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Using plastic has become second nature for many. But what if it's costing you?

A 2025 study by J.D. Power found that 35% of small businesses and restaurants tack on a surcharge for customers using credit cards. Businesses pay a “swipe fee” for each transaction, and many can pass that along to card-paying customers.

But other businesses are trying a different approach: a cash discount. A recent analysis by the Atlanta Federal Reserve found the share of transactions that offer discounts for using paper currency more than doubled between 2018 and 2024, to 5%. These discounts typically range from 2% to 4%, but are sometimes even greater, according to Monify Merchant Solutions, a payment processing provider.

So what?

A store might offer a cash discount or charge a credit card fee — but that doesn't always mean cash is the better option for your budget.

From a purely psychological standpoint, cash is often better if you want to limit your spending. Studies have shown that you spend less when using cash, since your brain perceives handing over cold, hard currency differently than swiping a card.

Plus, since you're only spending what you actually have, there's no danger of building up any debt — a particularly salient point, since half of credit card users carry a balance, according to J.D. Power.

But you probably don't have cash on you all the time — 42% of Americans say they don't use cash for purchases in a typical week, up from 24% a decade ago, according to a recent Pew Research Center survey. Withdrawing money from an ATM could come with an additional cost: The average total ATM fees hit $4.86 in 2025, according to a Bankrate study. Plus, with cash, there's no recourse if your money is lost or stolen.

You can avoid a credit surcharge by using a debit card, which carries some of the perks of cash, like not accruing interest (because it's deducting money directly from your checking account). And debit cards also limit your spending to what's in your account — though you can get dinged with a fee if you overdraw.

On the other hand, credit cards come with more consumer protections, like stronger fraud-fighting abilities. For example, if you wait more than a couple of days to report a fraudulent charge on a debit card, you could be on the hook for the loss.

If your credit card offers cashback or other rewards, you'll need to do some math to see if it still delivers savings despite a surcharge. The basic idea is this: Compare the benefits you get from the card — like the cashback rewards rate — against the business's card surcharge or cash discount.

If your rewards rate is greater than the fee or the discount, choose the card. If not, pay cash. A card that offers 3% cash back on dining (like SoFi's) beats out a 2% cash-pay discount at a restaurant.

Related Reading

How Much Cash Should You Keep at Home? (Experian)

Will the Visa-Mastercard Settlement Impact Your Credit Card Rewards? What To Know (The Points Guy)

Choosing The Best Way To Pay: Cash, Credit Cards, Debit Cards, P2p, Checks Or Online Payments (U.S. Public Interest Research Group)

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