighborhood was changing ] and moved to Newport , R.I. Fell in love with a large apartment with an ocean view . The asking rent was $ 1800.00 a month . I offered $ 1600.00 a month paid in cash for 12 months in advance . My offer was accepted I saved $ 2400.00 a year for the next 3 years . Cash works wonders . Read my Blog entitled Wealth or Poverty – Your Choice
Arminius-Aurelius.com
And a large roll of freshly printed notes smells delicious
You could totally be onto something…I guess cash is that instant gratification for the seller so he might be willing to give you a cheaper price because he’ll get the money right away but check or credit may be a little more difficult. Maybe I’ll do an experiment on this.
Cash is king. It’s a saying that hold true in many ways. Certainly, in terms of assets, it is liquid and is a sure thing.
In terms of purchases, cash is useful in obtaining discounts sometimes, and is also good for limiting your expenditures. With the former, I have seen this more when traveling abroad (I’m American) – particularly Europe – where I have been offered a discount after showing a credit card. Same can apply here, particularly with smaller operators. With the latter – limiting expenditures – cash is good in that it provides a controlling mechanism for what you spend. If you don’t rely on credit cards, and only pay cash, you might be able to control impulse and other non-essential purchases better. Personally, I do believe in using credit cards, and like to see people learn self-discipline first so that credit cards can be used effectively and beneficially – instead of detrimentally. But if one doesn’t have self-control, using cash only could help.
Anyway – good topic, and I still go back to the saying that Cash is King.
great post especially about the psychology of money. I have done research on this topic for my job teaching kids about credit, and it is very striking. 2 people entering the same store for the same items will spend differently depending on how they pay. Using credit, you on average spend 30% more than a cash paying customer would. Just a fact to point out, maybe it will help people control their credit card purchases in the future. Every little thing adds up.
We’ve found that in some situations paying cash means you can ask for a discount. One place this was most effective was in paying for my wife’s hospital bills. We had a couple thousand dollars that we had to pay, so we called up the billing department and asked them if we could receive a discount by paying in cash. They ended up giving us a 10% discount just for asking – saving us a couple hundred dollars. I’m assuming they do this because sometimes collecting on medical debt can be a tough thing, and to get someone to pay cash for a complete bill saves them in the long run.
Most smaller owners are willing to give you a discount if you pay cash. Just ask since it never hurts even if you rather pay by a credit card. The 10%, 20% or even 30% is well worth paying up front.