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Most consumers would change their payment habits when presented with a discount for paying with cash instead of with a credit or debit card, new survey data suggest. In its report "High Gasoline Prices and Inflation: What's the Fallout for the Credit Card Industry?" released last week, Pleasanton, Calif.-based research firm Javelin Strategy & Research found 67% of consumers likely would switch from paying with a credit or debit card to using cash or checks if retailers offered them discounts on purchases that cost less than $50. Javelin based its report on a survey of 2,957 consumers conducted in September 2007 and 3,136 other consumers surveyed in August 2006. On higher-ticket merchandise, some 58% of respondents said they likely would switch from paying with a credit or debit card to using cash or checks if merchants offered discounts on goods or services that cost more than $50. Javelin's report explored the potential effects of a trend in which some gas stations are offering discounts on gasoline purchased with cash instead of credit or debit cards to offset the cost of card interchange. Fuel merchants say interchange fees are cutting into their profits amid higher fuel prices and rising inflation. Merchant acquirers pay card issuers interchange and pass the expense on to their retailer clients as part of the discount rate. With increasing media coverage of high gas prices, the interchange business model is subject to pressure, and credit card companies are getting blamed for higher prices, the researchers wrote. News reports this week confirm that a smattering of gas stations across the United States are using discounts or surcharges to deter customers from using credit cards, a practice most card-network agreements forbid. The debate over credit card interchange spurred the House Judiciary Committee's recent approval of the "Credit Card Fair Fee Act," which would force card networks to negotiate new interchange rates with retailers (CardLine, 7/16). "The choice that card networks and issuers must make ... is whether or not to more rigorously police (the practice of offering discounts for paying with cash) and also whether to levy punishment–fines, acceptance revocation or some other punitive plan–for such operating regulation violations," the researchers concluded.
