This isn't obvious, but it's true.

I pay off my cards every month (my wife is a fantastic money manager), so I don't pay credit card interest. But that's only the surface.

Retailers have to pay to the CC companies a fee (it varies by card type, your processor, and what level of detail you provide to the company), something on the order of 2.5%. Even if you pay 0% interest on your card, you're still paying higher prices at retail in order to cover those card fees.

I have a card that gives me 1% back. I wonder if that's enough to overcome the higher prices due to the card fee. I guess that depends on how many people are paying cash or PO, and my guess is that for most retailers that's a minority, so I'm probably paying more even in this case.

Of course even though you pay nothing for your card and get a cash rebate you also receive a service from your credit card company in the form of hassle free returns and dispute resolution. This is, IMO, worth the nominal carry over effect that it might have on retail prices.

Try asking for a cash discount when buying things. A lot of establishments will do this, just to avoid the credit card fees.

At least a few years ago this was against their contract with the CC companies (which isn't to say people won't do it under the table, they'll just be quiet about it).

I don't think this is true. They're not allowed to tack on a CC surcharge, but a cash discount (while accomplishing the same thing) is OK.

I didn't believe that cash discounts were OK, so I googled it and found http://fso.cpasitesolutions.com/premium/le/06_le_ic/fg/fg-me... which verifies that you're right.

Huh, you are in fact correct. I had stored in my brain the intended effect of the agreement but not the actuality.

Merchants pay higher fees on rewards cards.