Cash discounts, while still rare, have increased by over 60% since 2015. Here’s how much you can save:

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in some cases, pay by cash.

More and more stores are offering lower prices to customers who use cash rather than cash. credit card This means that choosing paper over plastic could potentially save you money in some cases.

How much is it?

Typically, cash discounts amount to about 2% to 4% off a purchase, but the savings can be much more, experts said.

The share of discounted cash payments is still low, in fact, only about 3% of all cash payments in 2022, according to data from the Federal Reserve Bank of Atlanta.

But that’s up more than 60% from 2015, when 1.8% of all cash transactions included discounts, according to data from the Atlanta Fed. Though still uncommon, cash incentives are likely to become more prevalent in the future, experts say.

Meanwhile, other companies charge customers a fee when they make purchases with a credit card. In these cases, if you pay with cash, Revenue Savings.

Nearly 7 in 10 cardholders say that companies Charged extra A recent LendingTree survey found that when it comes to paying with credit cards, it’s the most commonly used method.

This trend is driven by a steady increase in consumers moved Moving away from cash purchases: According to the Federal Reserve, consumers will pay 18% of their purchases with cash in 2022, down from 31% in 2016. Meanwhile, credit cards increased from 18% to 31% during the same period.

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“In some cases, it just makes more sense to pay in cash,” said Matt Schultz, principal credit analyst at LendingTree.

Schultz said that may be true even when credit card rewards are taken into account: For example, most credit cards offer a typical maximum cash back rate of 2%, but cash discounts often exceed that percentage, he said.

“If a retailer offers enough discounts, even if you have the best rewards card in the world, you could end up paying less with cash,” said Adam Last, director of financial services at the Consumer Federation of America, a consumer advocacy group.

Businesses that offer cash purchase discounts typically do so to reduce the costs they incur with credit card transactions.

Credit card processing companies like Visa and Mastercard generally Charge the merchant According to the National Retail Federation, card payment processing fees range from 2% to 4% for each transaction, and the industry group says those swipe fees are most businesses’ second-largest expense after labor costs.

“You choose to use your card, so the store sees your dollar and they end up getting 98 cents,” Last said.

There are two ways that businesses can cut costs: by offering discounts on cash purchases (avoiding card fees) or by charging a surcharge on credit card transactions to offset the fees.

Either way, such practices are likely to drive down prices for cash users.

additional fee It is illegal But in every state.

As of May 2023, Connecticut and Massachusetts have banned the surcharge, while Colorado and Oklahoma have capped it at 2%, according to the North Carolina Restaurant and Lodging Association.

Visa too Capped surcharge According to industry groups, the rate is expected to be reduced from 4% to 3% in April 2023.

“It’s really important that you understand what the additional costs, if any, will be before you buy,” Schultz said.

Consumers are often swayed by cash incentives and are “quite likely” to switch to cash payments “particularly when a cash discount is offered,” according to research by Joanna Stubbins, a senior economist and policy adviser at the Federal Reserve Bank of Boston.

If a cash discount is offered, the odds are 19.2% increase Consumers who prefer non-cash payments will likely choose to pay with cash, Stubbins wrote in a 2018 paper, which took into account transaction amount and merchant type.

Additionally, Mr. Last of the Consumer Federation of America said small independent businesses are more likely to offer cash discounts than large national chains.

Gas stations have offered cash incentives to customers for years, but more are now doing so, and “some of the larger retailers are starting to introduce these features in the future,” said Patrick de Haan, head of petroleum analysis at GasBuddy.

The average cash discount is about 5 to 10 cents a gallon, de Haan said.

Meanwhile, more stations are offering their own payment platforms, such as branded debit and credit cards, which can offer even more savings than cash, he added.

Discounts are also “very prevalent” when it comes to paying medical bills, said Carolyn McClanahan, a certified financial planner and physician in Jacksonville, Florida.

McClanahan alsoCNBC Financial Advisor Conference.

Schultz said big-ticket expenses like taxes and college tuition are generally best paid with cash. The IRS and many colleges tell The costs of processing payments to consumers (in these cases, you may need to issue a check).

“Certainly there are big situations where you shouldn’t use a credit card because of the fees,” he says.

There are cases where credit cards have clear advantages over cash, says Last.

For example, unlike cash, credit cards come with certain protections regarding fraud and returning merchandise, Schultz said.

So if a consumer is shopping at a particular store for the first time, buying something they might return in the future, or buying something fragile and having it delivered, it may make more sense to use a card, even if there’s a fee, he added.

Additionally, credit cards may be a better option for people who want to track their spending more closely or who prefer the ease and convenience of using a card, Schultz said.

But consumers who struggle to pay their credit card bills in full and on time each month may be better off using alternative payment methods to avoid paying interest, especially with interest rates rising. Close to the all-time high.

There is an alternative to both cash and credit cards: debit cards. Retailers generally Can’t add Additional fees for debit card transactions.

“Generally, if you’re facing credit card fees, a debit card may be a better, cheaper option,” Schultz said.

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