June 01, 2009

Debit or Credit?


Every time I use my credit card, the business has to pay a 3% fee on the total purchase to the credit card company.

The only reason I use my credit card is because I get 1% cash back through my dividends credit card. So, what if I was given a different incentive? Let's say my local Chinese restaurant offers me a 1.5% discount on my purchase if I use my debit card?

I still don't have to carry cash, which I hate. He cuts his transaction costs in half (with a debit card, the retailer usually pays a nominal $0.10 fee per transaction). And I get 50% more cash back on every purchase.

6 comments:

LizM said...

Everyone wins except the credit card company!

Meghan said...

This sounds like a great idea, but I think it might be illegal - or would quickly become so once the cc companies found out!

Eric Olsen said...

it's definitely not illegal. a lot of places offers cash discounts right now.

Brent said...

Merchants can offer a discount for cash (not debit), but there are a lot of restrictions that complicate it to a point that most retailers don't bother.

Eric Olsen said...

restrictions to protect who? that seems ridiculous?

Brent said...

it's not a legal thing.

it's in the merchant agreement required to do business with visa/mastercard/etc.

you could get around it by taking debit only and not credit, but the merchant would probably lose more business than they would gain from lower cost.

you'd think this would violate anti-trust laws, but i guess not...