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Of course there's always some cost in handling payments. Cash also has costs for the merchant---somebody has to bring all that cash to the bank for example.

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.)

There's ups and downs to all payment methods. Cash can be reused to provide change to other customers, and to make smaller payments. Just like credit card transactions can be used to pay for larger payments to providers. Just like CC processing fees can be a huge pain in the butt for microtransactions, but taking cash and lots of it to the bank is a mindfuck and you decide to call one of those armored courier services instead.

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.

Thanks for the update from the real world.

Do you have any experience with debit cards vs credit cards?

Right now I'm using Costco's partnership with Elavon for credit card processing that also includes debit cards, and it's been a while so I don't think there's anything terribly different about accepting them. It's the same old industry that wants to charge you those transaction fees (that's at least kind of reasonable, you know?..) on top of $185972398742134 in monthly fees for everything from renting equipment to account fees and minimum charges and what have you. I think I went this way because it was cheaper than an Authorize.net+whatever mess (for brick and mortar, mind you) and better than the fees others wanted, on top of my spotting the brochure while shopping at Costco.

> ...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.

Credit card is a percentage of the purchase price. Mastercard/Visa charge roughly 2%, and IIRC roughly 1.7% on their debit cards. I know here in Canada debit charges through the Interac system are a flat fee between $0.05 and $0.25 and can be charged as a surcharge by stores (however as far as I can tell they're charged full service fees if they surcharge it, like many convenience stores).

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.

That ultimately depends on the merchant agreement. Regardless, it's a percentage and/or a flat fee (and usually the flat fee that makes no sense for micropayments), and varies depending on other factors (which creditor, what kind of card, etc). But that's not what I'm talking about. Typically in the US the merchant is responsible for paying all fees and is not allowed to explicitly charge the customer for it in any extra way except through methods like "cash discounts". So the customer will pay for this some other way (like raising the price of the product). I guess that's the difference I'm nitpicking about here...just as ridiculous as it is ok to provide cash discounts but not credit card surcharges, it's ridiculous to claim you're not paying anything for those additional fees, because retailers that have to deal with the possibility of micropayments aren't exactly oblivious to the fact that a percentage+flat fee just killed their profit on a $2 purchase.

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...

They are factored in, alright: cash users subsidize credit card users. And because of the income profile of cash vs credit card users, it amounts to a subsidy of the wealthy by the poor.

EDIT: There's more details here:

http://www.cutimes.com/Issues/2010/August-11-2010/Pages/New-...

I think the opposite: credit card users subsidize the use of cash. I hardly believe the former can be more expensive than the latter – if you take into account all the physical effort required to replace / collect / move around the pieces of paper / metal.

I addressed this in http://news.ycombinator.com/item?id=1591129.

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.

You're probably overlooking the portion of fees that credit card using customers can reclaim via cashbacks and rewards.

Well, I was talking more from a theoretical point of view (plastic/virtual money vs. cash). The current credit card model surely has its issues.