Is Cash Still King? I’m Starting to Have My Doubts

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Do you believe that cash is more powerful than a credit card? If you walk into a store with a wad of $100 bills, do you believe that you’ll get a better deal than you would if you flashed your Visa? I used to think so, but after trying the “flash your cash” method a couple of times, I’m starting to think that cash is no longer king…

Why Don’t They Want Your Cash?

The Car Dealership

The first time I tried to get a deal with cash was when we purchased our Jeep. We planned on getting a cashiers check from the bank, but we were going to look at a couple of vehicles that day and didn’t know which one we were going to buy. So, we went to the bank in the morning and withdrew $6,400 in cash – all $100 bills. I think it was the most money that my wife and I had ever held; boy did we feel POWERFUL!

When we rolled into the dealership, we let them know that we were interested in the Jeep and that we brought cash. We thought that the sales staff would treat us like royalty and give us the best deal they could, but it didn’t quite happen that way. I think they were more concerned that someone within earshot was going to jump us from the other side of the lobby!

He soon explained that cash was nice, but they were really only interested in a cash purchase if they were low on cash flow. Car loans and leases paid much better in the long run than cash. If I remember the stat correctly, when a dealership sells a car for cash, they only make about $80 on the deal. If they sell the car on payments, they make more like $600. And, if they lease the car, they make well over $1,000 per vehicle. So clearly, dealerships aren’t all that interested in your cash.

Appliances at Lowes

The next place we tried to flash our cash was at Lowes. Since we recently bought a foreclosure, we were in need of appliances (the previous owners stripped the place of pretty much everything except for the copper wire in the walls). Off to Lowes we went to check out their selection.

I figured we could get a great deal on appliances for two reasons.  1) We were going to buy 4 pieces (bulk discount), and 2) we were going to pay cash for them. Apparently I was wrong on both accounts.

Since there was already a 10% sale on the appliances there was no bulk discount offered, and when I asked the salesman about paying with cash, he told me that they really didn’t offer further discounts for that. As he explained it, ‘paying with cash only requires more man hours for counting, sorting, and handling. We can actually make more with the credit purchase – even after the 2-3% credit charge from Visa.’ I was a little astonished! Was cash no longer king?!?!

Why You Should Still Use Cash

First of all, I am not urging you to go out an purchase everything on credit. I still think that it’s incredibly wise to only use your debit or use your cash – it might not give you any more of a discount, but at least you know that your bill is taken care of and you aren’t shocked by a $2,000 credit card bill next month.

That’s not the only reason to use cash however. You can still save some money by whipping out the Benjamins in the situations below!

  1. Private Party Sale – when you’re purchasing an item from a private party (this could be anything…furniture, cars, appliances), cash is powerful. The seller loves cash more than anything, and they’ll certainly be willing to lower the price when the see it. Sometimes, it’s just an emotional thing.
  2. Small Mom-and-Pop Operations – with these small stores, cash flow can often be an issue. If you show them cash instead of a credit card, they might be willing to drop the price for you.
  3. The mechanic – For whatever reason, my mechanic preferred a personal check over a credit card. So much so, actually, that he gave a 10% discount off from the bill if you paid with a check. So, this could definitely be an option for you as well!
  4. Large Purchases – when you’re purchasing something of great value, like property or a business. Paying with cash is always enticing. I once heard a story about a man that would locate all of the properties that were nearing foreclosure, and then would walk up to their door with a briefcase of cash totaling $50,000. More often than not, the people jumped on the opportunity to get their hands on that cash, even though their homes were worth nearly $80,000. If you have a lot of cash, you can certainly get a discount.

Do you still think that cash is king? Were you ever able to get a discount because you paid with cash?

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Money

Derek

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

50 Comments

  1. I am a little surprised by your experience only because I hadn’t thought of it. It would make sense that the dealerships would prefer financing and the big chains aren’t going to care to deal with anyone.

    Cash is still king for the reasons you mention. Warren Buffett has gotten some good deals in 2008 and recently because he had cash readily available to bail out some companies with capital. If for no other reason, that is a good one to have cash.
    cashflowmantra recently posted..Measures of Fiscal Fitness

    • Makes sense doesn’t it? As I said in the article though, don’t give up on cash! It can still get you some great buys if you’re looking in the right places!

  2. Derek, I agree with you on the car dealership! I had that happen once where they were basically turned off that I had cash with me.

    That’s alright, I prefer to purchase vehicles from private party sellers anyways. Vehicles with cash in hand are dirt cheap then! 🙂

    As I still don’t use credit cards, I do though get a bit aggravated with hotels and car rental companies that almost require you to have a credit card. There are ways around that, thank god!

    • I love buying cars with cash from a private party! Many of the sellers just want to get rid of their car and will let it go for cheap, especially when I have a wad of cash in my pocket. 🙂

  3. I agree that the big chains, dealers, and department stores aren’t interested in cash but the mom and pop places definitely are because cash flow is much more important to them and their livelihood. Places like Kohls, however, will give you a much better discount if you use their card but you can pay off the balance right at the register, so it’s kind of the best of both worlds. I still don’t use credit cards though. Just can’t bring myself to do it.
    Matt Wegner @ Financial Excellence recently posted..076 Financial Excellence: Start a Business in a Bad Economy

    • That’s great that you don’t use a credit card! It’s one less hassle to worry about. 🙂

  4. I think cash will likely always be king, however for me, I prefer credit. However, many places that i enjoy visiting, yard sales, antique stores, flea markets, and book sales, ALWAYS prefer cash.

    Also, it is much easier to haggle with someone if you have cash, than if you try to pay with a credit card.

    I will use my credit card (and pay it off every month) every where I am able, but cash will always be King.
    MoneyforCollegePro recently posted..Your Worst Nightmare Might Not Be So Bad

    • Credit can be nice at times, but there are some instances where you could be saving more by paying cash rather than getting a 2% rebate on your credit card.

  5. When I go to flea markets and some thrift stores, I can usually get a better price with cash in hand. Otherwise, we will use a rewards card for large purchases and then pay it off. Well, most of the time. 🙂
    Lisa @ Cents To Save recently posted..$500 HOLIDAY CHALLENGE UPDATE

    • Mmmmm, flea markets and thrift stores. Those words are heavenly for me.

  6. As you said, it depends on the purchase. I am sure the guy at Lowe’s doesn’t even want to bother with dealing. He may not even have the power to do it.

    I remember when my in-laws sold their house, the offer they accepted was cash, because it was cash. It was well below what they could have gotten, but they loved that this guy was not a credit risk.

    Maybe it is a generational thing now that I think about it?
    Everyday Tips recently posted..A Rant About A Lack Of Communication

    • Great point. There are some house deals that fall through because the buyer is labeled as a credit risk. A cash purchase makes things much easier. 🙂

  7. There are some well made points here and great stories, but I think this will end up being one of those few times where we slightly disagree. I live by my credit card. There are many days that I don’t have a single dollar in my wallet (usually I carry 0-$10). I have never paid interest or a late fee and have made hundreds (if not over a thousand) in rewards in just a couple years. Credit cards also protect your investment in something. For example, if I were to buy some service from a company, I know that if that company doesn’t provide the service at all I can file a claim with my credit card and they will “go to bat” to get my money back (for free). Just some of my own prejudice.
    20’sFinances recently posted..Using Rental Properties as Retirement Income

    • I used to be kind of like you 20’s finance, but now I try to keep a wad of cash in my pocket at all times, just in case I sniff out a cash deal. Plus, paying with cash makes me more accountable with purchases too. When I see that cash leave my hands, it’s a little more emotional than if I were just swiping a credit card.

  8. I’m surprised that both the car dealership and Lowes were so honest with you about how they really don’t like cash-sales! I don’t pay by cash for large items (though I do pay my credit cards in full or within the 0% 12-month promo), and this just confirmed that maybe I’m doing the right thing.

    However, the four items you mentioned that prefer cash I definitely agree with.
    Little House recently posted..My Debit Rewards Program is Vanishing

    • If you are paying with a card, make sure that you’re paying off your balance each month. You never know what the future will hold, and if it holds something bad, you could be in trouble. Keep an emergency fund and always keep up with those bills! That is why I use cash, I don’t have to worry about a credit statement coming in the mail.

  9. I’ve done various home improvement work with cash. I had a bunch of trees and brush cut down and was able to save a bunch by paying in cash. My guess is that they’re avoiding paying taxes on it that way, but that’s not my issue if they were going to get caught.
    Money Beagle recently posted..Is Amazon Getting Pinched On Shipping Costs?

    • Sounds like you know what you’re talking about. Yay cash! 🙂

  10. I’m with Matt. You are probably going to do better at Mom and Pop places if you are looking for a cash discount. My husband is getting a lot of dental work done right now and we’ve been getting a 5% discount if we pay cash. So far that’s saved us a couple hundred.

    If the decision maker is also the one paying the credit card transaction fees they will know the value of cash and you can usually get a few percentages off. At least the amount of the credit card fee.
    Ashley @ Money Talks recently posted..School Fund Raisers

    • Nice job Ashley! It sounds like you are incredibly aware of when to use cash over credit. 🙂

  11. Now with things like the Square App, it makes it possible for even an individual to accept a credit card!

    IE – Derek you owe me $20, here let me swipe that for you on my phone….

    🙂

    • Haha…you know I don’t owe you $20! 🙂 Nice try wifey.

  12. The only time cash get a discount is with small store owners or businesses. It is because they do not report the income. I am surprised about the multiple item pricing. There is appliance dealer that advertises changing out your kitchen appliance for a bulk price. I don’t know how much you save though.
    krantcents recently posted..Another 15 Coolest Jobs on the Planet

    • Yep, needless to say, we did not purchase our appliance at Lowes! We ended up going to Best Buy and got an awesome deal on some shiney LG stainless steel products! 🙂

    • Yep, I suppose the credit card has its purpose. It’s really painful to say that….

  13. I had a similar experience (buying a car). I saved up, wanted to pay cash, and was almost penalized. They’d rather me finance it, even at .9% and even if I was going to pay it off tomorrow.

    I wonder how much “counterfeit” plays into this thinking? I know some are concerned… but I’m not sure how broad this extends.
    Doctor Stock recently posted..Food and Beverage Stock Series

    • Hmmm. I hadn’t thought of that! I guess they would be suspicious of fake money when it comes in the thousands… good point. I’ll have to buy my next car from a private party. Then I can pay cash AND most likely get a deal.

    • Can you elaborate on this FS? Are you saying a credit card will help avoid double taxation?

  14. This is actually pretty interesting. Really, it shows that the worst financial deals for consumers can often be the best for certain businesses. Using your examples, leasing or buying a car with financing.

    When people have to stretch for their purchases, businesses have something to bargain for. They’ll let consumers borrow, stretch etc – at a cost. That’s where the profitability comes in.

    Maybe a better way for us to look at it is that it’s best to be able to pay for cash for everything, but have the option to pay in the most cost-effective way possible in any given situation.
    Squirrelers recently posted..The September Effect and Stock Market Returns

    • Great perspective Squirrelers! You’re right! The dealerships and Big Box stores obviously want to make the most money – which leads them to push financing. It’s probably best to stay away from these scenarios. You want to make yourself profitable, not the big companies!

    • How often have you been mugged? I never have, so I don’t consider it to be super dangerous to carry a lot of cash. As long as I don’t flash it to everyone, I’m sure I’ll be fine.

  15. I use cash when shopping and doing the grocery so that I can stick to the budget. But when it comes to large purchases, such as appliances, furniture, or car, I prefer using my card.

    • Yep. My wife and I use cash for our groceries too! As for the larger items, I’ll use my debit card if cash doesn’t appeal to the seller.

    • It sure does, and it makes it tough to wheel and deal! I’m now starting to lean away from the big box stores for large purchases. In my mind, those places are for those that like to pay with credit.

  16. We almost never use cash. But then we always pay off the credit card bills each month with no problem. We get at least $300 a year from cash-back credit cards. For garage sales cash is king. Businesses that like cash are possibly not reporting it to the govt. While that is not my business, I don’t like to enable tax-dodging.

    • For garage sales, cash is most definitely king! For this reason, I love going to garage sales!

  17. I never carry cash anymore. My wife and I pretty much use credit everywhere we can to earn the points. We then pay off the card every month so we pay no interest. I’ve never really tried to pay any big purchases in cash because I never really had that much cash. Appliances I prefer to pay with credit card and then pay off that month. Cars and houses I definately have to use financing.
    Daniel recently posted..Personal Finance Source’s Money Rules

  18. The car dealer and the appliance store definitely make more on credit or payment purchases than cash, so they are not attracted to the latter. For garage sales, flea markets, private parties or small stores, however, cash is a magnet, so you can still flash around your wad and they will surely give discounts. Though these are little amounts, yet they all add up eventually to create bigger savings.
    Amy@CreditDonkey recently posted..Coffee and Credit Cards: Small Transactions for Big Success

    • The savings definitely DO add up! Thanks for the comment!

  19. “On a debt management plan we renegotiate your monthly unsecured debt payments down to a level you can afford”


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