Item — HN Reader

> but for rules-following merchants taking cash isn't any cheaper than paying the credit card fees.

That’s not true at all, particularly for large purchases.

If I go to an electronics and check out with $5000 in electronics, there’s no way that handling cash incurs the same expense to the store as the 3% fee ($150).

Maybe for nickel and dime purchases, but that’s rarely the case.

Even a $50 dinner doesn’t cost the restaurant $1.50 (plus the $0.30 transaction fee) just to handle cash.

5 comments

You're not factoring in "I won't go somewhere that doesn't take a credit card".

A store that sells $5k electronics is gonna lose a lot of sales if they attempt to save that $150 by only taking cash.

Which is why you take both but make the credit card customer eat the fees. Then many customers will save you (i.e. themselves) the money by paying cash and the ones that insist on using a credit card are free to pay what it actually costs.

Why do I almost never see a cash discount like this in practice? An I shopping in the wrong places? Or does something else prevent it?

The credit card companies hate it for the obvious reason and then the traditional reason was they would impose contractual requirements or get laws passed to prevent companies from offering a cash discount. People have posted here saying this has been reversed by federal rules, but then you're still left with two reasons.

One, inertia. Companies haven't realized they're allowed to do it now. That'll change over time.

Two, there are ways to transfer "cash" digitally without paying the credit card fees (i.e. ACH), and there are reasons to want to use digital payments -- making payments over the internet being a major one -- but ACH is ancient and it needs some kind of modern open standard in order to do things like make a payment request and determine in real-time whether the source account actually exists and has sufficient balance to make the payment. Various attempts to do that are constantly being made and constantly being fought against by Visa et al.

I've sometimes been able to get a cash discount by asking for it. This won't work with corporate places, obviously, but sole-proprietor sorts of shops - like my local car mechanic, and a print shop I used to use occasionally - have been receptive. I think they discounted by ~5% in each case. Did I suspect they're keeping the cash off-book? Of course. Did I care? Not at all. I don't expect their big-business competitors are paying tax, either.

Because that’s your subjective experience?

Canada has lots of stores that offer a discount if you pay cash. Many have a minimum purchase amount for credit cards.

In NY, I see it most frequently at gas stations.

Average cash handling cost is typically estimated in the range of 4%-15%. You're right that there might be individual differences in what it would cost to handle a single transaction, but a store isn't in a position to pick and choose - they handle an aggregate. If your electronics store only handles large transactions, maybe their percentage would be lower, but that's extremely rare. And even so, handling large cash amounts comes with its own costs around security.

> Average cash handling cost is typically estimated in the range of 4%-15%

I think the assumption is they declare only a portion of their cash receipts.

I think that is commonly the reason why some businesses do offer discounts, but note the person above replied to "but for rules-following merchants taking cash isn't any cheaper than paying the credit card fees" which seems to have specifically anticipated exactly that.

Yes, exactly. The business team at my (rules-following) company were ecstatic when municipalities around us began disallowing cash payments during COVID. Taking cash is, for us, directly 2-3% (and actually more, if you count labor, which is difficult to track) more costly than the vig on credit cards.

This is a huge pile of uncosted assumptions.

If you take cash it means you have to hold it on site. To be insured you have to demonstrate secure handling for the insurer, which would include security systems and limiting the amount in the safe and register. Which means routine trips to the bank, which also incurs costs.

Like...that could all be true, but the rate merchants tried to ditch ever handling physical money rather suggests the fees were worth it (not to mention all the risk mitigation doesn't cover the increased danger to ones personal safety - walking $5000 to the bank is no fun at all).

Business banking != consumer banking. The bank will charge ~$0.10-$0.50 for that $50 deposit + the wages of the person who goes to the bank to pay it in (minimum $7.25 per hour).

I promise you someone making minimum wage will not be trusted to make deposits! Ask me how I know....

Handling cash is obviously cheaper in Germany because merchants discourage customers from using their credit cards every time they can.