snipped-for-privacy@bbs.cpcn.com wrote in news: snipped-for-privacy@telecom-digest.org:
>> Ironically, today supermarkets do take credit cards which annoys me
>> since it adds to the cost of the food. Indeed, pizza places, fast
>> food, and convenience stores take credit cards too.
> I'm pretty much a cash shopper myself, but I do wonder about the
> economics of credit cards vs. cash and checks.
> Disadvantages of cash or check/advantages of credit:
> 1.) Banks charge big cash depositing businesses a counting fee to > deposit cash.
> 2.) Banks charge businesses a fee to deposit checks.
> 3.) Merchants bear the risk of bad checks, but for a fee can hire check
> guarantee companies to screen their checks at the point of sale and
> guarantee payment of those it approves.
> 4.) Banks charge fees to big customers for rolled coins and wrapped small
> bills used to make change. (What a racket--banks charge on both ends of
> the transactions!)
> 5.) Counting the cash tendered and making change slows up the line,
> perhaps enough to require adding staff.
> 6.) Stores were already required to put in electronic card-based
> payment systems as part of food stamp conversion from coupons to
> electronic cards, (either convert or lose all the business of food
> stamp customers) so none of the infrastructure costs are attributable
> to credit cards. (Note to non-US readers: food stamps are an
> agriculture subsidy/welfare program, whereby the poor receive
> coupons/electronic credits that can only be spent at qualified food
> merchants for the purchase of qualified foods (no liquor, candy or
> soda) processed in US factories from US agricultural products.)
> 7.) Handling all that cash poses several theft risks (embezzling
> cashiers, embezzling managers, armed robbers), and imposes increased
> security costs (installation of time-lock safes, armored car service > fees).
> 8.) For merchants who require presentation of a physical card,
> validate the transaction with the issuer's clearing house and collect
> a customer signature along with a card imprint or magstripe data, the
> merahcnt's bank makes funds available at the close of the current
> business day and guarantees payment with no chargebacks for
> counterfeit or stolen cards (unless there is clear evidence of fraud
> that the merchant was in on). (Chargebacks from customer disputes are
> a separate matter).
> Advantages of cash and checks/disadvantages of credit cards
> 1.) Credit card clearing houses charge a considerable percentage fee on
> transactions.
> 2.) Disgruntled customers can generate chargebacks far after the date
> of the transaction, which also trigger the merchant's bank to assess > penalty fees.
> Where does the balance of these factors lie? I have no idea, but it
> seems to me it's not necessarily the no-brainer in favor of cash over
> credit most folks would make it out to be. Is there anyone reading
> this looking for a subject for a thesis in economics? You are welcome
> to take this idea, research the numbers and run with it.
Most merchants would 'prefer not' to take credit cards. The 2-3% (minimum) that card-issuers/clearinghouses charge _is_ a big bite out of profits. Grocery stores, for example run a profit margin of about 4%. Either they give up *half* their profits, or they raise prices.
Unfortunately, in many businesses, accepting 'plastic' is a "business necessity -- too much of the competition does, and a significant share of business will 'go elsewhere' (to somebody who does take plastic), if you don't. You've got the 'unpleasant' choice to make, between losing business, and losing profits.