Re: Touch Tone Grocery Shopping - Promise Never Realized? wrote in news:

>> 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.

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Robert Bonomi
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