Hacker News Reader

Comment by happytiger | Hacker News Reader

Not using cash means someone gets a cut of a processing fee. Every time, with almost no exceptions.

I’m not down to have rent seeking companies taking a slice of my hard earned money just so I don’t have to manage a few pieces of paper.

You’re generally paying 3-4 percent of every transaction now, as that’s pretty standard for debit cards on businesses, and it doesn’t matter if it’s charged to the card holder or the business, the consumer ultimately pays for it in higher prices. Heck, people pay transaction fees on payments they make the to government because the government won’t take cash.

Do we really need to make not paying invisible fees in everything illegal? Seems crazy.

View on HN

There were already costs. There were always costs and risks associated with cash handling: armored trucks doing cash collection, risks of money in tills being lost. If it really were a lot cheaper you wouldn’t see businesses clamouring to go cashless.

That’s not to say I think cash should go the way of the dodo, but I don’t think there’s that much difference paying g4s to collect your money vs Mastercard.

IMO the benefits of cash are on the consumer, not the business.

Yes there are costs to handling cash. And they are vastly higher than the cost of handling bits. A 3% fee to write some bits to a database is insane. A 3% fee to pay all the people who need to handle the currency in a cash transaction is probably not covering costs.

That’s such a misrepresentation. The credit card fees exist because customers get benefits like delivery insurance, return insurance, holiday insurance, cashback, free credit, etc. If you just want to transfer bits you can do that for next to no fees (in Europe, where digital payments without consumer protections are common).

Cash back? Attention is finite and I don't want a payment processor forcing me to pay a fee so I can turn around and try and earn it back. How about lower the fee and let me keep that 1%?? Then I can earn interest on it for the month, not them. And then I don't have to read additional terms and conditions, use it or lose it, book travel through their marked up garbage store, etc. It's insane to me that you'd defend cash back as some kind of advantage to consumers when it's anything but. It's a crappy product that you can choose to avoid but I want the up front transaction fee reduced by the same amount.

Mine is just literal cash I can apply to the balance on my card. Obviously the fact that cash back exists means that the card companies are making even more money on the fees. However, since most stores charge an identical amount whether you use CC or cash, everyone is collectively paying it and you might as well get the cash/miles/rewards back.

The FCBA coverage, on the other hand, has some real value. That said, even though I have used it a few times, I doubt it has saved me as much as I've spent in CC fees.

They're talking about being able to take cash out at the point of sale, not the shit discount model.

> such a misrepresentation

Exactly. All the talk about fees misses the point because accepting and securing paper money is also very costly.

And the provocateur's stunt in the article also misses the point, because electronic payments for groceries aren't a dystopian tyranny no matter how loud he screams about it.

And the crypto skeptics are missing the point when they say you can't buy a coffee with bitcoin, because buying coffee is a solved problem, tap to pay with a bank card works just fine.

And the crypto advocates are missing the point when they say that lightning or solana or something else will solve the coffee-buying conundrum because that's not a problem that needs solving.

The real point about cash payments and crypto is whether people should be able to make large person-to-person payments that are not trivially surveilled or controlled.

In a free society, should people have this capability? Or are the dangers of illegal transactions so great that this freedom must be eliminated?

Europe has mostly free and mostly instant SEPA transfers which are one answer. Large payments are easy and cheap, though they are not secret or untraceable. Perhaps that's a reasonable trade-off.

The US payments system is a mess by comparison, where we have no privacy paired with extreme inconvenience. Try to buy a $20,000 car from a private party on a holiday weekend to see how well that works.

>Try to buy a $20,000 car from a private party on a holiday weekend to see how well that works.

I’m not convinced that spur-of-the-moment, trustless private-party $20,000 transactions are a significant problem.

Every system has edge cases.

Debit cards have the same processing fees, the credit cards are a complete red herring. If anything credit cards are much more evil than just charging the processing fee.

Yeah so you get consumer surplus if you pay 2.5% to a credit card processor instead of paying more than 3% to physical cash logistics. Everybody's happy besides your weird sense of "insane."

Furthermore you get a lot more than just writing a few bits with a credit card transaction. You can bypass the cc companies and cash logistics costs by taking checks. But certainly the revealed preference is to not do that.

3% is insane. As why many sane places in world have set much much lower limits...

I work in a bank and cash handling is a major headache in terms of internal control, logistics, reconciliation and AML. It's a large extra cost.

It is much cheaper for the bank and customers to use cards, but where I live the banks own a payment network that does not involve visa and mastercard so the cost is much lower and there is no rent seeking so card use have no fees.

We also have an app for sending "cash" for free to friends, family and businesses that under the hood are just instant bank payments between the accounts.

The issue is, whilst I’m sure that cards are cheaper overall, they present a serious burden for people who can’t use them: unbanked people for various reasons, older people, children etc.

Older people/Children are not a problem. I've seen both using digital payments for a long time.

Unbanked people is more concerning, as unbanked people include political enemies of the state. The centralisation of power that digital payments allow is concerning.

The other thing which isn't mentioned in this comment chain is that a reason credit is cheaper is that your transaction data is harvested.

Children and old people here all use cards or apps.

And derisking is illegal, so you have to provide a bank account and cards to anyone who wants. The high risk customers just need more follow-up on terms of AML.

Where are you based where derisking is illegal? Here in the UK it makes the news fairly frequently when someone notable becomes unbanked because of CIFAS or SARs or similar.

Also, I wasn’t able to get a debit card until I was 12, but perhaps that has changed over the past few decades.

I live in Norway.

My kids got a card at around 5, but they are older now. Not with visa/mastercard of course :)

Sounded like Italy. Same exact situation. The interbank payment consortium even created a cashless payment system called “Satispay” that lots of consumers and small retail businesses use on a daily basis.

Hmm in Finland it seems there is "Basic" card. Which I think is technically just more limited VISA debit card. Preventing such things as overdrafts.

Every EU country is required to have laws providing for some level of basic account.

I'm in the UK, and while regular banks don't generally provide debit cards at low age, providers like Go Henry specializes in accounts for kids with built in parental controls from age 6. They are effectively prepaid visa cards with app access for parents to top up instantly.

With respect to closing accounts, there are extremely few cases where people can be denied a basic account with the largest banks, but most smaller banks are not required to provide a basic account, and other account types can be denied at will, and most people have other accounts types (there are something like 7 million basic accounts).

It rarely makes the news and it happens all the time, but usually because people don't see fraud as criminal until it catches up with them.

Discussions like this on reddit/HN always get stuck in this loop of people projecting how things are in their part of the world onto the rest of the world and assuming everyone has the same problems/challenges/tradeoffs.

If you’re homeless (and esp. if lacking ID), getting a bank account is a pretty tall order.

Cash is not illegal here, in fact shops are required by law to also accept cash.

However the homeless problem is virtually non existent in this country, same with the lack of id.

It's just so much more convenient to use digital payments that almost nobody use cash anymore.

Some quote! "I work in a bank and cash handling is a major headache". Doubtless but perhaps we should reconsider the larger purposes of the banks in relation to their customers.

The biggest reason for banks to exist is too provide "grease" for the economy, i.e. to connect people with money to people who needs to borrow :)

Most banks here don't handle the actual payments themselves except the biggest ones.

The small "savings banks" like the one I work in doesn't have shareholders either, they are owned by the depositors. Almost every small town and community here has one.

The most valuable service banks provide is not just "matchmaking" lenders with borrowers (an exchange of some sort can do that much more cheaply) or even spreading credit risk across a pool of borrowers (again there are other ways to do that which are cheaper), but maturity transformation: depositors can lend money to the bank which is repayable on demand, but the banks' borrowers are given set repayment schedules.

I do not think so. Otherwise the British government would not have needed to outlaw charging customers more for card transactions to encourage the move away from cash.

I strongly suspect that the reason cash is seen to be cheaper for these businesses is that they don’t report all of their cash income to their tax authority, rather than because cash is actually that much cheaper.

Alternatively, they were counting the time they spent cash handling as a business owner as zero cost, which isn’t really true.

Those are reasons some people prefer cash, but it does not explain the need to ban passing on card fees.

Someone willing to take the risk of the severe penalties for dodging taxes would not be deterred from offering discounts for cash payments because they broke another law by doing so. They can also avoid the law by not taking card payments at all. I have found that many people in businesses traditionally took cash payments do not take cards but are happy to be paid by bank transfer (which is usually free on both sides in the UK if the sender is not a business).

The value of the time spent on cash handling may be very low. What is the opportunity cost of the time if it can be done in otherwise dead time? It is worth what value they attach to it.

They can't just stop taking cards as they would lose a lot of customers.

Most small places not declaring cash want to stay off the radar, they use tricks like using old cash resisters that don't have trackable invoice ids.

Food places are rife with it as they can claim excess food was thrown out as spoiled.

I would argue that cash maybe a little better than cashless because fees are tied to physical problem of moving cash around where as cashless fees are just one board meeting from changing ten fold.

These are even higher for digital, all the associated software development, audits, etc. That processing fee is on top of this, and is easily variable.

You need exactly the same level of software durability for cash handling; see the Post Office scandal, where the computer system was misrecording cash transactions.

If it was cheaper the government wouldn't force you to take part in the scam under pain of death.

Haha, Americans with their 2-4% transaction tax, it’s so funny.

No seriously, when I first moved to the Netherlands I was wondering what kind of backwards country wouldn’t let me use a credit card at the grocery store. And that’s when I learned about how crazy it is that credit cards and even American debit cards have such needlessly high transaction fees.

I use an Visa tied to an American bank every day for groceries in NL. I only have ever had issues using a card at a very small record store, I just make sure to carry 100eur in cash just in case. I do have more issues online when something only takes iDEAL though.

I'm sure you're aware of this - though others may not be: another trick US banks use is gouging you on exchange rates. My bank was charging something like a 0.5% fee visible fee and then an invisible fee several times that in exchange rate gouging. I found trying to use US banks abroad an absolutely painful experience, to the point I swapped my banking abroad which is itself a huge PITA thanks to FATCA and other stuff making Americans borderline persona non grata at most foreign banks.

Banks all over the world make healthy margins on cross-border transactions involving a currency cross. It is not unique to American banks at all.

My EU bank charges less than 1% currency exchange fee. US banks have charged me 5-8%. It's not the same.

No way a US bank charged you that amount unless you made the purchase in an esoteric fashion.

It was not a purchase, it was a money transfer. They converted it to EUR for me at really bad rates. It was not an explicit fee.

Ok well we are talking about something else entirely -- credit card purchases with an FX cross.

You get 95% of it back in the form of rewards, so it's not really a tax at all.

It seems kind of like a scam, though, credit card rewards. I don’t know enough about it, I generally don’t like participating in those sorts of things. Do you have a ref on the 95%?

Let’s just take 95% as a true figure … first of all the 5% you don’t get back is a straight up loss. The rewards you get at the end of the month are fine (eg cash back) but you’ve missed out on earning interest on the money you “get back”

Card network fees (the part credit card users don't get back) are about the same for the European payment systems. For card users on net there is essentially no difference.

The interest argument of course is nonsense because the opportunity cost ia outweighed ~50x by the interest benefit you receive from the entire purchase going on credit vs just the 2% interchange.

“Of course”.

Thanks for responding — can you clarify this interest benefit you are talking about?

You are able to buy now, but not pay until 30 days later, paying no interest unless paid in full. Which means YOU earn interest on your money during that period...

Oh duh! Pardon my ignorance; that makes perfect sense, I guess my mind was elsewhere

If you don't know anything about it, why would you call it a tax?

In exchange for signing away usage of your personal data/legally agreeing to participate in ad targeting.

> I’m not down to have rent seeking companies taking a slice of my hard earned money just so I don’t have to manage a few pieces of paper.

You’re pretending as if there weren’t any costs associated with handling cash. There’s almost always a handling fee if you want to put the cash into an account, which you will need to do if you want to pay people that are somewhere else than you are. If you have larger quantities of cash, you’ll also have to pay for safe transportation of the funds. If you make an honest comparison

I’m not. Visa and Mastercard collected $138 billion in service fees in 2021. They are among the most profitable companies in the world. You’re pretending that cash handling is a binary. You need a blend. For example, after extensive testing we are not going to send wire transfers exclusively in gold bricks. Though the loss weighs heavy on me.

But you should be very careful in eliminating cash.

I assume cash handling fees are made up by banks who want more transaction fees. That’s not a real thing in my experience. I many times have gotten a discount for cash. I have not shopped a few places because they don’t accept cash. But I have yet to be charged a cash fee by any of the banks I use.

And they have insane surveillance data on their customers from doing so. Data that is used for all kinds of unintended purposes.

Cash is also one of the last strongholds left to maintain anonymity and keep purchasing information truly private without handing heaps of data to the corporations that make a buck off your receipts—or worse, to hackers, in the case of a data breach.

To say nothing of the unbanked… which is a massive issue.

If that’s the future you want, we don’t see eye-to-eye. You are giving up a LOT more than you realize.

The fact that you immediately assume that something doesn't exist because you don't encounter it is insanely presumptuous of you.

The entire reason why small businesses moved away from cash is because its cheaper even taking into account fees. Food trucks, popups, small merchant kiosks. Not needing to take cash means far less overhead.

You're more than welcome to argue the benefits of cash transactions and in most cases I would agree. But you should not miss the truth of the situation.

Here, in France, small businesses are delighted when I pay in cash

From what they tell me, that's because: - they get 100% of the money (no tax) - it grants them the right to cheat with tax declaration (which is always good) - it can be quicker and easier than credit card (I'm think of those guys who sells stuff for 5€, for instance)

I believe medium/large businesses loves credit cards, because the people doing the payment are low-waged, untrusted people, who cannot do maths etc (or whatever the reasons managements got in their head) But small businesses ? When you give money to the owner of said business ? They have credit cards because the consumers use them, but they hate them

And danger to employees! My partner used to work as a waitress, and was always very nervous when she had to go home with a days revenue when she was the last to leave.

Electronic payments are much safer, no physical cash someone can steal.

No, it's not the entire reason. If a store doesn't accept customers' preferred payment methods some of them will switch to competing retailers who do.

>Cash handling fees are made up by banks who want more transaction fees. That’s not a real thing. I have yet to be charged a cash fee by any of the banks I use.

That's because you presumably have a consumer account. If you had a business account and were depositing thousands in 20 bills they're probably going to charge you fees.

Remember when banks made their money by taking in as many deposits as possible, and then lending that money out?

> There’s almost always a handling fee

Citation needed. I've been depositing cash for years, with multiple banks, and nobody has ever charged a "handling fee".

> safe transportation of the funds

Yes, a lot of people have this irrational reaction to carrying large amounts of cash, as if your unremarkable Toyota miraculously sports a giant "BRINKS" logo every time you carry cash, attracting the attention of would-be criminals everywhere. I assume you believe that thieves and pickpockets are regularly carrying millimeter-wave scanners to see what's in your pockets, briefcases, backpacks, etc?

>Citation needed. I've been depositing cash for years, with multiple banks, and nobody has ever charged a "handling fee".

It's a fee associated with business accounts.

>https://www.bankofamerica.com/smallbusiness/deposits/resourc...

>Cash Deposit Processing No fee for first $7,500 in cash deposited per statement cycle at an ATM or Financial Center; then $0.30 per $100 deposited thereafter

0.3% vs. 3-4%

>0.3% vs. 3-4%

No, the total costs of handling cash currency & coins for large businesses will still add up to 3% or more which is in the range of the fees of credit-cards processing. Costs of accepting cash also includes:

- paying for armored trucks and security guards to transport bags of cash to the bank

- percentage of cash lost to crime such as

--- employees/cashiers theft/skimming by handling cash,

--- robberies,

--- counterfeit bills

https://www.google.com/search?q=retailer+total+costs+of+hand...

For a business, a true arbitrage of not paying 3% credit-card fees would be convincing customers to pay by check or electronic ACH bank account withdrawal. Those payment methods avoid the costs of managing loose cash and also avoid the fees from the credit-card processors. But they also have the same privacy concerns as CCs if customers care about that aspect.

Time spend managing the tills that you do not either have too much money at one time or have enough money always to give change... Oh and at the end of shift counting the money...

Like today I returned some deposit bottles and they had run out of 20€ bills... Which should be the most common ones. Going on trip so I preferred 10€ bills, but still...

In Canada, from a 2009 article, https://www.cbc.ca/news/card-costs-who-pays-what-to-whom-1.8...:

====

How we pay

- Credit cards account for 31 per cent of transactions.

- Cash accounts for 29 per cent of transactions.

- Debit cards account for 26 per cent of transactions.

So what does it cost to process a transaction? The Bank of Canada survey looked at the estimated cost of processing a $36.50 transaction, which was the median cash transaction in its survey. Costs broke down like this:

Debit card: 19 cents.

Cash: 25 cents.

Credit card: 82 cents.

The study notes that the overall cost of electronic transactions falls as the volume increases, which the authors suggest, may encourage greater use of electronic payments.

====

Square will do you 1.75%, no contract, no fees and now you don't even need a physical reader as you can do contactless payment on your phone. You can get it lower with other providers if you negotiate right.

Nobody is paying 4% for any cardholder-present transactions.

>Square will do you 1.75%, no contract, no fees

Where? A quick search on their website shows 2.6%: https://squareup.com/us/en/pricing#rates

Everywhere, apparently, other than the US. You should fix your banking system.

someone has to pay for our big rewards program!!! :)

often as high as 2-2.5%

Exchanging value between two economical entities using pieces of paper seems crazy when you have better ways.

Try to explain buying with cash in 200 years to someone who never seen it.

What if I need to pay just a little, do I tear a bit of the paper?

No, you can't tear. If your piece of paper is worth too much then the seller gives you other pieces of paper worth less.

Can I throw out the rest of paper after I'm done buying?

Not unless you want to lose a piece of your value.

What if I don't have enough pieces of paper on me?

Then you can't buy.

So I should just carry all my worth in pieces of paper on me at all times?

That's a bad idea because when you loose this paper or it gets stolen or destroyed you no longer own their value.

Where do I get the paper from? Your employer can five it to you every month or week and you hold it in your home. Alternatively employer transfers the value to the bank normal way and when you need paper the bank can dispense it to you through various devices or service points.

Are any of those devices handheld?

Unfortunately no.

What if my house get burned down or robbed?

Then you lose all the value associated with all the papers kept there.

And so on.

Exchanging value between two economic entities using primitive card numbers seems crazy when you have better ways.

Try to explain buying with a credit card online 200 years ago to someone who has never seen it.

You type in about 23 digits (16-digit card number, 4-digit expiry month, 3-digit verification code) to make a payment.

But these digits only change every few years as you renew your credit card. So many parties will learn of your digits and you won't know who leaked them.

The merchant on the other end can take out any amount of money from your account; it's pull-based, not push-based.

The merchant on the other end can trap you in a recurring subscription without your knowledge or make it very hard to cancel.

People have credit limits in the thousands of dollars, and in any single transaction you are liable to lose that much money. Meanwhile, you can't lose more than the hundreds of dollars of cash in your wallet.

You can call your card issuer to dispute charges, but now you're at the mercy of an intermediary.

The intermediary skims about 2~4% of every transaction, for the luxury of being able to spend your own money.

You can't process certain types of transactions in an offline environment, such as debit cards during a power outage or on an airplane (though Wi-Fi is slowly becoming more common).

And you think cash is crazy?

Just yesterday, i went with my friend to some place, we park but the spot is metered, the park meters have been replaced by a “more convenient” digital system, there used to be machines where you could pay and print a ticket, of course this was still inconvenient so the machines were removed altogether and now it’s an app-only system, wonderful but there are several apps for different zones so if you go to an unusual place chances are you need to install a new app then enter the location, the time you want to park, the plate number, a picture of the tag, the payment info, the 2FA code and receive the confirmation. All this replaced the inconvenience of popping a quarter in the meter.

I have almost never done that. I just touch my personal computing device to a payment terminal and it's done.

I agree that giving anyone your card number is insanity. I only did it few times in hotels and it required tremendous leap of faith from me. To be honest I should have gotten plastic prepaid for this purpose.

I don't think OP was arguing to completely get rid of all wired transactions. And for all the points you made you still missed OPs major gripe, paying a third party for every single transaction you make. Wanna give your children pocket money? bank gets a cut...doesn't seem right tbh

But you pay for facilitating the service of value transfer.

If you do it by hand yourself the effort burdens you and the seller.

You might argue that the cost is too much and maybe it should be state run and paid from taxes since it's the state that provides the service of money.

Banks sometimes charge fees to make cash withdrawals from ATMs, even ATMs belonging to the same bank that holds your account (true at least in my personal case, outside the US).

If you are paid via direct deposit, you're financially incentivized to stay cashless. The direct cost of spending via debit/credit card (if one doesn't carry a balance) is zero, compared to the cost of withdrawing cash.

If you want to inventivize salaried professionals to pay with cash, try outlawing fees on ATM withdrawals first.

There are now systems that are far cheaper than credit cards or debit cards. In the US it's called: FedNow. The system enables direct bank transfers in real-time, almost for free.

https://en.wikipedia.org/wiki/FedNow

The support is still very limited, but in India a similar system (UPI) managed to become ubiquitous.

With Visa/Mastercard... debit and credit cards you get some purchase protection. With those direct bank transfer systems you don't.

Have you never done a chargeback on a credit card? With Fednow, UPI etc you can't.

Credit card companies are highly profitable, meaning that people spend significantly more money on credit card fees than they save through purchase protection. So it's not worth it. Especially not in cases where it replaces cash, which also has no chargeback.

The EU has indeed banned most of the rent-seeking on payment cards by setting upper bounds on various fees that can be charged.

The reality is most business prefer the 3% fee because the cost of Cash processing is higher when you factor in Bank Fees, Security, Accounting, Theft, and other factors.

[1] https://www.businesswire.com/news/home/20180130005244/en/New...

I pay a fixed monthly fee for my bank that comes with full access to the interbank payment system. Every business on my country does the same for the other side, and we get unlimited transactions with no marginal cost.

Anyway, as somebody else said, a 3% fee on transactions is just ridiculous. If you get any bit of competition, transaction-value based fees tend to be on the order of 0.5%.

It definitely matters who it is charged to. In almost all cases, it's just rolled into the overall price of the item, which means you pay it whether you use cash or not. It would be very interesting to see if prices for card were 3% higher across the board, if people would still use them as much. I honestly have no idea.

Using debased money (does the paper in the note have any value?) is already submitting to paying seignorage to the issuing authority. There's not escaping it unless you sit on the top of that food chain.

Almost like our govs should create a standard for digital currency with 0% fees involved.

But you know, our governments are fucking useless, so that ain't happening anytime soon.

maybe we should start thinking of payment infrastructure as a core public service if we move away from cash? Just like there is an official entity that can "print" cash, we should start doing the same with digital payments (I believe the EU is doing somethig similar). That way you don't have a duopoly taking a cut of every transaction.

This is called CBDC (Central Bank Digital Currency) and it is being worked on. But there are concerns about state surveillance and misuse.

CBDCs are a pandora box that once opened will not be closed. At best they will use for massive surveillance which is already scary.

Governments should be running their own digital counterparts to cash, but they need to add the anonymity of this cash into the constitution. Otherwise the security apparatus is going to ruin it for everyone.

... because the security apparatus is definitely held in check by the Constitution?

At least it could theoretically be. Anything outside of that would definitely not be. And at that point the digital cash equivalent will not be considered private. The government has to go above and beyond for people to believe the digital cash would preserve their privacy.

Maybe the government should limit the cut that can be taken to something like 1%. All it would require is some legislation,

And yet, when last did you get a 3-4% discount when paying cash? I remember that from the 90s and 00s.

In fact, I have seen some small places ask a 3-4% surcharge for cash payments, because banks don't process cash for free any more.

I have never seen a place with extra fees for cash. However I know many small shops that give discounts for cash or only take cash for small purchases.

A lot of places around here charge a bit less for cash payments.

Cash only restaurants are often 10-20 percent cheaper than comparable restaurants.

That would be because at least some of the cash bypasses the cash register and the tax report.

Edit: alternatively they might not have same profitability requirement as other restaurants, because a cash-only restaurant is perfect front for money laundering.

And they're probably just not comparable restaurants on average.

My barber only takes cash. $18 for a standard haircut.

That's not because of card fees but because of taxes. They can underreport their cash income, but can't do that if the bank and card processor are involved.

Had some fun with the thought of a “Standard Haircut”: https://chat.openai.com/share/cd2948ce-2285-4491-b58f-877abb...

Every gas station in my area offers a lower cash price.

I'm guessing it could be because when you pay cash you go into the store which causes people to buy stuff and they more than make up the cost.

Reply on news.ycombinator.com