Why is there a difference in prices for cash vs credit? Here’s what causes it
Ever wondered why there’s a difference between cash and credit prices at some businesses?
A reader asked Bee Curious, a community-driven series from The Sacramento Bee where journalists answer reader questions, why businesses such as gas stations charge more depending on how you pay: Why is there a difference in pricing of cash vs. credit in so many businesses?
The price differences are a result of one thing: fees.
Merchants have to pay fees to Visa and Mastercard when someone pays with a card, according to the National Merchants Association. And gas stations or restaurants, for instance, can pass that fee on to you. That’s called a surcharge: a percentage of the sale, according to the General Services Administration.
Why can they do that? Merchants sued, alleging Visa and Mastercard charged them excessive fees.
Even though the merchants won, they still have to follow a bunch of rules to do that, such as notifying you at the register and on your receipt that you’re being charged extra for using a credit card. So instead of that, some places will offer a discount for using cash.
The specific rules on this vary by card brand and by state. And only in Connecticut, Massachusetts and Puerto Rico is surcharging illegal, according to the National Merchants Association.
But then you also have convenience fees. And these can be charged for credit and debt transactions.
If you’re looking to avoid these credit card surcharges, NerdWallet has two suggestions: Just pay with cash or use a credit card where the rewards outweigh the fees.
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This story was originally published July 12, 2023 at 9:00 AM with the headline "Why is there a difference in prices for cash vs credit? Here’s what causes it."
