"They just pocket the extra" is another way of describing a business' profit margin. The point here is in order to pocket enough extra to stay in business, they

"They just pocket the extra" is another way of describing a business' profit margin. The point here is in order to pocket enough extra to stay in business, they need to increase prices in order make up for the additional cost of credit card transactions. They don't and can't give you a solid 4% discount for cash payments (or a credit card surcharge) because it is generally against the terms of their merchant agreement and they would be at risk of losing their ability to process credit card transactions altogether. My original comment was merely reflecting on the fact that the perceived upside of getting rewards is dampened by increased costs that are passed all the way back through to the consumer anyway.