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Credit Card Surcharges / Cash Discounts

Credit cards are a very convenient and popular way to pay for almost anything, and they are used extensively for purchases of PCs and components. This is especially true online, where using a credit card is not only helpful to the consumer, it is in fact strongly recommended due to the protection it provides to the customer in the event of problems. However, many consumers don't realize that when they use a credit card, they cost the vendor a portion of the price of the items they are buying. The credit card company charges the vendor a percentage, sometimes as high as 5%, for all credit card purchases.

As I mentioned in another section, margins are very low on many PC products, and losing 3-5% "off the top" for a credit card order can cost the vendor half his profit or more on a transaction. Therefore, many vendors would like to recoup the additional cost associated with using credit cards. They are not, however, allowed to impose a surcharge on credit card transactions. The credit card companies forbid this, because they realize it would reduce credit card use (and probably also because they'd prefer that nobody realized how much money they make on every sale).

Some companies get around this by offering a cash discount for orders that are paid by cash, check or money order. Cash discounts or credit card surcharges are really "six of one, half dozen of the other", if you think about it. If you are buying from a local store, cash discounts are a good thing, because they let companies offer lower prices to those willing to pay without using a credit card. I do not recommend doing this for any but the largest and most reputable of online companies though. See this section on payment methods for more.

Some people find it offensive if a company offers a cash discount. If you do, fair enough, don't shop at those vendors. I personally think that a company is only being honest in offering to let you save the money rather than pay it to the credit card company, or pocketing the 3-5% if you pay by cash or check. It's your choice of course, but the companies that don't offer cash discounts have to incorporate these credit card costs into their prices somehow, or else skimp on something to compensate: TANSTAAFL.

Warning: The only exception I would make to the comments above, and an area where I would beware, is when it comes to the companies that assume cash discounts in their pricing. Many of these companies--usually local or smaller PC shops--write their price lists and put a small note in a tiny font at the bottom of the page saying "price reflects N% cash discount". Sometimes they don't even bother with the footnote. I don't consider this to be very honest at all; in fact, I find it downright deceptive. Be very sure to watch out for it.

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