Discounts for Cash?

About 503 million credit cards are inuse in the U.S. today-- -proof enough that "plastic money" is replacing the folding kind. But the demonetization process is expensive. Merchants who routinely accept credit cards add a credit service surcharge of anywhere from 2% to 8% to the price of their product or service. Though cash customers do not benefit from the credit system, they in effect help to subsidize it because they pay the higher prices too. The situation smacked of price fixing to the nonprofit Consumers Union. So last February it brought an anti-trust suit against the most prestigious credit card company of all, American Express Co., charging that the company forbade merchants who accepted its card to give discounts to cash customers.

Amexco denied that it did any such thing, but last week it agreed to an out-of-court settlement. It will send notices to its 87,000 merchant-customers within the next 60 days that they may, if they wish, offer discounts to people who pay cash. To Consumers Union, the settle ment is "a tremendous victory." To American Express, it is merely "a clarification of existing policy."

The real question is whether merchants will choose to give cash customers the discount. They cannot grant discounts only to those customers who ask; under Amexco's new rules, a merchant who offers discounts must offer them "clearly and conspicuously" to everybody. Some may do that --if enough people request it. But many will not, since such two-tier pricing will surely cause bookkeeping headaches. In either case, the new discount is not likely to discourage Amexco's 5 million cardholders, mostly business and professional men and women who travel and entertain a lot. To them, the card provides a record of expenses, freedom from having to carry large amounts of cash, and a means of establishing credit quickly and easily. "Now it is up to consumers to make cash discounting work," says Consumers Union lawyer Paul Gewirtz. "Consumers have got to demand a discount and condition the pur chase on getting a discount."

Next Target. Nonetheless, the Consumers Union case does set an un official precedent that may affect other credit card companies--most notably the bank cards. Holders of such cards are mainly cost-conscious families who are more likely to want to spurn their cards in favor of a discount for paying cash on a major purchase, say, of furniture. Rather than just wait to see what will happen next, Consumers Union is pursuing another antitrust suit against a member bank of the BankAmericard system.

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