Cash or plastic?

[moonshadow]

I'm noticing a trend more and more, back east it was starting to catch on in maybe about two out of twenty businesses, here in the PNW I notice anywhere from 50-75% of smaller businesses are doing this...

... charging an extra fee for using a credit card to pay for your purchase.

On the other hand, you have a small minority of businesses (usually in metro areas, I've already run into one in Seattle) where they don't take cash.

The end result is I myself basically carry both these days, a little cash, and of course my credit card.

What I don't understand is why the businesses aren't rolling in the cost of processing credit cards into their product pricing like almost everyone did back in the day? Look, I get it, credit card processors charge a fee for running cards. I know, I used to be a merchant, and I took credit cards...

Here's the thing though, and you'd think most business owners would get it... IT COST MONEY TO HANDLE CASH.

When you deal in cash, you have to pay employees to handle it, deal with the inevitable shortages that come up from time to time, theft, being robbed, handling safe drops, then you have to have your manager or trusted employee cart this cash to the bank for deposit where you and the tellers are all using otherwise valuable production time simply counting greenbacks. Not to mention, for larger establishments, you may even have to pay middlemen like Loomis to handle your cash for security reasons... hell, it cost A LOT of money to deal in cash, seems to be a lot more than the 1-3% your credit card processor may be charging.

When I had my business, I used the Square app to accept credit cards and I loved it. The till could basically be x'ed in a matter of seconds, the less cash there was, the less time I had to spend in the back office counting it, and I always dreaded the possibility of a break-in or being mugged while carrying the cash to the bank the following day.

Credit card processing should be considered overhead, just like the rent, lights, and water.

But hey... if a store wants to penalize me for using my Visa card, then fine, I'll pay cash. Have fun paying your employees $20 per hour to count it, and may you not get robbed... and it makes me harder to track for marketing purposes... though I will miss those credit card points.

By the way, I don't pay credit card interest. I don't even know what my interest rate is, doesn't matter. I pay it off every payday. I just know that three or four times per year, they'll send me an email after making some purchase, usually around $60-$100 asking me if I want to pay that charge with points. I actually profit off of my credit card. I'd kinda miss that.

[shadowfax]

Here in the UK, the bank debit cards which one would use for ATM cash withdrawals are used for contactless transactions in shops, up to £100.
The card is held against the retailer's card machine to complete the transaction.
Above £100, one has to put the card in the retailer's card machine slot and enter the card's PIN number.
No transaction fees are charged by either the retailer or the bank.

In addition, most retailers do not charge extra for credit card transactions either.

A suitably-equipped smartphone can also be used instead of the actual debit or credit card, at most retailer's card machines.

[john62]

Here in Oz, if you use cash, be careful because most shop assistants have a great deal of difficulty working out the change!

[pelmut]

[...]
No tranaction fees are charged by either the retailer or the bank.

The retailers don't directly pass on the transaction fees that they are charged because it would be bad for business, but for small shops the cost of processing cards is a significant drain on their profits. The customer eventually pays but the cost is hidden.

[pelmut]

Here in Oz, if you use cash, be careful because most shop assistants have a great deal of difficulty working out the change!

There are a couple of ways of handling cash, which don't seem to be taught nowadays:

Place the customer's payment where it can be seen, then there can be no dispute about which denomination of note they tendered.  Then, as you give the change, count aloud upwards from the cost of the goods until you reach the amount tendered. it is much easier than trying to do subtractions and both you and the customer can be sure it is right.  It also saves time because you are both counting together -- if you count the change mentally and then hand it to the customer, you may have to wait while they check it for themselves.  Finally, when everyone is agreed the correct change has been given, place the customers payment in the till.

When cashing up, spread the coins thinly on a flat surface; then using one finger, flick all the coins of one denomination off the edge into your cupped hand, counting as you go. When you have (for instance) 10 coins, place them in a pile at the side and carry on counting the next pile. You can easily check for mistakes because an incorrect pile will be higher or lower than the others. When enough coins of one type have been pulled out and piled, start on the next denomination -- and so on. Adding up the piles will then be quick and easy.

[rode_kater]

My guess that most people end up paying with a card even with the extra surcharge. My understanding of the US is that the price you see on the shelves is not related to what you pay anyway because the sales tax gets added on later. That extra % or two isn't going to make a difference.

Europe's a bit different because merchant fees are capped at 0.3% for credit cards, so you don't see the distinction made as often. Still more expensive than debit cards here which are on the order of 6c flat fee per transaction. The only time I've seen the surcharge recently is buying plane tickets, there even 0.3% is significant.

[Jim]

cash-is-king.jpg

Spending locally, with cash the money stays local. Fifty transactions from store to store and the money is still local. With plastic, the banks get a percentage, say 1%, each time. With 50 transactions the banks own about half the money.

I understand that charging a surcharge for plastic could discourage customers. A discount for cash would be better.

[Bill]

My wife and I both have cards that pay us a "bonus" for using them. Depending on the card and the product it is usually in the 2-3% range. For example, my PayPal M/C pays 3% on PayPal purchases and 2% on everything else with no limits or restrictions. My wife's Amazon card pays 5% on Amazon purchases. When we dine out we will pay the check with a CC but leave a cash tip for the server or bartender.

Example from Capital One: "Earn unlimited 3% cash back on dining, entertainment, popular streaming services and at grocery stores, plus 1% on all other purchases. Earn 8% cash back on Capital One Entertainment purchases."

[6ft3Aussie]

Similar but yet different to the US in some areas down under, where due to the fees charged by the banks and credit card companies, there are many businesses that will not accept EFTPOS or debit/credit card payments for transactions less than about $10, (advertised by a sign that says " Minimum EFTPOS $10") so up to $10 cash only.

There are, however, some businesses, notably restaurants in the where the Asian (Chinese particularly) that only accept cash, no EFTPOS transactions.
This makes their transaction records harder to verify for tax purposes.
There are moves afoot by the government to discourage cash as all electronic transaction leave an audit trail that is visible to the tax office...

Quite frankly, what I spend my money on is my business, so often I'll use the ATM and pull out say $200, but only my bank's ATM so I don't pay fees around $3 just to put my card into someone else's ATM.

[Seb]

Cash is dead here. I use my card for everything. I have a wad of cash in my wallet that is basicly unusable, most places dont take it, large stores are all self check out and small ones opting instead for an app based direct transfer solution(small vendors and people-to-people).

I can buy lottery tickets for the cash, maybe the pizzeria still takes cash but not even the bank wants to handle it anymore.

Edit, vendors are not allowed to take an additional charge for using a card, nor a minimum sales value i belive.

[geron]

A fact that card refusniks often overlook is that handling cash involves costs and takes time: it all has to be counted, accounted for and carted round to the bank.

A few years ago I was involved in installing the Square system mentioned by Moon, for a club's self-service bar. It's based on a graphical tap-and-select iPad terminal. What our customers don't see is the suite of accounting and analytical software provided behind the scenes by Square to support the system -- which, as an absolute minimum, spares you the chore of counting the takings. The bar manager can receive a daily email bulletin summarizing the trading position.

Virtually all of our bar customers were quickly coaxed across to contactless payments via card or mobile phone. We were just getting into Covid time then, and fingering filthy lucre was decidedly hazardous. But I can't imagine that anyone would now want to go back to cash. Our users no longer have to fumble for coins and banknotes and they can even have their bar receipts sent to them immediately via email or SMS, free of charge.

Incidentally, payment handlers differ in their charging structures. With some, there's a flat fee plus a percentage of the transaction. Square's percentage is a little higher than some; however, it does not levy the flat fee but instead sets a minimum transaction total -- currently just £1. We find this structure works well for us, because it doesn't make smaller transactions unduly costly.

[phathack]

A friend had a Bar/Restaurant and was all Cash.
They were cash since His Dad started the place in the 1950's
He put in a Local ATM so that people could get cash to pay the bill.
On top of that, he got 30% of the ATM fee.

He retired when the Gas Station next door made him an offer for the land that was too good to turn down.
He took the offer and moved out of the city to a small town where the living was cheap.
Sadly, he passed away July 2023.

[alexthebird]

For small business, cash has the advantage of being easier to hide from the IRS when it comes to tax time. Payments on credit cards can be easily audited and shown to be relevant business income. If someone is doing most of their business transactions in cash, it is a lot harder to audit business income and to keep business transactions separate from personal transactions. So even if there is a transactional cost for handling cash, it may be offset by the tax advantages of doing transactions that are difficult to trace.

[Jim]

"If there is a transactional cost for handling cash", then it stays in local wages, not going to enrich the bankers.

[geron]

"If there is a transactional cost for handling cash", then it stays in local wages, not going to enrich the bankers.

That's wishful thinking, I'm afraid. A trader taking cash must count it up laboriously each day, using the procedures outlined by pelmut above, as well as checking the sums tendered at each transaction -- which all adds up to time that could be devoted to other activities, whether profitable or merely recreational. And the cash must be secured from theft all the time until it reaches the bank. Taking a contactless payment, by contrast, is instantaneous, automatic and secure.

Incidentally, in the UK the limit for contactless payments made via a smartphone and authenticated by fingerprint is much higher than £100. In fact, there doesn't seem to be any limit.