> Because merchants charge everyone the same price regardless of how they pay, those fee costs are factored into prices for all shoppers. However, credit card users get that money back and then some through rewards, while cash and debit users get little or nothing.
>The result: People paying cash face the equivalent of a 26% higher sales tax than premium credit card users shopping at the same store.
I am surprised this never occurred to me or has come up at all in discussions with people (in the context of rising costs/inflation specifically). I’ve literally never considered this compounding effect until now. It’s so obvious of course, it just never even crossed my mind.
toomuchtodo · 2026-08-25 12:01:50 UTC
Many restaurants I’ve eaten at lately surcharge credit cards with a 3% fee, offering a discount if you pay cash. This is the way to nullify this regressive policy until the US commercial banking system offers instant payments for merchants, internalizing the externality of the interchange fee. If you pay with card, you
US FedNow instant payments went live three years ago, and can move $10M per transaction for a few pennies per transaction.
(A gap in legislation was not mandating offering FedNow capabilities to your customers as a condition of your banking license as a bank; I expect this to be patched eventually)
steveBK123 · 2026-08-25 12:12:23 UTC
The problem is the way the US credit/debit card systems are setup, there's not much of a discount/surcharge that would make me switch usage to debit.
If my credit card number gets stolen, zero money ever leaves my account. It simply gets contested before the monthly bill is even due, and cancelled. I have probably had number stolen 5 times in 20 years, and its never cost me a cent. Zero dollars every left my accounts even temporarily.
If my debit card number gets stolen, the money is out of my checking account immediately. Mortgage payments and other bill payments might fail, and the onus is on my to chase up the bank to get charges reversed and money returned to my account.
toomuchtodo · 2026-08-25 12:52:18 UTC
n=1 of course. All US mobile carriers provide a substantial discount if you establish autopay with ACH over debit or credit. I've seen the same with Xfinity. It will take time, but we'll get there.
> You can get a $10 discount on your monthly bill if you: Have Xfinity Internet and sign up for automatic payments and paperless billing with a stored bank account
Walmart was one of the larger supporters of FedNow during public comment period, as they experience billions in interchange costs per year, and are building instant payment support into the Walmart Pay component of their app to avoid these costs.
> “It surprised me,” Henry said of adoption of Walmart’s first iteration of pay-by-bank, which is available online but hasn’t been marketed to customers. “It’s certainly surpassed our expectations of the amount of customers that have registered and actually use the payment type.”
> Walmart’s upgraded pay-by-bank offering will be rolled out in 2025. The transactions will occur over bank technology provider Fiserv’s NOW Network, which integrates with The Clearing House’s Real Time Payments network and the Federal Reserve’s FedNow. Until now, large retailers hesitated to launch real time payment options because many banks were not connected to an instant settlement system, meaning their customers would not be able to use the product. NOW Network aims to connect to as many banks as possible to reach 100% of deposit accounts by combining its own network with RTP and FedNow.
My understanding is that Meta is also pushing ad buyers to invoicing vs credit card payment.
Like the slow decline of check volume, I see the same here. Credit card rails will exist for some time, perhaps another 10-15 years, but they have likely peaked from a volume perspective. If you're a merchant, surcharge when you can, and work towards on boarding and offering customers cheaper payment rails (imho). If folks want to pay the ~3-4% surcharge, enable them to, that is a choice if they want the benefits of using a credit card. But we should not all have to eat the cost for their benefit when less expensive options are available.
(I work in financial services adjacent to payment systems, thoughts and opinions always my own, this is behavioral economics at scale, as always think in systems)
internet2000 · 2026-08-25 12:14:39 UTC
Not only would the 3% fee not make me blink, as my cards have 3% cash back for dining, I doubt I'd change my behavior even at a 5% discount. If anything it'd dissuade me slightly from patronizing the restaurant.
Credit cards are convenient and cash isn't. The genie is out of the bottle, no way to make people move back to cash.
aprilthird2021 · 2026-08-25 12:24:55 UTC
You're not the avg person though. Most people are being squeezed by inflation and watching prices on everything and trying to claw an extra 2-3% back wherever they can.
If interchange fees were capped, people would go back to cash, imo. A lot of research shows you spend less when you pay with cash. And the lack of credit card rewards as a draw might lead people to carry it again
iso1631 · 2026-08-25 12:41:58 UTC
> If interchange fees were capped, people would go back to cash, imo
And this is based off evidence from countries where interchange fees are capped?
zf00002 · 2026-08-25 12:20:22 UTC
Car mechanics, dealerships, house fixing contractors, city (property taxes), these are the ones that I can think of in the past year I've come across charging a fee for credit card payments. What's most irritating is that most of them do not setup for and drop the fee if you pay by debit card.
toomuchtodo · 2026-08-25 13:09:19 UTC
Always ask if they’ll give you the discount paying with Zelle if they won’t for debit. Almost every major bank supports Zelle currently in your native banking app.
In small restaurants, that’s just a tax grift for the owner. The “smarter” ones underreport income, the dumb ones steal the sales tax and the hammer eventually drops. Over time, they’re probably paying a lot more than 3% for shrink, Due to screw ups and employees skimming the till.
Credit cards have a really high ROI. The 3% drives 10-20% more spend, sometimes even more. When I was on the board of a small private school, we bought a square terminal and used QRs for flyers. That drove 30% increases in fundraiser expenses and helped us reduce mailings and nags. We would cross-sell stuff - could buy your youth soccer registration at the fall fest or whatever.
The things where ach, check, cash make sense are where there’s no discretionary spend at point of sale or recurring payments. If you pay 75 bucks a week that have your apartment cleaned dog groomed or whatever. You’re not getting value beyond taking the payment in advance with a credit card. Those are the areas where Venmo and Cash app have really dominated.
pistoriusp · 2026-08-25 12:01:58 UTC
Same, that percentage seems absurd though.
cge · 2026-08-25 12:08:59 UTC
The only way I can interpret the percentage is that they are stating the increased cost as a percentage of sales tax rather than a percentage of the sale, such that "26% higher sales tax" in a state changing 10% sales tax would mean paying 2.4% more in total. That choice seems misleading, but does make the percentage make sense.
post-it · 2026-08-25 12:13:14 UTC
That is what it says after all, it's pretty explicit.
cge · 2026-08-25 12:45:00 UTC
It's just such a bizarre choice that one might hope there would be another interpretation. Why measure a percentage change on sales tax, which varies heavily from location to location, and is not what the associated fees are based on, rather than simple choice of total cost?
post-it · 2026-08-25 20:06:26 UTC
Because sales tax is something you pay that's more than the sticker price, and people tend to have an intuition for sales tax in their area. Personally, I find "a 3% credit card fee is like paying 21% more in sales tax" to be intuitive.
nilamo · 2026-08-25 12:02:08 UTC
And there I was thinking it was obvious that merchants wouldn't just eat cc fees, and would cushion all prices to account for their costs.
Forgeties79 · 2026-08-25 14:26:19 UTC
You’re right but that’s actually not the part I’m talking about. Specifically the fact that even though we are all “being charged the same price,” as prices increase, the amount I am saving increases as well due to cashback or other benefits on a credit card. And because I am spending less money, I ostensibly have more money to make my credit better, which means the benefits only increase on top of that.
It’s a variation on a theme we are all very familiar with. It’s expensive to be poor. But this is another angle I hadn’t really considered. It’s a little more complicated than just “I can have better cards with better benefits.”
TL;DR: The actual cost per item for me is, in very literal and quantifiable terms, lower as a result - and the more expensive things get, the steeper my discount gets while the person next to me paying cash is paying a little more than I am every transaction for the same items.
Put another way: As price/inflation increases, the real number I am saving increases as well. So we aren’t just paying different prices, but their increase is also higher the higher prices get.
r3trohack3r · 2026-08-25 12:12:19 UTC
I was surprised by this number too - and I’m pretty sure it’s a clever wording trick to inflate the percentage:
> equivalent of a 26% higher sales tax than premium credit card users shopping at the same store.
I do not think the sale price is increased by 26% - which doesn’t square with a 1% to 3% fee - I think they pay approximately 26% more in “sales tax” so you’re paying 26% more than the 7% tax.
Forgeties79 · 2026-08-26 19:52:31 UTC
I wasn’t questioning the number so much as saying I hadn’t considered the mechanics of what was happening
slicktux · 2026-08-25 12:15:37 UTC
I believe a similar thing happened with fast food and food delivery fees. It costs money to be listed on the food delivery app so fast food chains started charging everyone the same price to offset the cost of being listed on the apps.
paxys · 2026-08-25 12:31:32 UTC
Delivery apps don’t mandate that the price on their apps be the same as on the actual menu. If you walk in and order you’ll pretty much always get a lower price.
tialaramex · 2026-08-25 12:24:54 UTC
It also means stratifying card users, even if you actually make all the card users pay more than those with cash. The people who can just barely qualify for a card are paying to fund the "rewards" for the wealthy who pick the best options.
"It's expensive to be poor" is a more or less universal experience under capitalism and it's amazing how many novel ways we've come up with to make it more expensive for poor people.
"Means testing" is one of the fun ones. The wealthy will often justify this as "People like me shouldn't get this help" which sounds even generous, and then you realise, oh, because we're testing if you're worthy to receive help now to get help you need to expend some time and effort to pass the test. When this "I shouldn't get benefits" is offered to you as a reason to means test, ask them why they're taking a benefit they don't think they should have and why they can't pay society back in other ways rather than inflict more misery on the poor...
Forgeties79 · 2026-08-25 15:02:19 UTC
Then they get angry when the other side of the coin is discussed - they can’t get certain benefits because they’re above the threshold too, but they’re different of course.
aurareturn · 2026-08-25 12:02:18 UTC
I always wondered why people in America would ever pay by cash or credit card - unless they are laundering that cash.
Otherwise, you're giving up 1-3% discount.
Set auto-pay on your credit card to pay in full every month. I've never once paid for credit card interest. I think there's a term inside credit card companies for people like me: leeches or something like that.
MattGaiser · 2026-08-25 12:04:32 UTC
Most people can’t optimize for 1-3%. Life is flooded with 1-3% choices.
Even as someone who is a credit card optimizer, I also ignore numerous 1-3% choices a day.
Many people also spend more than they can cover on it.
hvb2 · 2026-08-25 12:05:46 UTC
> Otherwise, you're giving up 1-3% discount.
I would be curious what percentage of people actually qualifies for a card with over 2% cashback especially without a monthly fee. My guess is that that percentage is very low.
High earner/spender, sure but that's not most people
svpk · 2026-08-25 12:10:47 UTC
I know that Discover has a card with a 5% discount category that changes once a quarter. Everything not in the category gets 1%. It's not hard to get the card (or at least wasn't) and was frequently advertised to college students.
If you combine that with a card that gives 2% on everything than it wouldn't be hard to average over 2% cashback as long as you were mindful about using the discover card for qualifying purchases and the 2% card for everything else.
greenavocado · 2026-08-25 12:16:46 UTC
> as long as you were mindful about using the discover card for qualifying purchases and the 2% card for everything else.
And that's the rub. Credit card companies know most people won't be too mindful most of the time about their spending habits.
bluGill · 2026-08-25 12:41:55 UTC
There is one other rub - because I use my bank's card I get better interest rates. How does a .25-.5 % on my various loans and checking account compare to 2% on groceries - this is a complex question that it not easy to answer.
Xirdus · 2026-08-25 12:10:57 UTC
My first US credit card was a 4-3-2-1% rewards program and I had literally zero income at the time. I was told by the banker, "oh you can't do that right away, you must first get a secured card to build your credit score, after a year you can try applying for real", but I told them I don't care and to send the application anyway, and I've got it.
Ever since then, I wondered how much of the "not qualifying" is due to misinformation like this.
bitmasher9 · 2026-08-25 12:23:38 UTC
Most true not qualifying are either
1. People with proven bad credit.
2. People asking for a lot of money without proven good credit.
3. People asking for more specialized credit, such as lines for businesses or lines for high earners.
Xirdus · 2026-08-25 13:37:34 UTC
The question is what percentage of overall population are 1, 2 and 3 combined, and is it big enough to warrant the perception that high reward cards are only for high earners/spenders.
My instinct says hell no, not even close.
ixwt · 2026-08-25 12:12:35 UTC
I have a 2% cash back credit card from my bank, with no monthly fee. It started as a 1% cash back card around a decade ago, and slowly crept up to 2%. It's a nation wide credit union that has certain requirements to join though.
sokoloff · 2026-08-25 12:26:10 UTC
If you have Amazon Prime, I recommend getting the no-fee Chase Amazon card. 5% on Amazon and Whole Foods; 6% on some Amazon “no rush” deliveries.
No affiliation; just a happy user.
Jach · 2026-08-26 11:03:53 UTC
I treat the Amazon Prime membership as the "card fee". The cash back accumulation per year is always greater than the membership fee for me. (The original main benefit of savings on shipping is of course also nice, though if I'm honest with myself I'd say the majority of my purchases didn't actually need 2-day/1-day/same-day shipping. Very nice luxury however.)
gblargg · 2026-08-26 12:37:43 UTC
It's not hard at all. Citi Custom Cash has 5% on the highest category spend each month for the first $500 (I use it on groceries). American Express Blue Cash Everyday has 3% on groceries/gas/online purchases for up to $6000 purchases each year. Chase Freedom Flex and Discover It have rotating categories every quarter, sometimes groceries, gas, Amazon, PayPal, etc. None of these required much income to be approved.
strix_varius · 2026-08-25 12:06:08 UTC
This presupposes the ability to get a credit card and the confidence of sufficient funds when that auto payment hits.
sokoloff · 2026-08-25 12:08:49 UTC
If the alternative was paying cash, cash has an even more demanding level of confidence of sufficient funds required and it applies earlier with no flexibility.
strix_varius · 2026-08-26 00:10:12 UTC
No it applies at whatever time you choose - it's the most flexible option for a person whose wealth fluctuates frequently around a low baseline.
sokoloff · 2026-08-26 11:29:37 UTC
I don’t think I understand.
If I pay cash for everything and my cash level fluctuates down to $0 temporarily, how do I buy something right then?
aurareturn · 2026-08-26 00:06:23 UTC
confidence of sufficient funds when that auto payment hits
How is this different than paying with cash or debit?
strix_varius · 2026-08-26 00:08:55 UTC
Because cash and debit allow you to pick the time in the month when you happen to have the ability to pay for something.
Frankly these questions astound me, do y'all really know no low income folks?
brainwad · 2026-08-26 09:22:04 UTC
You can always use a credit card as a debit card. Pay it off to zero every day. Indeed with the very low limit cards people with bad credit can get, you kind of have to pay it down faster than the bill comes if you want to keep using it.
gblargg · 2026-08-26 12:28:25 UTC
With cash: you must have the money when you make the purchase.
With card: you can set the cash aside at the time of purchase to pay when the card bill is due.
How does the card give you less flexibility or make it harder to pay for?
brainwad · 2026-08-26 18:25:48 UTC
With cash you can't overcommit - you can only spend what you have - with card you can. If you are poor, overcommitting is very tempting as otherwise you will be going without things you need/want. But that temptation leads to debt.
Xirdus · 2026-08-25 12:06:18 UTC
A lot of it is to enable the small business owners to hide their real income. At least that's how it works in immigrant communities.
esseph · 2026-08-25 12:25:42 UTC
Huh?
Xirdus · 2026-08-25 13:34:15 UTC
Based on the downvote and your reaction, I assume I misread something. We're talking about why Americans sometimes prefer paying with cash over credit card, no?
IAmBroom · 2026-08-25 16:48:24 UTC
I think it was the "immigrants" comment.
To me, it's like claiming "black people like chocolate!". They do. So do most people. Why single out black people?
Xirdus · 2026-08-26 21:12:16 UTC
I'm the immigrant in question. I pay with card for literally everything online and offline, except two things - my haircuts and my wife's nails. Both of which accept credit cards. I go out of my way to withdraw cash (10 minute drive) just for these two things. Both the barber and the beautician appreciate it, for obvious reasons. My cousin with housecleaning business also gets paid mostly in cash, also for obvious reasons. It's just a thing we do. I don't know if natural born citizens do it too or not. Personally haven't seen it.
IAmBroom · 2026-08-28 18:47:32 UTC
And you wouldn't see it from the POV of a natural citizen, not being one, but I assure you it has nothing to do with immigration. Cash is one of the few ways the "little guy" can sneak things past the IRS.
esseph · 2026-08-25 21:15:24 UTC
I just don't understand the statement.
Can you explain the process or idea?
Xirdus · 2026-08-26 22:27:16 UTC
If there's no electronic record, then there's nothing for tax authorities to compare your declared revenue to. If you say you earned only $1000, then for all intensive porpoises, you earned only $1000 and that's the end of it.
esseph · 2026-08-27 02:26:44 UTC
Ohhh like the thing restaurant servers did with their cash tips until recently (only claim your credit card tips or part of your cash tips).
Xirdus · 2026-08-27 13:06:24 UTC
Yep, exactly.
IAmBroom · 2026-08-25 16:46:57 UTC
That's how it works in established US communities, too. Contractors often give cash discounts (off the record).
My lawn mower asks me to write "gift" on checks when I can't pay in cash.
ChrisMarshallNY · 2026-08-25 12:08:48 UTC
I paid a lot of credit card interest, as a yute, but, since getting married, I have paid in full. Been over 30 years. Leeches rule!
At one time, credit card companies forced vendors to charge the same, whether cash or credit, but that seems to have fallen by the wayside.
The problem is, is that cash is becoming less and less acceptable.
In a nearby town, you can't pay for parking, with cash. I have seen credit-card-only vending machines. A lot of restaurants have iPads at the table, and you never see anyone but the bus[boy|girl|whatever], bringing you your food.
bluGill · 2026-08-25 12:38:56 UTC
Credit cards are cheaper than cash for most merchants. Most people forget about all the costs of cash because they are hidden, but they add up to more than the couple % credit cards cost.
ChrisMarshallNY · 2026-08-25 15:33:09 UTC
> Credit cards are cheaper than cash for most merchants.
Huh. I always thought it was the opposite. I know several restaurants that refuse to accept credit cards. They are great places to eat, but I won't go there. I don't think they miss my custom, though. Refusing to accept credit seems to be a signal of excellence, around here.
bluGill · 2026-08-25 22:20:24 UTC
If you don't do the accounting, it appears that the fees on a credit card are greater than the cost of cash and so restaurants that haven't done their accounting closely often think they're getting themselves something by not accepting credit cards.
The cost of a credit card is very obvious. The cost of cash is many small things that are very hard to see and thus very hard to account for correctly.
OptionOfT · 2026-08-25 23:58:54 UTC
In Belgium it is common knowledge that cash-only places don't report everything to the feds.
For the same reason those food establishments had to get a government approved White Cash Register, because there was so much money disappearing.
ssl-3 · 2026-08-26 08:21:53 UTC
Small cash-only businesses sometimes have other motivations to stay that way, like: The books can say whatever the owner wants them to say.
quickthrowman · 2026-08-26 15:47:49 UTC
If you only accept cash, you can report whatever you feel like as income* and avoid paying taxes on the rest.
* As long as you don’t raise any red flags in your accounting, which can be difficult.
OptionOfT · 2026-08-26 00:10:41 UTC
> At one time, credit card companies forced vendors to charge the same, whether cash or credit, but that seems to have fallen by the wayside.
I miss that. I really dislike that it is allowed to charge extra for a credit card. It shows that the company doesn't understand the cost of cash.
internet2000 · 2026-08-25 12:12:37 UTC
Prices don't go down, they only ever go up.
There is no situation in which interchange fees get slashed and prices go down across the board by 3% to make it worth it for card users.
Long term average? Sure, it goes up, that's inflation. But do you know what causes inflationary pressure? Visa and MasterCard adding unjustified fees because they're a duopoly and control most of the payments market, and your government won't regulate them and cap fees.
The UK and the EU both cap debit card fees at 0.2% and credit card fees at 0.3%. When the UK left the EU, Visa and Mastercard jacked up their fees over 5x for UK-EEA payments. Not because they had to, but because they could, and they love sucking money out of other peoples' businesses. https://www.psr.org.uk/our-work/market-reviews/market-review...
Retailers in competitive industries absolutely do use a reduction in card fees to lower their prices. Maybe not all the way, but they definitely don't give it all to themselves as margin; their competitors don't.
internet2000 · 2026-08-26 01:09:03 UTC
> Long term average? Sure, it goes up, that's inflation. But do you know what causes inflationary pressure?
An economy that relies on growth, yep.
EliRivers · 2026-08-25 12:14:33 UTC
I've heard such people referred to as deadbeats.
bluGill · 2026-08-25 12:47:45 UTC
Once in a while. However the truth is the large people who collect the 1% and pay off their card every month are the people who don't. These people are customers year after year, and often spend more on their cards (they tend to be higher income), and the bank gets their 2-3% from them (2-3% after rewards)
People who don't pay their card off also are on the look out for lower interest rate cards and switch all the time. they in reality are not paying the very high rates on cards, they are paying the lower introductory rates (which is still a lot of money). These people are also more likely to default and stop paying leaving the bank to write everything off. Combine that with the fact that they typically don't spend as much over several years (they hit their credit limit and their income won't allow an increase so they have to stop spending), and they are not as profitable as it seems.
cfiggers · 2026-08-25 12:17:15 UTC
When I and my (still fairly young) family needed to move cross-country, my wife and I accepted a credit card offer with 0% APR for the first year and put all our moving expenses on it. Then once we settled, we paid it down a bit at a time each month, and then right before it would have started charging interest we paid the rest as a lump sum.
Really helped us float the moving company and also some DIY renovations on our house that we didn't have all the cash on hand to pay for outright. And we didn't pay a thin dime for the privilege.
onion2k · 2026-08-25 12:21:28 UTC
Credit card companies are still charging merchants a transaction fee for your purchases though. The fact they're only charging one side of the transaction is probably annoying for them, but you still make them plenty of money.
dougdude3339 · 2026-08-25 12:22:37 UTC
I prefer my debit card because I'm more aware of how much I'm spending. Money taken out of my account is immediate and feels real. Ultimately, I spend less.
paxys · 2026-08-25 12:29:16 UTC
One isn’t more real than the other. They are both numbers in an online database. In one case your assets are going down, in the other your liabilities are going up. The net result is the same.
cpburns2009 · 2026-08-25 12:48:16 UTC
I agree with dougdude. I like debit cards better because you see the balance change immediately. The thing I dislike about credit cards is payment is deferred by a month.
ValentineC · 2026-08-26 13:37:37 UTC
> The thing I dislike about credit cards is payment is deferred by a month.
I like this. It means that I can earn a bit more bank interest on what I've spent.
skinfaxi · 2026-08-25 12:53:17 UTC
It's a world of difference if one of them gets stolen vs the other.
paxys · 2026-08-25 13:11:27 UTC
In that case a credit card is actually significantly better than debit
skinfaxi · 2026-08-25 13:19:27 UTC
Yes that was my point. A debit card stolen from you hits harder than some numbers in a database going down when you can't pay your rent.
caminante · 2026-08-25 13:12:27 UTC
The parent isn't explaining it well, largely because it's not rational.
I think of it like alcoholics who can't be near alcohol. It's some deep seated degeneracy or fear.
red-iron-pine · 2026-08-25 15:30:17 UTC
it's just as easy to check a debit balance as a CC balance.
and once debt is spent you cannot get it back. you get scammed you can dispute the credit card, and if the CC gets stolen you can fight any charges.
debit means the money is gone and that's it.
OptionOfT · 2026-08-26 00:02:19 UTC
Problem with a debit card is that if something goes wrong (product broken, or worse, debit card skimmed) it's my debit card, and thus my money.
Credit card? I file a charge-back which is a forcing mechanism for the vendor. Credit card skimmed? I get a new one, and I don't need to wait for my $ to be re-imbursed.
ValentineC · 2026-08-26 13:36:15 UTC
Debit cards on Visa/Mastercard have chargeback protection too, but yes, the money leaves one's account until the chargeback is successful.
dml2135 · 2026-08-25 12:26:01 UTC
Well, one reason is the one described in TFA —- credit card rewards amount to a regressive wealth transfer, and if you think that is bad, you may not want to participate in it.
Another reason is that credit card companies sell your purchase data to aggregators and advertisers, and cash affords more privacy.
matheusmoreira · 2026-08-25 12:30:07 UTC
> Otherwise you're giving up 1-3% discount.
I always ask for a discount but for some reason I almost never get it.
The rational move then is to pay in as many installments as I can get without any additional interest. Then time itself gives me the discount. My actual money stays invested and I only pay later. My credit card gives me 1.1% cashback on all purchases. Inflation too does some of the work.
bluGill · 2026-08-25 12:37:45 UTC
You shouldn't get a cash discount - cash costs the merchant MORE than credit card fees. You have to count all the costs of cash that credit cards don't have: counting, and recounting the cash and change. Then the manager counts and recounts everything in the back room at the end of the shift. Then the manager counts everything twice again to write up the deposit forms. Plus you need a cash register with the extra cash drawer that acts like a safe. Plus other security systems just to prevent robbery (this can get elaborate in areas where robbery is common). Those all add up.
matheusmoreira · 2026-08-25 12:42:21 UTC
> You shouldn't get a cash discount
Maybe, but "should" has nothing to do with it. Either I get one or I use my credit card.
> cash costs the merchant MORE than credit card fees
That's not my problem.
greyw · 2026-08-25 13:33:11 UTC
Just pay with a credit card, it's the optimal way by far (float, flexibility, rewards). No need to overthink it.
matheusmoreira · 2026-08-25 14:16:52 UTC
It's worth to think about it a bit, especially in larger purchases. Significant discounts on the order of 5% to 10% can easily beat all credit card benefits, and not taking advantage of it leaves lots of money on the table.
I have a little lookup table for this. Interest free installments mapped to cash discount necessary to beat the credit card. I just look it up.
These numbers are actually conservative. There's a lot of credit card benefits that weren't priced in. I add a couple percent to the required discount numbers and round it up to compensate.
Mathematically you are right. However those interest free payments are generally setup in such a way as to make it highly likely you won't pay it off by the end of the interest free period. The bills they send contain the minimum payment - designed to get you past that time. I don't trust my ability to get the fine print right - it only takes messing this up once to destroy all the gains from several times getting it right. So I use the credit card anyway and pay it off every month - that payoff is the one number I can get right every month.
Comments
>The result: People paying cash face the equivalent of a 26% higher sales tax than premium credit card users shopping at the same store.
I am surprised this never occurred to me or has come up at all in discussions with people (in the context of rising costs/inflation specifically). I’ve literally never considered this compounding effect until now. It’s so obvious of course, it just never even crossed my mind.
US FedNow instant payments went live three years ago, and can move $10M per transaction for a few pennies per transaction.
FedNow Is Live - https://news.ycombinator.com/item?id=36801491 - July 2023 (1022 comments)
(A gap in legislation was not mandating offering FedNow capabilities to your customers as a condition of your banking license as a bank; I expect this to be patched eventually)
If my credit card number gets stolen, zero money ever leaves my account. It simply gets contested before the monthly bill is even due, and cancelled. I have probably had number stolen 5 times in 20 years, and its never cost me a cent. Zero dollars every left my accounts even temporarily.
If my debit card number gets stolen, the money is out of my checking account immediately. Mortgage payments and other bill payments might fail, and the onus is on my to chase up the bank to get charges reversed and money returned to my account.
T-Mobile, AT&T follow Verizon on discouraging credit cards for bill-pay - https://www.paymentsdive.com/news/tmobile-att-verizon-incent... - August 10th, 2023
Xfinity Automatic payments and paperless billing discount (APPD) - https://www.xfinity.com/support/articles/automatic-payment-p...
> You can get a $10 discount on your monthly bill if you: Have Xfinity Internet and sign up for automatic payments and paperless billing with a stored bank account
Walmart was one of the larger supporters of FedNow during public comment period, as they experience billions in interchange costs per year, and are building instant payment support into the Walmart Pay component of their app to avoid these costs.
Walmart Plans Instant Bank Payments, Cutting Out Card Networks - https://news.ycombinator.com/item?id=41593450 - September 2024
Walmart FedNow instant payment public comments: https://www.federalreserve.gov/SECRS/2019/December/20191227/... [pdf; 2019]
> “It surprised me,” Henry said of adoption of Walmart’s first iteration of pay-by-bank, which is available online but hasn’t been marketed to customers. “It’s certainly surpassed our expectations of the amount of customers that have registered and actually use the payment type.”
> Walmart’s upgraded pay-by-bank offering will be rolled out in 2025. The transactions will occur over bank technology provider Fiserv’s NOW Network, which integrates with The Clearing House’s Real Time Payments network and the Federal Reserve’s FedNow. Until now, large retailers hesitated to launch real time payment options because many banks were not connected to an instant settlement system, meaning their customers would not be able to use the product. NOW Network aims to connect to as many banks as possible to reach 100% of deposit accounts by combining its own network with RTP and FedNow.
My understanding is that Meta is also pushing ad buyers to invoicing vs credit card payment.
Meta Ends Credit Card Payments for High-Spend Ad Accounts: Mandatory Monthly Invoicing Starts April 1, 2026 - https://www.auditsocials.com/blog/meta-ends-credit-card-paym... - March 31st, 2026
Like the slow decline of check volume, I see the same here. Credit card rails will exist for some time, perhaps another 10-15 years, but they have likely peaked from a volume perspective. If you're a merchant, surcharge when you can, and work towards on boarding and offering customers cheaper payment rails (imho). If folks want to pay the ~3-4% surcharge, enable them to, that is a choice if they want the benefits of using a credit card. But we should not all have to eat the cost for their benefit when less expensive options are available.
https://www.visualcapitalist.com/sp/cb03-charted-the-end-of-...
https://www.federalreserve.gov/paymentsystems/check_commchec...
(I work in financial services adjacent to payment systems, thoughts and opinions always my own, this is behavioral economics at scale, as always think in systems)
Credit cards are convenient and cash isn't. The genie is out of the bottle, no way to make people move back to cash.
If interchange fees were capped, people would go back to cash, imo. A lot of research shows you spend less when you pay with cash. And the lack of credit card rewards as a draw might lead people to carry it again
And this is based off evidence from countries where interchange fees are capped?
https://www.zelle.com/get-started
Credit cards have a really high ROI. The 3% drives 10-20% more spend, sometimes even more. When I was on the board of a small private school, we bought a square terminal and used QRs for flyers. That drove 30% increases in fundraiser expenses and helped us reduce mailings and nags. We would cross-sell stuff - could buy your youth soccer registration at the fall fest or whatever.
The things where ach, check, cash make sense are where there’s no discretionary spend at point of sale or recurring payments. If you pay 75 bucks a week that have your apartment cleaned dog groomed or whatever. You’re not getting value beyond taking the payment in advance with a credit card. Those are the areas where Venmo and Cash app have really dominated.
It’s a variation on a theme we are all very familiar with. It’s expensive to be poor. But this is another angle I hadn’t really considered. It’s a little more complicated than just “I can have better cards with better benefits.”
TL;DR: The actual cost per item for me is, in very literal and quantifiable terms, lower as a result - and the more expensive things get, the steeper my discount gets while the person next to me paying cash is paying a little more than I am every transaction for the same items.
Put another way: As price/inflation increases, the real number I am saving increases as well. So we aren’t just paying different prices, but their increase is also higher the higher prices get.
> equivalent of a 26% higher sales tax than premium credit card users shopping at the same store.
I do not think the sale price is increased by 26% - which doesn’t square with a 1% to 3% fee - I think they pay approximately 26% more in “sales tax” so you’re paying 26% more than the 7% tax.
"It's expensive to be poor" is a more or less universal experience under capitalism and it's amazing how many novel ways we've come up with to make it more expensive for poor people.
"Means testing" is one of the fun ones. The wealthy will often justify this as "People like me shouldn't get this help" which sounds even generous, and then you realise, oh, because we're testing if you're worthy to receive help now to get help you need to expend some time and effort to pass the test. When this "I shouldn't get benefits" is offered to you as a reason to means test, ask them why they're taking a benefit they don't think they should have and why they can't pay society back in other ways rather than inflict more misery on the poor...
Otherwise, you're giving up 1-3% discount.
Set auto-pay on your credit card to pay in full every month. I've never once paid for credit card interest. I think there's a term inside credit card companies for people like me: leeches or something like that.
Even as someone who is a credit card optimizer, I also ignore numerous 1-3% choices a day.
Many people also spend more than they can cover on it.
I would be curious what percentage of people actually qualifies for a card with over 2% cashback especially without a monthly fee. My guess is that that percentage is very low.
High earner/spender, sure but that's not most people
If you combine that with a card that gives 2% on everything than it wouldn't be hard to average over 2% cashback as long as you were mindful about using the discover card for qualifying purchases and the 2% card for everything else.
And that's the rub. Credit card companies know most people won't be too mindful most of the time about their spending habits.
Ever since then, I wondered how much of the "not qualifying" is due to misinformation like this.
1. People with proven bad credit.
2. People asking for a lot of money without proven good credit.
3. People asking for more specialized credit, such as lines for businesses or lines for high earners.
My instinct says hell no, not even close.
No affiliation; just a happy user.
If I pay cash for everything and my cash level fluctuates down to $0 temporarily, how do I buy something right then?
Frankly these questions astound me, do y'all really know no low income folks?
With card: you can set the cash aside at the time of purchase to pay when the card bill is due.
How does the card give you less flexibility or make it harder to pay for?
To me, it's like claiming "black people like chocolate!". They do. So do most people. Why single out black people?
Can you explain the process or idea?
My lawn mower asks me to write "gift" on checks when I can't pay in cash.
At one time, credit card companies forced vendors to charge the same, whether cash or credit, but that seems to have fallen by the wayside.
The problem is, is that cash is becoming less and less acceptable.
In a nearby town, you can't pay for parking, with cash. I have seen credit-card-only vending machines. A lot of restaurants have iPads at the table, and you never see anyone but the bus[boy|girl|whatever], bringing you your food.
Huh. I always thought it was the opposite. I know several restaurants that refuse to accept credit cards. They are great places to eat, but I won't go there. I don't think they miss my custom, though. Refusing to accept credit seems to be a signal of excellence, around here.
The cost of a credit card is very obvious. The cost of cash is many small things that are very hard to see and thus very hard to account for correctly.
For the same reason those food establishments had to get a government approved White Cash Register, because there was so much money disappearing.
* As long as you don’t raise any red flags in your accounting, which can be difficult.
I miss that. I really dislike that it is allowed to charge extra for a credit card. It shows that the company doesn't understand the cost of cash.
There is no situation in which interchange fees get slashed and prices go down across the board by 3% to make it worth it for card users.
Well, there was that time in the 1930s.
Long term average? Sure, it goes up, that's inflation. But do you know what causes inflationary pressure? Visa and MasterCard adding unjustified fees because they're a duopoly and control most of the payments market, and your government won't regulate them and cap fees.
The UK and the EU both cap debit card fees at 0.2% and credit card fees at 0.3%. When the UK left the EU, Visa and Mastercard jacked up their fees over 5x for UK-EEA payments. Not because they had to, but because they could, and they love sucking money out of other peoples' businesses. https://www.psr.org.uk/our-work/market-reviews/market-review...
Retailers in competitive industries absolutely do use a reduction in card fees to lower their prices. Maybe not all the way, but they definitely don't give it all to themselves as margin; their competitors don't.
An economy that relies on growth, yep.
People who don't pay their card off also are on the look out for lower interest rate cards and switch all the time. they in reality are not paying the very high rates on cards, they are paying the lower introductory rates (which is still a lot of money). These people are also more likely to default and stop paying leaving the bank to write everything off. Combine that with the fact that they typically don't spend as much over several years (they hit their credit limit and their income won't allow an increase so they have to stop spending), and they are not as profitable as it seems.
Really helped us float the moving company and also some DIY renovations on our house that we didn't have all the cash on hand to pay for outright. And we didn't pay a thin dime for the privilege.
I like this. It means that I can earn a bit more bank interest on what I've spent.
I think of it like alcoholics who can't be near alcohol. It's some deep seated degeneracy or fear.
and once debt is spent you cannot get it back. you get scammed you can dispute the credit card, and if the CC gets stolen you can fight any charges.
debit means the money is gone and that's it.
Credit card? I file a charge-back which is a forcing mechanism for the vendor. Credit card skimmed? I get a new one, and I don't need to wait for my $ to be re-imbursed.
Another reason is that credit card companies sell your purchase data to aggregators and advertisers, and cash affords more privacy.
I always ask for a discount but for some reason I almost never get it.
The rational move then is to pay in as many installments as I can get without any additional interest. Then time itself gives me the discount. My actual money stays invested and I only pay later. My credit card gives me 1.1% cashback on all purchases. Inflation too does some of the work.
Maybe, but "should" has nothing to do with it. Either I get one or I use my credit card.
> cash costs the merchant MORE than credit card fees
That's not my problem.
I have a little lookup table for this. Interest free installments mapped to cash discount necessary to beat the credit card. I just look it up.
These numbers are actually conservative. There's a lot of credit card benefits that weren't priced in. I add a couple percent to the required discount numbers and round it up to compensate.