Why the US keeps minting coins people hate and won't use
bbc.co.uk
bbc.co.uk
From what I heard the Treasury doesn't lose money with the direct-ship program, at least with accounting on paper. It's kind of weird. They create the money out of the thin air using some metal. We bought them at face value using our money. The cost of the coins would be the metal, the minting process, plus the shipping cost, which is less than the face value of the coins. It defies intuition when it comes to the fiat money creation process. Of course coins out-last paper money many times and have long term cost saving result for the Treasury.
See especially the "Seigniorage Today" section.
Head down to Ecuador and pay for something with a five dollar bill. (Ecuador, El Salvador, and a few other places use the US dollar as their official currency). You'll get dollar coins in change.
It works great. Coins have value. Especially since nobody uses pennies down there. Everything costs a multiple of five cents. Hopefully this little bit of 3rd world efficiency will trickle up the the 1st world.
Looking at the title provides clue to human behavior: then there is no need to ask "why do people resist accepting what they hate."
Simple principles of shaping behavior suggest one simple principle: reinforcement: offer discount for using coins (i.e., $1.01 of merchandise for a $1 coin) or transaction penalty for paying with notes.
When you buy something in a store there, they pretty much ignore the two least significant digits. They make up the rounding error for you by giving you a handful of mints.
In Egypt you can get 25 Piastre notes, they are worth about 4p in Sterling. Local cab drivers sometimes refuse to accept them.
Bus driver in England did not accept my £5 scottish note.
As the article points out this would take "an act of Congress." There is an excellent reason that "act of Congress" is a figure of speech meaning ~Herculean feat of struck-by-lightening probability~
As a side benefit, a pocket full of coins can mean you're carrying around 10+ EUR. No wallet needed at all!
Et voila, you can always pay exact change for any cent value with only 8 coins.
Switzerland seems to have this figured out as the smallest coin is 5 centimes. To the average American who doesn't like dollar coins, imagine their reaction when they find out that Switzerland has a 5 CHF coin. Their smallest bill is 10 CHF.
But still, not having to carry Euro coins would be great. They are awfully heavy.
That cost is factored into your purchase somehow, and if it isn't and it's a problem to the retailer paying the fees, it will be eventually. Transaction fees seem insignificantly small, but they'll easily chew into any profit margin and more for a payment as small as €5 (as small as, not less than). This is why at least in the US, lots of retailers try to enforce minimum purchases, tack on surcharges, and have differing prices for card and cash payments even if it's against the terms of their merchant agreement.
There's also that whole aspect of dealing strictly in cash being convenient for tax fraud and purchases that can't easily be traced. Those two are possibly the biggest stumbling blocks for an all electronic currency. Case in point: I love the idea of going that way because it makes my finances easier to manage, but I hate that my CC company already tracks what I buy with my card to determine my credit-worthiness and more that has nothing to do with fraud monitoring, and it's frankly none of anyone's business what I buy with my own damn money if I have had no trouble paying my bills in full on time for years on end.
There's so many pros and cons here, I really don't know which way to go.
Debit card payments (in Germany at least) are as free as it gets for the merchant, and they get their money immediately (not several days later like with credit cards).
(I still prefer cash.)
That being said, speaking from personal experience owning and running retail stores, credit cards are a pain to accept because of the transaction fee vs. microtransaction issue when people decide to pull their credit cards out for all of a $2 purchase, but more customers spend more money usually because they didn't have any cash on them. What can you do....heh.
Do you have any experience with debit cards vs credit cards?
> ...update from the real world.
All things considered, I don't think there's anything fundamentally different about physical purchases vs. online purchases made with a credit card. The only big one is that micropayment systems and fees aren't really in place for brick and mortar retailers that might struggle just to accept cards in the first place, whereas it's becoming more and more common online because people are buying 99 cent songs and apps all over the place. It needs to happen for the former because people make 99 cent purchases everyday anyway (usually combined with something else, or else they're paying with cash...hopefully), but that's a problem that hasn't even been sufficiently solved in an all-digital world that loves the idea but can't easily do it because of all the damn fees.
However, because of the Interac system's flat fee some businesses will give you a 2% credit for using a debit card over a credit card.
Here in Canada we have a $1 and $2 coin and I find it saves a lot of hassle, I can pay for a lot of things by just grabbing my change. I don't like taking my wallet out in a crowded area when I've got a couple 100 dollars in there.
There is a lot more to the cost of accepting credit cards than just the transaction fee, just as there are costs of accepting cash. It's just that the benefits of accepting cash (i.e. tax fraud as I mentioned above) is a lot more appealing than accepting card payments to many businesses. But I digress...
EDIT: There's more details here:
http://www.cutimes.com/Issues/2010/August-11-2010/Pages/New-...
To continue addressing it, credit card processing does not end at a card swipe. Unlike for internet retailers, brick and mortar can have more steps to take to complete a transaction, and routine things like tip adjustments takes just as much time as collecting and moving pieces of paper and metal.
Other fees collected in the process of accepting credit cards can be just as ridiculous as the fees for hiring an armored service to take care of the cash, or the time/effort required to go to the bank. Or employees stealing cash.
It's ultimately difficult to determine if credit cards are in fact cheaper than cash in a broad sense, although that's something you usually can figure out on a per-business basis.
see this, for example:
Or one of the latest bits of news from here in the UK - credit ratings firms checking benefit claimant spending looking for fraud:
http://www.bbc.co.uk/news/uk-10922261
You almost certainly don't need to be committing fraud to attract an investigation and all its hassle.
See http://www.govtrack.us/congress/billtext.xpd?bill=h111-627&#... and http://www.federalreserve.gov/BoardDocs/RptCongress/creditca...
tl;dr off the top of my head: Congress/POTUS passed a law last year that included commissioning a report on whether or not creditors were actively profiling, and how far it went. The FRB eventually found that most of the creditors in the US applied this kind of profiling to the majority of CC holders, but only a tiny fraction of a percentage were directly affected by it. It was also pointed out that the use of this information to track things like fraudulent transactions probably outweighed many negatives of tracking this information for other uses as well, so limiting the profiling would probably be a Bad Thing. But they didn't have enough information to determine if this was overall a negative enough to justify restricting it. And that's kinda...scary. They may not do it now, but what's to stop them from doing it in the future without you fully aware of what's going on?
Eventually I found out why they did this; so people had no credit history could get a card for work.
Why should I have a physical store of value, when I can trust Bank X's database?
Also, now all transactions can involve at least three parties, instead of two.
When I was traveling in Europe I really liked having change that was actually worth something. I especially liked the English Pounds because of their heft and the sound they made when clinked together in the hand.
I love the idea of $1 coins too, but I think they were badly executed in the US for a long time where the $1 coin was not much different in look and feel from a quarter. Nowadays it's really only that whole thing about retailers not wanting to accept it/customers not wanting to use it.
I think the US should make a huge push towards getting rid of the $1 and $2 bills in favor of coins. There's so many positives to this I can't even begin to imagine (for one, not having to carry around $10 worth of quarters to feed parking meters for a single hour where I don't necessarily feel like swiping my credit card...).
Well … there’s your problem.
A friend worked in a pub where they had always had a Scottish £5 note in the till to give as change. More often than not the customer would just put it straight in the tip jar.
Edit: I am wrong about the concept of legal tender, and smazero is right. Interesting. Check out the few paragraphs beginning: http://en.wikipedia.org/wiki/Banknotes_of_the_pound_sterling...
For example in the UK no coins are 'legal tender' as they can be refused as payment for a debt, but still all shops will accept them as they have a fixed value relative to legal tender.
Alternatively my watch is not legal tender, but if I offered it to a shop keeper in exchange for a newspaper, there is nothing stopping the shop keeper from accepting it.
The EU is better, but I find Switzerland the best so far. No bill smaller than 10, all notes are different sizes so you never accidentally pay with a 100 instead of a 10. A nice big 5cf coin (it's cool to be able to buy a new DVD with 3 coins or less) and no pennies. There is a .05 coin but it's rare, most prices are to the nearest 0.1. Every time I go back home I remember how painful the US system is by comparison.
Back 30 years ago I longed for the Washington Metro Farecard machines to accept them--in those days you about had to send your bills had to be all but starched and ironed before the machines would accept them. The technology improved tremendously, but as far as I know the machines still don't accept dollar coins.
I was sure that this would be about pennies. Sure, you get them as change but I've never spent one in my life.
Besides, if we got rid of the penny and nickel, the size of the dime would finally actually make sense.
Sometimes I think we'd be better off eliminating congress...