Rising Card Fees Inform ‘Top 5 Places to Pay Cash’

calendar iconSep 26, 2022


U.S. journalist Andrew Lisa created a list of the top five things for which people should always pay cash, and there is a common thread: extra fees included should people make card payments, which can add up to hundreds of dollars on large transactions.

College tuition is top of the list, with Lisa observing that while around 85 percent of colleges and universities will accept payments by credit card, there is typically a two to three percent surcharge. Assuming a 2.5 percent rate, that would be an extra $250 on a $10,000 tuition bill.

Moving on to doctors’ bills, Lisa points out that credit card companies charge fees to merchants for using their services, and most states have no legislation to prevent merchants passing that fee on to customers. Given these surcharges can be as high as four percent, it’s easy to see how a trip to the doctor, dentist or hospital could become even more expensive when not paying with cash. While the healthcare industry previously lagged behind small businesses in charging these fees to customers, Lisa says they are now increasingly building them into their price structures.

Even the few states that do prohibit this passing on of card fees to customers will typically make an exception for government facilities, so Lisa’s third pick is payments made in places such as the DMV, post office or local court.

The penultimate recommendation is paying cash at the gas station. In 2013, when Visa and Mastercard first allowed merchants to charge their customers extra to pay by card, gas stations often gave people a discount for paying cash. These days, Lisa says, many are now simply showing two prices side by side: a lower one for paying cash, and a higher one for paying card.

The final place Lisa urges people to use banknotes and coins is for making tax payments to the IRS, where three different payment processors are used, all of whom have different price structures, to make matters even more confusing.

ACI Payments charges a fee of $2.20 for debit cards, or 1.98 percent for credit cards, to a minimum of $2.50. With Pay1040, it’s $2.50 or 1.87 percent for debit cards, depending on the type of card, and 1.87 percent on credit cards to a minimum of $2.50. The final provider, payUSAtax, sets the fees at $2.55 for debit cards, and 1.96 percent for credit cards, to a minimum of $2.69.

This puzzling arrangement adds complexity and cost to tax payments, neither of which are welcome at the best of times, and even less so in the current economic climate.

There are attempts under way worldwide to combat ever-rising card fees, including a lawsuit brought by retail associations in North Dakota against the Federal Reserve to reduce debit card fees, and an investigation into soaring credit card fees being undertaken across the pond by the UK’s Payment Systems Regulator. However these unfold, added fees will inevitably remain a fact of payment by card, meaning cash will always be a valued option for those looking to pay simply, and pay less.

Last Updated: Sep 25, 2022