Over the past few years, we've asked for a cash discount on a few larger purchases.
- A local building supply store offered us a 4% discount on vinyl siding for paying in cash (which is probably pretty close to the amount they would have had to pay in credit card processing fees).
- A well repair company gave us I think a 3% discount for paying in cash (paying by personal or certified check was the quoted price, cash was a 3% discount, credit was a 3% surcharge).
- A gutter company gave us a 30% discount for paying in cash.
- A landscape company did some tree trimming, and they gave us a 10% cash discount.
We're currently in the process of getting estimates for a major project, and I've been inquiring what sort of cash discount they each offer. I don't want to hire someone that's trying to get around paying insurance, taxes, workers comp, etc. - but I think a cash discount is a legitimate thing. It costs companies money to pay credit/debit card processing fees, they are accepting a risk for chargebacks/reversals on credit cards (for fraudulent use on stolen cards), on insufficient funds or stop-payments on personal checks, forged checks, etc. Paying in cash on completion gets the money in their hands, and eliminates the need to potentially send out invoices or spend time on collections.
But it's a risk for the homeowner, certainly. On the job where we hired the gutter company, we made sure that everything was on paper. We had an official estimate/quote, we didn't make payment until the work was completed to our satisfaction, we got a receipt and an unconditional waiver of lien. We didn't exchange funds in front of a notary or banker, and we didn't have the waiver of lien notarized, but we also weren't talking about a lot of money either.
Now that we're looking at some major work items, I'm not sure whether I want to pay in cash. Truthfully, I hate that the credit card companies make so much money off each time I swipe a card, and ultimately I'm paying for it with higher prices. I'm okay with paying taxes, because the money we pay in taxes means more money spent on public services that ultimately pay our salaries (education, public safety, infrastructure, etc).
I'll take a risk on small jobs, but I don't want a shady contractor to try and come back after us for more money down the road. I'm not hiring anyone that I don't trust, but you never really know either. I'm also not entirely sure what the legal ramifications of paying in cash are - cash is legal tender, but I don't know if I would need to get into issuing a 1099-MISC or various IRS forms once I exceed a certain dollar amount. I always get receipts, and once went so far as to get a signed waiver/release of lien, but I don't want to deal with finding a notary and having everything witnessed & notarized. I've also heard conflicting statements on whether paying by check is sufficient to get a cash discount (since they don't have to pay the card processing fees), or if it has to be greenbacks (since checks take longer to clear, and have a greater chance of being fraudulent). And certified checks are somewhere in the middle - but on at least two occasions, certified and personal checks were not accepted for the cash discount price. (At the time, both places told me that there was a cost of doing business for them to accept checks: recording relevant information, bank fees for handling/cashing checks, the time to clear, and the time for an employee to go physically deposit & then withdraw the money)
Does anyone have experience with cash discounts for home renovations or other projects? I'd love to hear about your experiences.
