Pay cash on Small Business Saturday. Texas restaurants will thank you.
Small business Saturday is just around the corner, and some businesses are telling shoppers the best gift for them is cash.
Paying with cash would help businesses offset credit card processing fees that eat into their razor-thin margins, said the Texas Restaurant Association (TRA), representing the largest private employer in that state. Credit card fees now average 2.35% of every sale, totaling at least $187 billion nationwide, and can consume more than half of a restaurant’s profit on a $100 ticket, it said.
Instead of passing on costs to customers via a credit card surcharge as many businesses nationwide have done, TRA said it wants to keep costs down for its members and their customers. So, ditch the plastic and pay in cash this year, it said.
“While surcharging is an option, most restaurants are trying to avoid adding new fees at a time when families are already feeling significant financial pressure,” TRA said in an email to USA TODAY.
Why is this so important now?
For decades, businesses have absorbed credit card fees but after years of elevated inflation, labor shortages, and mounting tariffs, they’re struggling and can’t continue to eat rising credit card fees, TRA said. This holiday season may be a last stand for many of them before a traditionally slow first quarter and an uncertain 2026, it said.
“This isn’t just a Texas issue,” it said. “If more customers pay with cash or debit, everyone saves money, and small businesses are able to keep prices stable and stay competitive during a tough holiday season.”
Americans paid between $187.2 billion and $236.4 billion, or about $1,200 annually per family, in credit card processing fees last year, according to the nonprofit Merchants Payments Coalition advocacy group. Credit card processing fees are levied both on the price of the goods or services and any taxes or tips added to the bill.
Illinois became the first state last year to pass major processing fee legislation to exclude taxes and tips from credit card processing fees, but legal challenges have stalled enforcement. Critics argue Illinois lawmakers overstepped their authority and that the law would create “credit card chaos.”
Is cash the answer?
Payments companies argue the opposite is true: credit cards save money and cash is costly.
“Without electronic payments, the hidden costs of cash would drive up expenses for small businesses,” said Richard Hunt, executive chairman of the Electronic Payments Coalition, a lobbying group representing banks, credit unions, and payment card networks.
When Americans purchase with credit cards, they’re saving time and earning valuable rewards like cash back, while helping local stores operate more efficiently to keep prices down, Hunt said.
Research and advisory firm IHL Group data show businesses spend more handling cash transactions. Cash handling can cost retailers between 4.7% and 15.3% of the transaction value compared with $1.43 to $4.40 per $100 transaction depending on the credit/debit or payment processor, it said.
“The fact is, credit cards are the most safe, secure, efficient way for consumers to pay and businesses to collect guaranteed payments,” an EPC spokesperson said.
What’s the real answer?
The long-term answer is competition among payments processors, merchants said.
Visa and Mastercard, which process more than 80% of credit card transactions, “set the rules and prices for nearly every credit card transaction, and those costs ultimately get baked into the price of everything consumers buy — even for people who never use credit cards,” TRA said. “If true competition isn’t possible, then stronger regulatory safeguards are needed, similar to how utility markets are overseen to ensure fair pricing where competition doesn’t exist. We either need genuine market forces or meaningful consumer protections, because the status quo leaves businesses and families paying the price.”
But nothing’s status quo in the payments industry, credit card processors said.
Mastercard has noted previously payment options continue to grow, with buy now pay later, person-to-person and account-to-account services, real-time payments platforms (including from the Federal Reserve), digital currencies, wallet providers, and open banking companies.
Visa and Mastercard also recently offered merchants a $200 billion proposal to lower credit-card interchange fees charged to merchants to process credit cards and end 20 years of litigation. Fees would drop by 0.1 percentage point, on average, over five years while standard credit card fees would drop to 1.25% for eight years. Merchants would gain surcharging flexibility and those that accept one of a network’s credit cards would no longer have to accept all of them. A court still must approve the settlement.
But merchants balk at the proposal. “The miniscule reduction proposed in the settlement on bank fees could still allow Visa and Mastercard to be able to raise their own fees without any limits,” said Jennifer Hatcher, Food Industry Association chief public policy officer.
Businesses need to see a reduction in “a structural cost that has grown so large it threatens the viability of small businesses,” TRA said. “Research shows that some consumers spend more with credit cards, but that benefit is increasingly outweighed by the rising and unpredictable fees tied to each transaction.”
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
