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The DOJ explicitly isn't comparing using Visa to handling cash, they're comparing it to what it would cost if Visa didn't allegedly manipulate the market.

Buying from Standard Oil was more efficient than trying to stick with non-oil-based alternatives, but that doesn't mean that Standard Oil didn't illegally manipulate the market to maintain a monopoly that hurt consumers.

Agreed, just adding it as a data point to those who think cash is a solution.

I looked through the lawsuit and this is about stifling alternative payment methods.

Nobody is suggesting cash as a "solution" except you.

The issue isn't the solution, the issue is the staggering cost of the service in the US vs everywhere else. It's 2x higher in the US, for no good reason other than having a monopoly. In Europe near-instant wiring of money is trivial so for large purchases, businesses can just accept a transfer - so MC/Visa have competition there.

Here, wire transfers are a royal pain in the ass, slow, and expensive, so there's no competition. Zelle and others are slowly changing that, but they mostly compete against paypal for p2p payments, not b2c etc.

I mean in Europe they also have credit card payments, the rates are just pushed down. Yeah it means Europe doesn't get the cool rewards.

There doesn't need to be a magical new business here. Some numbers changing can resolve a lot of pressure.

Comments from this discussion...

>Visa charges 3%. Everything you buy could be 3% cheaper, that's better than cash back.

>And anyone that ever uses cash for anything is overpaying, because prices everywhere have been jacked up to include headroom for "give back 2.5% as credit card rewards"

>For people like me who treat a credit card as a debit card, I see no reason for vendors to pay that "tax" if there are almost free alternatives.

> Standard Oil didn't illegally manipulate the market

FYI, Standard Oil was never actually charged with market manipulation. The court determined that all of their acquisitions were legal, but that it was within the scope of the Sherman Antitrust Act to break them up just by virtue of their market power.

Also, those numbers are for the US market. In Europe, merchant credit card fees are half what they are in the US.

https://www.lendingtree.com/credit-cards/articles/na-vs-eu-i...

Grandparent commenter was engaging in a false dilemma fallacy (cash handling vs US merchant cc fees...and not US merchant CC fees vs what the rest of the world pays.)

> ... shows that cash handling costs many retailers between 4.7 and 15.3 percent.

This feels like a weaselly way of putting it. I want to know the average (or median) cost of cash handling, not what it costs for "many" (whatever that means) retailers. It could be that the 15.3% figure represents costs that 0.01% of retailers have to bear, and that 4.7% is for 10% of retailers. And it could be that 90% of retailers spend less than credit card fees managing cash.

Or they could mean what you want them to mean, and it really is more expensive than credit card fees for the median business to manage cash. But from their wording, it's hard to know the truth behind it.

Sniff-test-wise, I find it hard to believe that gas stations (and other retailers) would offer a cash discount if cash was actually more expensive for them to handle than credit cards. It seems unlikely that they wouldn't have come up with that without at least some research to quantify their cash-handling costs.

> Sniff-test-wise, I find it hard to believe that gas stations (and other retailers) would offer a cash discount if cash was actually more expensive for them to handle than credit cards. It seems unlikely that they wouldn't have come up with that without at least some research to quantify their cash-handling costs.

Well said. I totally agree, and I can't imagine any basis in reality for cash handling costing retailers 4.7% (much less 15.3%). Sure, cashiers need to handle change, but that's not a big cost compared to turnover for most businesses.

There are lot of other steps as well. Like counting the till, depositing the big bills and possibly getting more change. As in general lot of cash users use larger bills compared to the change. Moving this cash around, guarding it. Recounting it at times. Work spend outside the transaction with the customer. And it is not like bank will always offer free deposits or give out the right amount of coins for no fee.

For small businesses cash also allows for easier tax evasion

> Sniff-test-wise…

Penny-wise, pound-foolish isn’t a saying because it’s a total rarity. Plenty of people follow “common” practices that seem positive but are actually negative.

Cash is much easier to steal from your employer, let alone miscount, misplace, or even accidentally destroy. You’ll see most if not all of these outcomes occur if you work a service/retail job.

> It looks like Visa debit fees are about $0.21 + 0.05%. Compare that to cash handling...

Debit fees are that low because of the Durbin Amendment, which legislated caps on debit card fees (amongst other things). Credit card fees are where the real money is made, and the meat of the complaint here.

>>> Credit card fees are where the real money is made, and the meat of the complaint here.

From the DOJ Press Release [0]:

"Justice Department Sues Visa for Monopolizing Debit Markets"

"Filed in the U.S. District Court for the Southern District of New York, the complaint alleges that Visa illegally maintains a monopoly over debit network markets by using its dominance to thwart the growth of its existing competitors and prevent others from developing new and innovative alternatives."

0 mentions of the word "credit" 27 mentions of the word "debit"

I'd love for this lawsuit to be about Credit Card fees, but it appears be limited in scope to debit card fees.

[0]: https://www.justice.gov/opa/pr/justice-department-sues-visa-...

Relatedly, I know of an excellent local bakery that only takes cash or check. A regular birthday cake of generous-but-not-huge size is around $60, and it's worth it.

But when you go in to pay, the price after sales tax ends up being something like $57.63 (or whatever, you get the idea). So for checks, not an issue, but for cash... they now have to keep loads of coins on hand, lots of small bills, and presumably reload those often.

Either raise or lower your price. Someone buying a $57.63 cake isn't going to balk at paying an extra $2.37. And if you make it $60 even, after tax, you don't have to keep anything but $10 and $20 bills in stock for your best-selling cake, because you'll get a mix of bills in, but the only way you give change will be from a $100 bill (2 x $20) or a $50 and a $20 (1 x $10). You will still get other bills in sometimes, and some coins, and of course they do sell other sizes (but they don't do a lot of small-scale things like cupcakes). Most sales require an order in advance.

Just cutting down on all that cash handling would be advantageous (and that's why one of the owners is always at the register).

I am from a country where there are 2 economies. One above water and one below.

Cash allows you to hide revenue. You do not forward the sales tax / VAT of the item you sold, and you don't declare the revenue of the cake.

Added to that you need the cash to pay your suppliers, as they need cash to pay their employees partially in cash, as employment taxes are sky high.

Oh, absolutely that happens here too. But why would you want a bunch of heavy coins when you could make them no longer relevant? Paper money is much more compact.

The reason cash sucks like this on the US is because of the tradition it has of listing prices before taxes. In countries that list prices after taxes, the cake would be priced in a way so that the final number would be something round like 60. (Although they would likely do 59.99 or 59.95).

Merchants are able to price things to result in exact numbers, and some do especially if they sell individual items.

However, many customers (1) throw odd change in the tip jar, and (2) an exact amount might discourage add-on purchases.

In this case, an exact amount would certainly result in zero tips. The customer would need appropriate bills and wonder how much would be appropriate (since 15% of $60 is too much).

They do almost no ready-to-buy business; if you didn’t order it, it’s probably not going to be there. And few people are going to buy multiple cakes at once. And they don’t have a tip jar. Order cake three days ahead, walk in, pay for cake, leave.

So it very much fits the mold of “95% of sales are single items”.

No. It all has to do with retailers belief in “Psychological pricing”. Whether that belief is well founded or not is an open question but pre or post tax pricing is irrelevant.

https://en.m.wikipedia.org/wiki/Psychological_pricing

It’s not hard to set the price so that, after tax, it’s exactly $60. It’s a local shop. They aren’t dealing with a bunch of locations or planning to move any time soon. They are good enough that you will seek them out in their low-rent back-street suburban mini-strip-mall. They don’t rely on walk-ins or visibility to sell. You will drive there just to eat their cake, and they are well-known enough that they do most of the high-end cakes in town for weddings and the like.

So instead of advertising a $55 cake that sells for $57.62 or whatever, advertise a $57.33 cake that sells for exactly $60.

At that point, yell fuck it and advertise a $60 cake with a decent sized font to say "Including all applicable taxes and fees"

Hell, people might actually tell others how it ended up being the exact price on the sign

> This means for every $100 sale, a business is paying between $4.70 and $15.30 just to manage their cash.

I'm pretty skeptical of that number, but more importantly

> And, the cost is only increasing as more businesses and consumers trend away from cash.

That should be excluded here. We want to look at the baseline cost of cash as a major payment method, not the effects of a payment method becoming overly niche.

> I'm pretty skeptical of that number.

The actual study is here.[1] "Depending on the segment and current processes, retailers can recoup upwards of 200-500 labor hours a month per store." It's related to ads for cash handling systems and armored car services.[2] It's not promoting card use.

[1] https://www.ihlservices.com/product/the-cost-of-cash-handlin...

[2] https://player.vimeo.com/video/441475326

Additionally with cash, people often just don't buy things. If they're running low of cash on-person, don't want to lose a certain type of bill (e.g. for the bus/tips), or simply don't want to carry coins.

That only makes sense if cash is the only form of payment a business accepts

True, but if they accept credit cards then customers will rarely pay with cash. We assumed here cash is a major transaction method, since otherwise their cash management costs are minimal.

Well, the comparison is not cash but a counterfactual market that's more competitive and where fees are lower.

>The idea that accepting cash is cheap is actually a myth. While some business owners might think the 3 percent fee for processing credit cards is a burden, research from IHL Group shows that cash handling costs many retailers between 4.7 and 15.3 percent.

How cute. The value proposition of accepting cash isn't to save on transaction fees, it's to save on Uncle Sam's fees. Cash doesn't have to go into a register and get Z'd at the end of the day (or have a Quicken invoice to go with it, depending upon the type of business). Although I neither condone, participate in, or tolerate tax fraud, it's absolutely a thing, and their failure to mention it doesn't inspire confidence in their conclusions.

That's a thing only if you don't emit receipts or use a modern POS system. In particular it would happen in flee markets or in old shops that only keep a very forgiving paper trail.

But otherwise your POS won't let you get away with that, and your customers will usually be grossed if you're handing them goods for cash without any receipts. Food business could be the last bastion where it would somewhat work on a regular basis IMHO.

That's the interchange (i.e. what the issuing bank earns), not Visa's fees.

Visa charges both the acquiring and the issuing bank on top of that; that's then called "scheme fees".

The issuers pays these out of the interchange; the acquirer charges the merchant for them, so they end up paying a bit more than the figure you've quoted.

The cost of handling cards is more than the fees, obviously the machinery and network needed to use them costs something. It's always going to beat cash, but cash should always be available as a fallback for disaster situations and "off-grid" individuals.

I don't think government should be setting prices. But disrupting monopolies is one of those things governments are good for.

One big reason that it’s still favored is because it allows some tax evasion

The question is not how much better it is to pay by debit card than cash, but how high the margins are compared to the costs. If the margins are high there may be possible to improve the competition of the market.

I don't think that a lot of people realize that this is why cashback exists, to get physical cash out of the drawers and electronic cash into the retailer's account where they can spend it.