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Comment by gymbeaux | Hacker News Reader

I saw one of those “mind blown!” sorts of posts on Facebook the other day that I haven’t been able to really reconcile in my head because it both makes sense and doesn’t make sense.

The gist was that if everybody is paying with credit cards, $50 will eventually whittle down to $0 because AmEx, et. Al. got $50 worth of fees after so many transactions (accountant pays grocer who pays dentist who pays hygienist who pays daycare, etc.). On one hand, what a huge waste of money. On the other hand, I as the consumer typically don’t get a discount for paying with cash, so why shouldn’t I take advantage of the “free” and secure payment option available to me?

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This feels plausible but I think it is really nonsense.

Processing fees are not unique to cash. Banks charge cash processing fees to businesses too, and have for ever. Most shops will deposit all the cash received at the end of the day - perhaps every few days - with a bank.

Yep, dealing with cash comes with significant costs too. It's a hassle to handle much of it

Those cash processing fees would only apply if the cash was repeatedly deposited and withdrawn, and probably only by businesses. The hygienist can probably deposit cash for free, I don't think I've ever paid a fee into a consumer bank account.

Taxes will do the same, though. Employers have to payroll taxes, employees have to pay income taxes. The $50 will eventually all bleed back to the government.

That's true- everyone with a checking account pays a "fee", even if that's in the form of "allowing the bank to loan your money out to make more money"... except for maybe USAA. Their checking accounts are free, no account minimums, and they even pay a little bit in interest. Not just anyone can get a USAA checking account though so I guess that doesn't really count.

So long as you don't use a brick and mortar bank, most banks have interest providing checking accounts, although rates vary wildly.

Savings accounts in particular are egregiously terrible at brick and mortar banks. I made more in interest payments in my first month at Ally than I did in the ten years I had my child hood savings account at Bank of America.

Ally is a special case and you’ll find most other virtual banks don’t match their rates. They’re fighting for customers.

TMobile Money was fighting Ally pretty hard when rates were rising and had me switching money back and forth for a little while. Goldman Sachs traditionally fought with Ally. Doctor of Credit has large lists of smaller banks with favorable rates. It's just the traditional large brick and mortar banks rip off customers who just assume having money in a savings account is a good thing to do.

I wasn’t aware T-mobile had a bank. You’re absolutely right about savings accounts, it took me a while to explain to my wife how you lose money using the traditional ones.

The $50 in fee is paid to the employee at AmEx (99%+ of it), then the last % is paid into dividends and such, which people will use to buy grocery etc. In that way, the loop closes and why the point doesn’t make sense.

The fees get distributed elsewhere geographically, and never make it back into the local economy. Sure, the money doesn't disappear, but the locals are worse off for it.

This is the crux here. And this is what I tell people who are so insistent on highways and cars too - the productivity of your local economy is siphoned off because local coffee shops can’t afford to compete with Starbucks drive throughs so the capital leaves your local economy.

Where I live a Starbucks was opened across the street from a local coffee shop and the Starbucks closed because it couldn’t compete. This is in a walkable neighborhood. Once you get to the ‘burbs and highways it’s all Starbucks.

Those transactions are usually taxed too. And in my experience cash discounts come from off the books transactions, ie tax evasion. Handling cash in business has a non zero cost too.

Because of privacy.

credit cards are pure evil. And yet I have 2. What's worse is that they raise the cost at stores, payed for by people who don't pay them off on time. I'm no socialist, but that's certainly not progressive.

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