Want to pay cash? That'll cost you extra
wsj.com
wsj.com
Imagine you live in a town. In that town, you go to the local butcher, and you buy food with $100 cash. The butcher takes it to the local baker and he buys $100 of bread. The baker goes to the local mechanic and pays $100 to get his car worked on. Around and around, always $100 kept local in the town.
Instead, the reality of our world is we all use a credit card, and 2% gets taken every time. Soon enough no local has any of the original money.
Visa and Mastercard are card brands/schemes/networks, but definitely not issuers of credit cards, and accordingly also not issuers of credit. No fiscal policy is happening here; if anywhere, you'd have to look at banks for that (and it might be interesting, but in my view this has nothing to do with cards).
What they do control to a concerning degree is the ability of merchants to accept payments in the first place, together with acquiring banks. If Visa and Mastercard decide that merchant category x or charity y can't accept payments anymore, that's a big problem.
In my view, this is a task best left to democratically elected governments held accountable through checks and balances, not to private corporations. Of course, these will also have to follow regulations – but sometimes, they go above and beyond (e.g. out of brand recognition concerns), and in doing so end up exporting decisions and policies into distant corners of the global economy that have no political, legal, or economic recourse.
Finally, you've got the concern of market dominance and whether there is effective competition in all relevant markets (e.g. merchant-side in addition to just issuing-bank-side) between the two, and whether that leads to inefficient prices for merchants. But as I've mentioned elsewhere, the biggest chunk for card processing fees is paid back to the cardholders as points in the US, not to Visa or Mastercard.
At least in the US, credit cards really largely an implicit surcharge on cash payers: Paying by card, you effectively pay 97%-99% in 4-8 weeks; with cash, you pay 100% immediately.
1: https://www.delish.com/food/news/a37579/chipotle-caught-roun...
The discount has to reflect the fact that the cost of dealing with the cash isn't too far off the actual cost of paying card fees now. To the point where cash is so rare in Australia that cash handling companies are in trouble [1].
Our Reserve Bank recently suggested that businesses might soon want to charge customers who want cash /more/ - it seems possible that at some point in the near future anyone offering discounts for cash will just be instantly flagged for tax investigation!
1. https://www.abc.net.au/news/2024-06-05/fresh-accc-scrutiny-o...
I think at one point I've even seen 4% cash discount and 4% card surcharge in the same place. And I doubt that even the most expensive payment service provider out there charges the merchant anything close to 4% for card processing.
In the example in the article: You will need to find a reverse ATM, which charges a fee, and wastes power itself (and requires the use of a card; this card may be reusable though, but if not then that is another waste), and the possible theft is not reduced (someone may steal money from the ATM) but may even be increased (someone steals it on the way, someone steals the card, someone manages to reprogram the ATM, etc) and has other problems (e.g. the ATM stops working or has no card available).
From the other comments here, it seem some places will charge more for cash and some charge less for cash.
Fortunately, from the article, it seem some states had banned cashless retail, but I don't know what is the laws in Canada relating to such a thing.
Which I thought was pretty amazing (the graph, that is): older Americans I can see hanging onto what they're used to, but 18-25 year-olds seem to be ticking upwards, which I think is actuallyy encouraging. Privacy implications aside, I appreciate Visa/MC being less an arbiter of what I may buy, as well as cash making it easier to save money and budget.
I can't help but wonder what the yoots rationale is though. I can't imagine they're the same as mine, considering how often I seem to fall outside the Overton window of "normal" - so why the uptick?
One anticipates a business model where proxies manage the public transactions for people who want to have some private market without all of the Monday-Friday data trail associated with their Monkey Fighting transactions.
For a price, of course. As the wise man sang: "Freedom isn't free / There's a heavy f***g fee."
Also important to note that the items mentioned are discretionary and entertainment. As such it's not unfair at all to have to pay more if you want to pay in a way that the business requests. There is no obligation for a business to support payment methods that require them to increase costs (in theory) for all customers to cover the loss of dealing in cash. (Also removes potential issues somewhat with money laundering).
I believe some cities have passed laws requiring cash to be an option. Philadelphia appears to be one, though there are various exceptions: https://www.inquirer.com/consumer/philadelphia-music-venues-...
I’m not sure if it remains the case but a lot of stores near my university had “$1 fee for credit card” which was against TOS. And one week we noticed they all suddenly swapped to “$1 off if paying with cash. A $1 fee applies to all purchases.”
Of course that’s the opposite of this, but it’s the same idea. Ultimately a company has lots of ways to say “we prefer to do business in a certain method.”
I'm not taking a stand one way or the other and I acknowledge the problems of cashless-only, but I understand why businesses are increasingly often not finding the cost of dealing with cash worth it.
I have to think robbery isn't the main concern, however, since the lines are typically so long it would be hard to get in and out rapidly (and there are a decent number of cops around).
Probably much better fraud protection, and much better usage tracking (e.g. accurately tracking bus stop boarding metrics).
1. few people pay with cash and the company must handle those transactions differently for those few people. This may be seen as an unacceptable inconvenience and may cost the company more in employee training and the handling of the funds
2. customers that pay in cash may have no choice, or may choose to pay in cash on principle
In the second case I am speculating that they may be exploiting a niche population that they believe will pay the higher price. Consider that while some people may choose not to pay in cash due to the higher cost, case 2 accounts for those specific customers that will knowingly pay the higher amount in cash.
If the place does not take cash, I will not buy the item. I would love to order Pop Corn and told no cash. They would have to toss that item, thus loosing money.
But I have yet to run into one of those places where I live.
While Apple would be a great candidate from a technical point of view (unlike many other manufacturers, they exclusively control both the smartcard chip/"Secure Element" and the Secure Enclave in all of their devices, which would both be good candidate technologies for P2P digital cash that works without an internet connection), I don't see it happening.
Why would they pick a fight with banks, governments, and payment networks, when they can just continue in their position as part of that ecosystem?
Also, even as an Apple user I would find it quite concerning if we'd replace cash with a proprietary technology. And I don't exactly see Apple participating in or even driving the development of a new, open standard, unless possibly forced by a regulator.
> Also, even as an Apple user I would find it quite concerning if we'd replace cash with a proprietary technology.
I'm not saying we should replace cash, just that it would be nice if a cash-like option were available for digital payments.