Oh that’s a good one.

“You have obviously never owed a business that takes cash, credit and debit cards. You pay fees for depositing cash into the bank. You also pay fees for each credit card and debit card transaction plus a percentage of the sale price.”

While this is true for a small business, consider that cash management does NOT scale well for medium sized or large businesses.

For example, I would imagine that administration of this blog is 90% deal with “people problems”.

In a medium size, chain store or large corporation .. the costs of managing physical cash are enormous in both personnel, complexity of procedures and management.

This is why large employers in recent years have taken steps to make everything electronic that they possibly can, from the banking industry doing instant check cashing to paying employees without checking accounts via cash debit cards. This goes for things like government benefit payments as well.

The cost isn’t some fee a bank charges you, it is the management of the people that screw up and the value of streamlined business practices where less problems occur that cost a lot of time and money.

1) Who pays

2) How much

As pointed out, handling cash does cost a lot more than handling debit or credit card purchases. That though is a cost of doing business.

Credit is great, if you pay the bill at the end of the billing period. The price of all items in this area reflect the additional cost of handling credit, even if you buy with cash.

I tend not to shop at stores that don’t accept credit card purchases or try to charge a fee to use them. For small businesses, that is simply a cost of doing business. If you don’t want the added cost, don’t accept credit cards. Costco accepts AMEX only so I have one and use it anywhere it is accepted. I pay the balance monthly so there’s no interest and I earn a sweet 1-3% cash back. One of the best features of the card is buyer protection that increases the warranty by at least a year. My Costco also recently stopped accepting their own cash card at their deli counter. I used to buy the cash card to keep with me in case I wanted something to eat or drink. They said it was costing too much in fees to accept the card at the deli where purchases are smaller in value.

>>Note that in many places (California, for
>>example) it is illegal to charge a fee or
>>higher price to the customer for using a
>>credit card, but it IS legal to offer a cash
>>discount.

Well. Now THERE’S a meaningful distinction!

#10 Are cash customers subsidizing the credit customers?

Not really. Consider how much less business a merchant that didn’t take credit cards would get in the marketplace. The increase in sales volume helps keep prices down for everyone. Note that in many places (California, for example) it is illegal to charge a fee or higher price to the customer for using a credit card, but it IS legal to offer a cash discount. Still, very, very few merchants bother.

And, banks do charge customers who move a large volume of cash in or out on a regular basis. Then there’s armored car service, if needed…that gets very pricey for merchants, but it beets getting robbed or killed.

FYI, American Express charges a fee much higher than Visa or MC. That’s why many places don’t accept it.

@moss – when you use the debit card with a pin (like to get cash back) the fees are usually lower and are usually just a fixed transaction cost, instead of a percentage fee and a fixed fee that is charged when the pin is not typed in. Walmart and Visa had a huge fight a few years ago over Walmart’s right to steer customers to type in the PIN – http://tech.mit.edu/V123/N22/debit_22.22w.html

@hmeyers – thats a little harsh, the website isnt “lying”, its just mashing up and presenting data that already exists. Obviously there are also costs to handling cash (and checks). The website doesn’t have any incentive to lie since it’s not like it has a position.