Ch 12 Blog :)

Gas stations offer discounts for cash instead of credit cards

Summary:

As most people noticed gas prices had increased compared to 15 years ago, and because of that consumers don't have enough cash on hand so they pay with credit card. The problem with that is the gas station's profit is being eaten by credit card fees. Many gas stations try to advertise the idea of using cash instead of credit card by offering cash discounts. But if the gas price goes up, then it means that credit card fees goes up too. The point of the cash discount is to avoid paying a the credit card fee, which in return gain more profit for the gas station. Since the credit card fees are one of the largest expenses businesses have, it makes sense that if they give discounts, it would still be a profit, even if it's at a low rate. Credit card companies are going to just sit there and do nothing, they argue that if the merchant thinks the fees are too high, they should come up with a solution by themselves instead of blaming on the credit card companies and demanding for lower fees. With that ideas like encouraging people to use cash, or they can choose not to accept cards are some solution gas stations have resorted to. But the bottom line is that despite the fact that they give out discounts, not as many people are going for it since the price of the gas is so high, so the gas station's profit is suffering quite a bit this year, even if it doesn't look like it.

Connections:

The gas stations are not profiting as much as they hope, so they offer cash discounts. Which is used by many different merchandisers to encourage customers to pay on time. But in this article it tells us that cash discounts can be used for other things besides encouraging customers to pay on time. Both ways of using cash discounts are very useful, since one it promises revenues are earned right away and not have to worry about late payment, but secondly it also reduces the amount of expenses to some degree.


Reflection:

It quite interesting that the same cash discount can be used in different ways. In a way that both side of the transaction gets a deal out of it, whether one is bigger than the other or vise versa. The cash discount shows that if one side were to be at a small disadvantage, they may gain another advantage. But with the world worrying so much about how the economy can't afford to be in a recession, it seems like the theme of cash discount may be the way to prevent the economy from falling. But who would be the one that makes that move first?