Surcharges and Discounts Can’t Overcome Payment Inertia

Why It Matters

Understanding payment inertia helps merchants design realistic strategies that don’t rely on modest price incentives, which rarely change consumer habits. The findings also highlight broader implications for pricing policy and consumer protection, as surcharges and discounts may not achieve intended cost‑shifting outcomes.

Summary

The Federal Reserve Bank of Atlanta’s new report shows that merchants’ attempts to shift consumer payment behavior with cash discounts or credit‑card surcharges have little impact because shoppers stick to their preferred method out of habit. Discounts only influence cash‑oriented buyers on very large purchases (over $1,000), while credit‑card users continue to use cards for roughly 75% of transactions regardless of fees. The report finds that the most effective merchant lever is to simply refuse card payments on low‑value sales, though this is a drastic measure. Experts like Don Apgar warn that penalizing credit‑card users can alienate high‑value customers, underscoring the power of payment inertia.