Cash, card or app? The coffee choice worth $118 a year

A flat white can now have three different prices depending on whether you pay with cash, card or order through an app. Here's how much Australians could save, or lose, on their coffee habit.

Cash discounts are well and truly back after Australia's card surcharge ban came into effect on October 1.

Cafes have led the way, with many charging customers less if they pay with notes and coins.

It comes as coffee prices rise and some cafes introduce extra fees for customers who order through an app.

As a result, Australians can now pay dramatically different prices for the same coffee depending on how they order and pay.

For regular coffee drinkers, the difference can add up quickly. Money's analysis found that buying three flat whites a week via a café app could cost more than $118 extra a year compared with ordering in person and paying cash.

Why cash discounts are suddenly everywhere

"Prior to October 1, it would be hard to find a restaurant or cafe that had a published cash discount," says Wes Lambert, CEO of the Australian Restaurant and Cafe Association (ARCA).

"However, we're getting reports from members and first-hand experience that about 10% of the industry has taken up some sort of cash discount".

Lambert expects more businesses to get on the cash bandwagon in coming weeks, once they get their next bill from the financial institution which operates their card terminal.

"Many businesses will be shocked when they get their first [post-surcharge ban] merchant fee bill," he says.

"Their overall fee will likely be 1% or more of their revenue and we believe many will then implement price increases and cash discounts."

How much can cash really save you?

Lamberts says most ARCA members who have introduced a cash discount have put it at 2-5%.

Five per cent seems a popular figure: this was the markdown of choice for several cafes visited by Money in Sydney's CBD.

Aussies online have also shared images of several cafés spruiking a 5% cash discount.

But some cash users are scoring even bigger savings: there have been reports of some businesses marking down prices by as much as 10% if customers pay in cash.

Why are cash discounts back?

The Reserve Bank's decision to ban card surcharges means businesses like cafes can no longer charge customers extra for paying with card.

But business advocates say the ban has deprived owners of a way of recouping overheads which haven't gone away.

"Small businesses still face costs associated with accepting card payments," explains Skye Cappuccio, CEO of the Council of Small Business Organisations Australia.

"Every additional expense matters, so offering a discount for cash may be one way for businesses to encourage customers to use a payment method that avoids card processing fees."

What the savings look like in dollars

So what does a cash discount actually mean for your wallet?

Small Flat White is an online platform that tracks coffee prices across Australia.

Earlier this week, it listed the average price of a regular-sized flat white as $5.16.

With a 5% cash discount, the average flat white falls from $5.16 to $4.90.

If you visited your café for a regular flat white three times a week, you'd save more than $0.70 by paying cash rather than card.

That may not sound like much, but over a year the saving would exceed $40. Just keep in mind that ATM fees could eat into those gains if you need to withdraw cash regularly.

Some consumers have questioned whether cash discounts are being used to avoid tax obligations. Business groups reject that suggestion, arguing that discounts simply help businesses offset card processing costs.

Why the same coffee can cost you $118 more a year

The cash savings may only be a few cents per coffee, but new app and ordering fees can quickly outweigh them.

The arrival of the surcharge ban has coincided with some businesses bringing in 'platform,' 'service' and other fees for online orders.

Instigators include coffee chains where customers can order their coffees in advance so they can be picked up on arrival.

Such convenience is coming with an increasing price tag: Money has seen cafes whose online order fees can be as much as $0.50.

This would push the cost of your three-a-week flat white habit to $16.98.

Interestingly, these cafes also offer a 5% cash discount, making turning up in-person even more attractive.

Using their online system for a three-a-week coffee habit would cost you $2.28 more than if you were ordering in person and paying cash.

Over a year, that's an extra $118.56 for exactly the same number of coffees, simply because of how you order and pay.

Can you get a coffee discount with PayID?

Cash discounts are legal and businesses can also give customers a deal if they use other payment methods that don't come with card processing fees.

These include digital systems like PayID or QR code platforms.

But Wes Lambert from ARCA says Aussies shouldn't hold their breaths for their local café to start rolling out these payment options.

He says the systems can run on a delay, which can make it hard for businesses to match payments received with sales.

"It's not instantaneous, so they don't instantly integrate with the point of sale software and tech stack of the hospitality business... it makes the reconciliation very cumbersome".

For now, the cheapest way to buy a coffee remains surprisingly old-fashioned: walk in, order at the counter and pay with cash. As cafés adapt to the surcharge ban, the gap between the cheapest and most expensive cup may only grow wider.

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