Why would a restaurant offer a very large cash discount?
Why would such a large discount make business sense to the restaurant? The legit reasons could be;   Or can I assume that the restaurant is trying to avoid leaving a paper trail so that they could avoid paying tax? The illegal reasons could be; Another possible reason for this is to benefit the servers. When patrons pay with a credit card, they usually tip on the credit card too. If patrons are more likely to pay with cash, then the servers will get more cash tips. Even if the restaurant is completely honest with their books, the servers may not be. Having a restaurant where tips are mostly cash might attract better servers, or perhaps enable the owner to pay servers slightly less than otherwise. This could be a case of the new chip card technology and dealing with slow reimbursement turnaround time. I recently visited a restaurant who was not using the chip technology, and it refused my card after several attempts. I found out from my bank it was because the restaurant was not set up for chip and I had not eaten there before....I know at the other end it takes far longer for the funds to get to the merchant; banks don't want to part with other people's money.
The big one is to keep you from refinancing it with someone else to get a better rate. There may also be some funny-money reasons having to do with being able to count this as a new sale. I am a carsalesman. Lets get one thing straight, we are not allowed to give people a better deal just because they pay cash, regardless of what some people say. That can be seen a discrimination as not all people are fortunate enough to have cash available. if anything, finance is better for the dealership, as we get finance commission and the finance company DOES pay us the total amount immidiatly No they aren't boom times. Not sure how that justifies overpaying cashiers; the fact that the economy is slumping could be an argument to pay them less. Less money given to cashiers = lower prices = better for everyone in the economic downturn. Sorry to play devil's advocate but there is no free lunch and this isn't skilled work. Cash back from credit cards is handled separately than the rest of the purchase, i.e. interest begins accumulating on that day, and likely at a higher rate, and usually comes out of a lower limit than the credit allotted to that card. Given all these differences, and the obvious revenue-generation situation for the lender, it makes sense for them to give the store an incentive, rather than penalize them further, for the use of such a feature.  Note: I am not privy to the inner-workings or agreements between large stores and credit lenders, so I cannot guarantee any of this. "This isn't so much a legal issue, the prohibition on giving discounts was written into the merchant agreements that most of the major credit card companies enforced on businesses that accepted their credit cards. That is, until the recent Financial Reform Bill (2010) passed Congress. It changes everything. (The logic on this is a little convoluted, so read carefully) Credit card companies can no longer prohibit merchants from requiring a minimum purchase amount to use a credit card. Meaning: That if merchants want to, they can now stop taking credit cards for a $4 latte. Credit card companies can no longer prohibit merchants from giving discounts for cash. Here is an article with a lot more detail: Financial Reform Bill Good News for Credit Card Holders Here is a link to the actual bill details and content: HR 4173 - Dodd-Frank Wall Street Reform and Consumer Protection Act Here is the relevant part: This subsection is supposed to take affect ""at the end of the 12-month period beginning on the date of the enactment of the Consumer Financial Protection Act of 2010."" In other words, July 21st, 2011." My wife's uncle is a high quality Italian chef and constantly gets shat on for not having large enough portions.  His restaurant serves lamb and veal and generally good entrees.    People keep coming in expecting olive garden portions.   That's not the kind of place he tries to be.     He smokes his own duck for his pasta dish.    It's funny how people value a $2 bag of pasta for $17. Uhuh. And if I go to the Sushi bar 10 minutes before they close, they'll give me their stale rolls 50% off. Will CNBC right on article on that tip from me?  Its just a stupid article. Possible (unlikely) reasons: But usually, yeah, if you can pay cash, you should. It's not that simple.  Where I live, McDonald's charges $6.19 for a Big Mac combo.  The local In-N-Out charges $6.59 for a Double-Double combo.  They're pretty damned close in price and I don't think anyone would price discriminate over 40¢.  The difference between the two is enormous.  In-N-Out makes a great product, the burger and fries are delicious and fresh.  Further, In-N-Out is known for treating - and paying - their employees well.  They promote from within and becoming a manager is a good job.  Thanks to the decent pay, In-N-Out employees tend to be very good and care about the customers.  McDonald's is very different.  The food is terrible.  Flavorless and bland and *very* expensive for what you get.  In-N-Out aside, I can go to a local mom'n'pop and get a good meal for under $6.  There is no reason for me to go to McDonald's, none.  McDonald's isn't such a great employer, either.  The employees don't care.  I've never been treated badly, but there's no enthusiasm.  They are there for the paycheck only.  I blame accountants and the business structure.  For the record, I am an accountant, so I know what they're up to.  McDonald's is a large, public company bent on returning maximum profits to shareholders.  So they bring in the cost accountants who are very good at shaving costs down to the absolute minimum.  The Big Mac has suffered death by a thousand cuts.  No one cut makes it a lousy product, but give the cost accountants enough time and they will make anything mediocre to bad in lots of different ways.  In-N-Out is a privately held company.  Obviously, they are more interested in making money through selling a quality product and expanding sales.  They don't have to worry about shareholders who don't give a fuck and just want short-term profits.  They could make more money by turning the cost accountants loose, but they also know that would hurt their business.  The difference shows.  McDonald's is rarely busy here.  At In-N-Out, lines are usually out the door and you can't find an open table.  I only go there late at night on weekdays, since that's the only time it isn't slammed.  So you have two companies selling a similar product at almost the same price.  One is wildly successful and slowly expanding.  The other sells a shitty product and thinks that marketing is the problem. People will always eat out.  Waited tables during the last recession, had no problems making money.  I agree with the people in the article, it will discourage tipping and potentially lower their pay.  It has nothing to do with taxes as everyone claims either. Probably because large chains can absorb the loss from fraud better than small stores do.  Thus, small stores want to ensure that the person holding the card is the same as the name on the card. There is a funny story about that.  If you were visiting Apple and Jobs was taking you to lunch in the cafe - he would insist on paying.  Employees, get to checkout and have their badge scanned and the cost of the food is deducted from their paycheck.  So why did Steve always insist on treating for lunch?  He was enjoying all he (and guests) could eat for $1 a year. I thought this was because credit card companies charge the retailer a fee to accept credit card payments. If you spend $100, the retailer pays $1 (or whatever percentage they have negotiated) to the credit card provider.  Handing over $100 cash and paying $1 fee to Visa means a loss to the retailer. The same transaction on $100 worth of product means the loss is accepted out of the profit margin which the retailer accepts to attract custom. Indeed, perhaps even businesses that cater to different markets within the same industry could be affected differently. Restaurants in particular, where a smaller cafe or cheap sandwich shop might see more business as a result of more money in people's pockets, but a higher end sit down restaurant might only experience the wage increase without any additional incoming revenue. True on the second point. It is information based. My bad.  With regard to the first point, I don't think he's Jesus returned. He makes plenty of mistakes but he does provide the return record of a very disparate group of investors following the same method. That method may not work anymore (hard to say) but I think it does. I'm obviously a true believer.   With respect to third point, I don't think you were being a dick. Enjoyed the debate. Thanks for the perspective