Let?s first look at what we should consider the root cause of this situation. We have become a debt nation. We want what we want and we want it now. The day of saving and sacrificing for something we want appears to be a thing of the past and we have an entire overcharged nation to prove it. Keeping up with the Jones? has become getting it before the Jones?. We feel we will always have time on our side to pay for our decisions and so what I have to make monthly payments 20%-30% more for an item over time, I?ve got what I want.

Practically 95% of all businesses accept some type of credit or debt cards. VISA, Mastercard, Discover and American Express are not complaining. I know you?ve seen some business that stress cash or checks only, no credit or debit. There is a reason and you will soon learn why.

Did you know that the credit card companies (VISA, Mastercard, Discover, and American Express) get a percentage of every transaction made with their card? Every time a card is swiped, for the privilege of using a card with their logo those companies are compensated. Now apart from that the bank that issued the card is hoping to make their money off your revolving (monthly payment) charges. They charge interest on the purchases you make, thus profits. I?m getting ahead of myself.

Let us for the sake of this explanation assume you are purchasing a common item, a pair shoes. Nothing fancy, just a normal pair of ?Brand X? cross trainers. The estimate cost $50.00. The business owner of course did not purchase the shoes for $50.00; the price they set is based on what they want to receive in profit for selling the shoes. For this example let?s say it?s 10%. So now the price should be $45.00. So the business owner has determined for every pair of these shoes he needs to make $5.00 (profit) to pay for employees, insurance, rent, utilities, etc. thus the $50.00 price. The price is also determined to take into account the fact the merchant services or the company responsible for processing credit card payment receives a percentage of every transaction. That can be 1%-3%. Now the price based on 3% is $52.00. Now, a person who purchased the shoes with credit or debit actually is paying $50.44, all the other money is going for processing fees. Here is the kicker. It doesn?t matter of you are paying with cash or credit the price is the same.

So here you are a person who doesn?t use credit and you are paying for those who do. Does that seem fair? Why don?t stores have prices based on how you are going to pay for the item? For instance, if you are purchasing the shoes with cash you pay $45.00 and if you are buying with credit or debit the price is $52.00. This may sound strange but it?s easy to do. When you go in a store there are prices marked but the prices are adjusted based on the profit the business expect to make. In fact, it?s done in some Latin American countries. Cash is less and credit is more. Why? Because the store owner can make the same profit from you paying in cash versus having to pay the merchant services company a percentage for processing the payment. You won?t get Wal-Mart or any other major corporation to admit this fact. The next time you frequent a sole-proprietor small business ask them and they will tell you.

Is paying cash really an advantage? In fact, some business owners are upset that the merchant services are continually increasing their prices they charge for processing credit cards annually or semi-annually and the businesses have to increase the bottom-line prices of their items to make up the difference to both cash and credit customers. If you are one of those individuals who pay in cash there is one way to circumvent this growing trend. Find a credit card that offers points or rewards based on purchases. Assuming you will pay off the balance in full when the bill comes this can be very advantageous. You make your purchases as normal, pay off the balances and reap the benefits of the points or rewards. Since it doesn?t make a difference in the price if you are paying with cash or credit, you may as well benefit.