Have you ever noticed that certain businesses offer a discount for paying with cash vs. credit? This practice is particularly common at gas stations, though you’ll sometimes see it at other businesses, as well. And yet, as we’ve discussed, it’s against the policies of the major card networks (Visa, MasterCard, etc.) — and, in some cases, against state laws — to charge a premium for using a credit card.
So what’s the deal? Are these businesses breaking the rules? As it turns out, dual pricing is allowable, but only if the vendor advertises the credit card price and then offers a cash discount from there. In contrast, they’re not allowed to advertise something at a certain price and then tack on an upcharge for using a credit card. Seems like a silly distinction to me, but it is what it is.
Given this loophole, a number of businesses have taken to incentivizing cash by passing a portion of their savings on to the customer. From a consumer standpoint, you have a decision to make. Is it worth giving up the convenience of your credit (or debit) card, as well as the cash back rewards, in return for a cash discount? In some cases, yes. In other case, no. It all depends on how big the discount is — and how much extra cash you’d have to carry around to cover the expenditure.
I’m mainly bringing this up today because I recently received an e-mail from a reader named Joe who ran into something similar at the doctor’s office. Apparently he’s been dealing with an eye surgeon who is charging $5400 for a certain procedure, but wants more if you pay with a credit card. Joe was wondering if this is allowable.
In short, it all comes down to how the dual pricing is presented. If the doctor is advertising the procedure at $5400 and then upcharging if you want to use a credit card, he’s running afoul of the credit card rules, and possibly state law. If, on the other hand, he is charging (say) $6000, with a 10% cash discount, that’s perfectly allowable. Again, it’s a silly distinction, but it is what it is.
We’ve actually run into this ourselves at the orthodontist, where they offer both a cash discount and a discount for paying for the full course of treatment in advance vs. doing an installment plan. Since we’ve been in the fortunate position of having the cash on hand, we jumped at the chance and saved a good bit of money.
What do you think? Should dual pricing be allowed? Do you choose to pay with paper over plastic when there’s a discount involved?