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I'm staying in Cabo San Lucas and have noticed that businesses here tend to either be cash-only or provide big discounts when paying in cash. For example a whale-watching company mentions that:

We accept VISA, MC, USD, Mexican Pesos and Euros cash only. We offer a 15% discount when paying for your entire tour in cash.

Same with a diving company:

Payment Methods: VISA, Mastercard, PayPal & AMEX 10% Discount for Cash (USD, MXN, CAD).

Same with a sightseeing company:

You may pay directly on the day of your trip by MasterCard, VISA, travelers' checks or cash (10% discount for cash payments).

Is this because banks charge so much for card transactions in Mexico? Or does this happen because of tax issues? In the US I wouldn't be surprised if a business offered a 1-5% discount for cash, but 10% or 15% would be highly unusual.

JonathanReez
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2 Answers2

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There are a bunch of legit reasons

  • Save Credit Card Service fees (2%-3%)
  • No risk of having to chase or eat a bad payment.
  • Less paperwork

However, I suspect the main reason is the same as in most other places in the world: To put it delicately: Cash allows for "more creative" accounting practices which may or may not be legal and may or may not result in substantially less tax payments.

Even in the US it's not uncommon for a contractor to give you 10% on a full cash payment.

Hilmar
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Please note: when you pay for some service/goods a certain amount X, the profit (so the money that actually stay in the pocket of service/goods provider) is on the order of 8-10% at best. This X includes VAT that the shop must transfer to the Government. After taxes, let's assume the net profit will be ~5%.

The credit card fees are calculated on X (even on VAT!), not on the profit. If credit cards ask fees on the order of 1-3%, it means that they are taking something between 20% to 50% of the net profit.

EarlGrey
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