I have seen this argument a lot, but whenever I see a separate price for paying with cash versus paying with credit cards, the price for paying with cash is always lower.
Cash allows the merchant to pocket a lot more by evading taxes on the income.
The same mechanism works the opposite way for larger employers, where electronic payments cut losses from theft, and the costs required to prevent the thefts.
True, but the merchants with separate prices tend to be smaller organizations, since they need to fly under credit card processors' radar to do this. For a mom and pop shop, they may be willing to do the extra labor to make back the 3%, even if it's not something that would make economic sense to pay an employee to do. (Similar to how it's cheaper for you to mow your own lawn on the weekends, even if the money you save is less than your hourly wage at work.) Or they may view labor as a sunk cost and see cash handling duties as a way to decrease idle time for staff.
