Want to pay cash? That'll cost you extra(wsj.com)
wsj.com
Want to pay cash? That'll cost you extra
https://www.wsj.com/personal-finance/paying-cash-fees-reverse-atm-744d1bd6
50 comments
https://archive.ph/S3wPX
My uncle is a bit of a Luddite and doesn't like how the world is changing, but he has one very good story I think about often.
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.
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.
I am 100000% in favor of government takeover of the payment card industry. Legal tender is unquestionably in the domain of governments, and with payments moving to 100% digital, the idea of a private company with shareholders and a profit incentive, essentially playing the role of an unelected quasi-government setting quasi-fiscal policy is nauseating to me. Visa and Mastercard don’t deserve to exist.
You're mixing several (valid!) concerns here that I think deserve being addressed individually.
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.
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.
It’s a shame you feel the need to disparage your uncle before sharing his wisdom. Totally unnecessary.
The butcher, the baker and the mechanic pay 35% income tax each. The original $100 turned into -$5 at the end.
That income tax then goes to build roads and educate their children, at least to some degree. The profits to visa and Mastercard go to the shareholders.
Visa and Mastercard certainly don't work for free, but the largest part of the interchange goes right back into the pockets of the customer, in the form of rewards points.
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.
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.
And a surcharge on cc users who don't get points (largely those with worse credit).
That's so wild. Many small businesses in my area give you a discount for paying with cash. They pass the card fee onto the consumer, but it's baked into the menu prices.
Yep, some restaurants added a cc surcharge during the pandemic, and none seem to have done away with them. I've watched customers pay at the POS, and pretty much no one seems to realize that the fee is assessed (and the employees don't mention it).
This also really annoys me. Sometimes that fee is up to 4%, and I've seen corner stores that literally only disclosed it on a tiny sticker at the front door – not near or on the POS, not on the receipt (which you usually don't get by default).
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.
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.
Yeah, I understand cc minimums (usually $5, but sometimes $10), but the hidden fees bug me.
The case studies in TFA are all places that deal with extremely high volume over very short time periods—amusement parks, zoos, and sporting events. Many of their points of sale are also mobile (food carts or someone walking around with a tray). Both the volume and the mobility make cash much more difficult to manage than a phone with a card reader, so they've likely done the math and determined that the interchange fees more than pay for the logistical improvements.
Remember when Chipotle got in trouble for rounding 24¢ and 26¢ to 25¢, to save time making change? [1] It was not unfair on average, and it surely sped things up, but they stopped because it's technically not correct.
1: https://www.delish.com/food/news/a37579/chipotle-caught-roun...
1: https://www.delish.com/food/news/a37579/chipotle-caught-roun...
I can see if being considered unfair if it's a single business, but I do think that it's at least a little funny, considering we have penny rounding (to the nearest nickel) here in Canada since geting rid of the penny. Now it's by default, everywhere. And as someone that uses cash for all in-person purchases, it's actually really, really nice
And there is a subtle distinction between charging more for using a credit card (not a bank debt card) and a discount for cash that people argue about with respect to a particular card's merchant agreement.
The typical reason for a business to give a discount for paying for cash is so they can then evade paying tax on that income (at least, here in Australia, but it was my direct experience in the UK as well at least sometimes).
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...
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 live in Sweden and don't think I've touched physical money for about a decade. Cash is more or less on life support by now, with a small and dwindling list of places you can even use it anymore - basically grocery stores and e.g. hairdressers that cheat on their taxes. And illegal drugs, I suppose, though from recent news where people get busted by paying dealers using Swish (a Swedish Venmo-ish service) I'm not sure it's used even for that.
I always pay in cash (although I live in Canada, and not in United States as described in the article), and always prefer to be paid in cash when possible. (In some cases, the payment is shared with someone else who wishes to use a credit card for whatever reason (usually points) and I will just pay the cash to that person instead; when paying by myself, I always prefer to use cash as much as possible.)
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.
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.
Per the fun graph in the article, we might even assume your age (Though Canada seems to buck the trend re: dropping cash so completely).
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?
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?
There are plenty of perfectly legal reasons to crave privacy.
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."
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."
There are many reasons for this and as mentioned one is employee theft. If you've ever owned or operated a retail type business you would know there is much involved in reconciling the cash sales vs. what the register shows.
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).
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).
It’s also just a framing issue. You can make cash more expensive or say that cards receive a discount.
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 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.”
> 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.
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 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-...
The article doesn't explicitly mention that handling cash as a business isn't free and comes with its own set of problems. I can understand why one might choose to eschew cash as the cost is greater than any lost business these days when most people have/prefer card or mobile payments. Contactless payments have gotten very fast, low friction, and widespread.
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'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.
Cash is “messy.” Employees can mess up change. Bills can get stuck to each other. People can pass you fake bills. Robbers can steal the drawer. Insurance rates probably go up. For businesses with a high number of cash transactions (ie, strip clubs), it’s best to hire an armored courier to transport to bank.
Not to mention the pain of making change
At the San Mateo County Fair, parking is $15 with cc or $20 in cash. This may be due to risk of robbery, or because they have no way of reconciling their receipts against any sort of inventory (and do not trust the employees to turn over all of the cash).
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).
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).
It might cost them a little more to handle cash, but a 33% premium is a little excessive.
[deleted]
Or they don't feel like getting a bunch of $5 bills for change? It's easy to just take a $20 bill (or two $10, four $5, etc.). Most ATMs give $20 bills; so, that's what a lot of people have. (They probably don't get too many $50 or $100 bills for parking.)
Sure, but why not charge $20 for cc also?
Bus fare on SamTrans to the San Mateo County Fair is also cheaper with Clipper Card ($2.05) vs. cash ($2.25).
Probably much better fraud protection, and much better usage tracking (e.g. accurately tracking bus stop boarding metrics).
Probably much better fraud protection, and much better usage tracking (e.g. accurately tracking bus stop boarding metrics).
The first time I ever had anyone balk at my cash was 20 years ago when I tried to buy a car and the guy told me he needed a check. It has gotten so much worse since then that now I only keep $20 or so in my wallet any more.
The annoying this is that it's hard to spend $50 bills even though they're worth 20 1989 dollars when nobody would treat you like a suspect then for spending them.
Weird. I bought a used car in Canada last week, and paid about two thirds by check, and the rest in cash, with a bit also on a credit card, just to collect points. Cash is still good in Canada, at least for the moment. It remains popular because the TAXES ARE TOO DAMN HIGH. There, I said it.
It is possible that they are asking for more money because:
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.
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.
Handling cash is inconvenient. It has to be counted and secured. It has to be regularly deposited in person. Change has to be maintained. There is a risk of theft and counterfeit.
That falls under my first case. I improved my answer to make it more clear.
That seems plausible. There is a trend happening where businesses are increasingly offering different prices to different customers. The Odd Lots podcast just did an episode about it. One of the more memorable examples discussed was to offer a higher price to customers who have probably received their paycheck today.
https://www.youtube.com/watch?v=46T--lB2P3Q
https://www.youtube.com/watch?v=46T--lB2P3Q
Wild. The invisible hand of credit and debit card networks (Visa/MC/Amex/Discover(CapOne?)) is getting stronger every year.
I do not know why you are down-voted, but one thing not being mentioned. I expect your Credit/Debit Card Company is selling what you buy to Data Brokers so they can build a profile of your buying habits.
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.
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.
Does paying with Apple Cash (using Apple Pay) avoid this tracking/data reporting? If so, it's probably worth the 2% hit to maintain cash-like privacy. But if the data gets hoovered up the same, no point.
No. Despite the name, it's really just a regular Visa debit card, issued by Green Dot Bank.
Dang, super disappointing. Hope Apple changes things up so that we can transact digitally without leaving a trail.
I also really hope that somebody steps up and fills the gap that the widespread disappearance of cash has left in terms of payments privacy and resiliency.
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.
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.
I agree it's not super likely, unfortunately.
> 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.
> 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.
No cash accepted here, pal. You are the product, not a customer, of gotcha capitalism so we can resell your metadata. And fuck the unbanked and don't even think about tipping our underpaid employees because that's what socialism us merchants arranged in the form of benefits you pay for with taxes are for. - Cash-hostile businesses
[deleted]