Remember cash? It's back in vogue in US marketplace

When James L. Harris, a Washington, D.C., businessman, recently bought a new color TV set for over $300, he found a way to cut the price by about 5 percent. Mr. Harris's money-saving strategy: pay with cash. His savings came to more than $15.

Soon Mr. Harris may not be alone in his buying habits.

Although most major national retail chains are taking a cautious "wait and see" attitude about cash discounts, scores of medium-sized and smaller merchants are jumping aboard what some financial analysts dub the "cash and cash" system -- payment in cash -- followed by the rebate (or discount) in cash.

The reason for the sudden interest in cash discounting is hardly hidden. Over half of all retail sales in the United States -- a multibillion-dollar business -- are done by credit. Yet, given the new Carter administration crackdown on credit cards and installment purchases, many merchants are looking toward discounts as a way of preventing any large-scale falloff in consumer purchases.

"If the current cutback in credit goes on for a long period of time, . . . more and more establishments" will begin offering cash discounts, argues Daniel Cooper, an official of Peat, Marwick, Mitchell & Co., a New york-based accounting firm.

Mr. Cooper, who specializes in retail firms, says that there is "increasing discussion" throughout the merchandising industry about eventually scuttling or reducing heavy dependence on credit cards, particularly "in-house," or company, charge cards. Since many firms must finance customer credit by borrowing bank funds, they are in effect forced to pay more for the credit than they can charge under state usury ceilings.

That means, he suggests, that many firms are seriously considering either accepting only the major national bank or travel cards, like Visa, Master Card or American Express, or ending credit card usage altogether.

And that is precisely where cash discounts come in.

"Our customers have shown overwhelming approval of our cash discount policy," says Paul Winston, an owner of Chipp Inc., a New York City men's store. Chipp is hardly a newcomer to cash discounts -- having offered them for almost two decades. Under the store's special sales are held every July and January -- and items carry three prices -- the regular price, the charge card price, and a cash discount price.

'Discounts run about 5 percent," Mr. Winston says, and can "make a sizable difference, running from 10,15, to 20 or so." Not surprisingly, he says, most regular charge customers tend to put down cash on the line during the sales.

In some 94 US cities, meanwhile, a number of savings and loan associations are providing a unique savings program where a discount on a cash or check purchase is automatically credited to the customer's passbook savings account.

Here in Washington, D.C., the program, called "Savesystem," is handled through Washington Federal Savings and Loan Association. According to James L. Harris, president of Washington Federal, account holders cumulatively had $32, 000 in discounts averaging around 6 percent credited to their accounts during the first three months of 1980 alone.

Mr. Harris, who purchased the color TV set for his office, was just one of these many customers.

All told, he says, more than 2,400 firms are participating in the rebate plan. The average discount is around $2.66.

A number of restaurants, particularly in the New York area, are also known to discreetly offer cash discounts on requests for expensive dinners.

Will the discount system catch on with the major retail chains?

That, financial analysts say, remains in doubt for a number of reasons, ranging from the top-heavy dependence of national stores on credit cards to already tight pricing policies.

Between 50 and 60 percent of existing sales by firms like Sears and Montgomery Ward are credit linked.

Moreover, the "discount" chains -- like K-Mart., the nation's second largest retailer -- have already largely done away with their own internal credit cards. "Discounting is K-Mart's only thrust," says Herbert S. Christner, assistant treasurer for the Michigan-based firm.