A friend of mine (this is in the United States) said that he always pays cash when he goes to a restaurant or a business that he particularly likes, so that the restaurant owner (he often does this in family-owned or small businesses) don't get their revenue cut by banks or credit card companies.

This sounds like a good gesture to follow, but how significant does this affect the business owner's revenue? Is there a calculation of how much cut do banks/CC companies take?

I'm trying to find out If the effect is very negligibly small, maybe it's not worth the inconvenience of doing cash transaction and missing out some benefits that my credit card might offer for making credit card transaction.

  • While it likely does not matter much to the restaurant owner who may well prefer to be paid by credit card because of the issues noted in littleadv'a answer, it might very well make a difference to the waitperson. Some people claim that some restaurants do not pass on tips on the credit card to the staff but pocket them as additional profit instead, and so leave tips in cash. Others say that this means the waitperson (or the busboy who clears the table) gets all the cash whereas putting the tip on a credit card means that everyone (including the sommelier and chef) share in the tip. Feb 2, 2014 at 21:34

3 Answers 3


Credit cards charge about 2% fee from merchants. This is already priced into the restaurant menu.

Generally, dealing with cash will not cost the merchant significantly less since he needs to make more trips to the bank, pay fees for frequent cash deposits (banks charge per operation), and maintain a safe location for storage of that cash.

Bottom line - I doubt it makes any significant difference to the restaurant owner.

  • This was my thought. The risk of having a lot of cash is pretty high in some locations
    – MrChrister
    Feb 2, 2014 at 23:18
  • I don't think this is always true. In my area, I've been in several restaurants that asked me whether I have cash when I pulled my credit card when paying (which means they prefer I pay cash). I've also seen some gas stations that posted slightly lower price when I pay by cash instead of CC.
    – user69715
    Feb 3, 2014 at 1:15
  • 1
    @user69715 that is not necessarily because of the credit card fees. It is more likely that cash purchases are not properly reported for tax purposes. It is much easier to "forget" a cash transaction than a credit card transaction (which are now reconciled by the IRS through 1099-K). This is especially true for employee tips.
    – littleadv
    Feb 3, 2014 at 2:12
  • 1
    Some credit cards charge significantly more than 2%. Feb 4, 2014 at 15:46

The biggest advantage to small business owners paid in cash is not that it might save the 2 or 3 percent that would go to the credit card company. The biggest advantage is that they have the opportunity to keep the transaction entirely off the books and pocket the cash without paying income tax or sales tax, especially when no receipt is given, or when it's a service instead of a product being sold, or when it's an approximately-tracked inventory unit going out the door. Although it's illegal, it's widely done, and it's also often a temptation for employees to try and get away with doing it too.


You know those perks/benefits that you don't want to give up? Those are funded by the fees you are trying to eliminate by paying cash.

The credit card company makes money by interest, merchant fees, and other fees such a annual fees. They give you perks to generate more transactions, thus bringing in more merchant fees.

For a small business they need to balance the fee of the credit card transaction with the knowledge that it is convenient for many customers. Some small businesses will set a minimum card transaction level. They do this because the small transaction on a credit card will be more expensive because the credit card company will charge 2% or 50 cents whichever is larger.

Yes a business does figure the cost of the cards into their prices, but they can get ahead a little bit if some customers voluntarily forgo using the credit card.

  • Any reference for your figure 2% or 50 cents?
    – user69715
    Feb 3, 2014 at 1:16
  • comments from a few years ago from a relative that was running a small business. Feb 3, 2014 at 3:10

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .