Kroger, one of the largest grocery chains in the United States, is considering a new policy which would give a discount to customers who pay for groceries with cash. The decision would mark the first time that a major retailer uses an option won in the recent credit card settlement that would allow retailers to give discounts for all-cash purchases.
Kroger has yet to announce how much it will discount cash payments. Most stores and gas stations which currently offer a cash discount provide 1-2% off a customer’s purchase.
The discounts may not be effective when it comes to reducing total credit card spending volume. Many credit card users have no incentive to stop using their credit cards, despite a lower bill. On the basis of total cost, a rewards credit card user would save more by using a 5% cash back card for groceries rather than take the 1-2% discount on their total purchase.
Numerous credit card companies including Discover, Bank of America, Chase, and American Express has special rewards cards that give customers bonus cash back on grocery purchases. Ranging from 3-5% all the time to 5% over a quarter-year, rewards cards users can easily beat the cost savings at Kroger with a proper rewards credit card for groceries.
Retailers are likely to find stiff competition for customers who pay with cash. Cash discounts on groceries from a major chain like Kroger may force other chains – like Publix, Walgreens, or Walmart – to offer similar discounts. So far, Walmart has rejected the terms of the settlement, instead wishing for a new agreement that would give more power to retailers in the future. Most retailers back the settlement, however, noting that if the credit card processors lower their fees, there will be no reason for disputes in the future. Additionally the $6 billion settlement will be a large cash infusion to struggling retailers who may have lost competitiveness due to disproportionate credit card use.