If you are a cash customer, why should you pay the same price for a product or service as a credit card customer? In order to subsidize the credit card industry is one answer. But the astute consumer answer is that you should pay less. All legal obstacles to your paying less for cash purchases have been cleared away in recent years. Nearly four years ago Consumers Union successfully settled a suit it brought against American Express and a Maryland bank administering BankAmericard. The defendants agreed to drop restrictions imposed on merchants prohibiting the granting of lower prices for cash. Other major credit-card issuers soon agreed to drop similar restraints on the right of merchants to compete for cash customers.
Then in 1975 the Fair Credit Billing Act declared such restraints unlawful and freed the merchants to offer a two-tier pricing system for cash and credit customers. The act also exempted from the requirements of the Truth-in-Lending Act all cash discounts of 5 per cent or less if the notice of such discounts is conspicuously displayed on the premises and available to all prospective customers.
So why are cash customers getting so few cash discounts around the country? Because cash customers are not organized to induce merchants to provide them with a 5 per cent or less discount. And left to themselves, most merchants prefer the status quo rather than have to explain to their credit card customers why cash customers pay less.
Explaining is not difficult if the merchant wants to be both fair and competitive with other merchants. Sales can increase for the merchant who is an aggressive cash discount devotee. In 1974 the Continental Illinois National Bank conducted a survey which documented common sense. Seventy per cent of consumers polled replied that they could pay cash (including checks) instead of using credit if merchants gave them discounts for cash purchases.
Add to this consumer preference the following facts about credit card purchases: more paperwork, delay of weeks before the merchant is reimbursed by the credit card company, and a service fee ranging from 3 to 5 per cent which is retained by the credit card issuer or bank.
Consumers Union (CU) phrased the argument pithily: “Cash customers get less and cost a merchant less. It is only fair that cash customers should pay less.”
To help lighten the cost of living for the cash customer, CU has prepared a consumer organizing kit entitled “How to Compile a Consumers.’ Directory of Merchants Offering Discounts for Cash” (available for $1 from Consumers Union, Orangeburg, NY 10962). The directory would inform consumers which merchants in their city or town have agreed to give cash discounts–a listing which could prove to be a boon for merchants and customers.
Compiling such a directory is easier said than done. It takes determination by a small group of cooperative consumers. The CU kit provides many useful suggestions including a form questionnaire and advice to interviewers.
What it cannot provide is the “esprit” and confidence that a community group can bring to this project. Those qualities are up to you as you start surveying clothing stores, food markets, appliance stores, restaurants, department stores and hotels.
If you have the endorsement of elderly, labor, religious, civic and consumer groups when you go up and down main streets and shopping centers, the chances of success, of course, are greater. The cash discount movement may start slowly but gain rapidly in momentum as the news spreads from one community to another.
Should you compile a directory or devise another approach to secure cash discounts for your community, let Consumers Union know about it. In this way CU can compile the best ideas from around the country and distribute them in Consumer Reports, its monthly magazine, to assist other consumers looking for more value for their cash buying.