Cash is becoming a payment mechanism for poor people (and poor countries), but because of its high costs it’s very bad for both of them. Oh, and it’s really annoying for women, even if they are not in poor countries.
The latest survey of payment preferences in the US show that cash is still holding on for small purchases but it’s steadily sliding. Everyone used to use case for this. Now, two-thirds do. Soon (praise be to Apple) it will a half.
In-person purchases of less than $5. The breakdown: 11 percent prefer credit cards, 22 percent debit cards, 65 percent cash.[From Poll: Cash or card for $5 purchase?]
Personally, I never use cash unless there is absolutely no alternative. I’m not particularly unusual, given my demographics. Broadly speaking, cash is the preserve of the poor.
A combined 38 percent of those making $75,000 or more preferred plastic for small purchases, compared with 43 percent of those making $50,000 to $74,900, 32 percent of those earning $30,000 to $49,900, and only 23 percent of those making less than $30,000.[From Poll: Cash or card for $5 purchase?]
I came across a very interesting gendered perspective on all this a while ago. I know from the statistics that women are heavier users of debit cards than men but I hadn’t really thought about why. It turns out, however, that other people have.
It’s the fault of every “service” establishment that puts up the most oppressive sign a woman will see in her life: “Cash Only”.[From Reductress » White Woman Speaks: I Don’t Have Any Cash On Me]
Now I hate those signs as much as the next person, and I am outraged that it is not the law in New York to force restaurants to have a sign on the door in big letters if they do not take cards — something along the lines of “mafia front, cash only” or “you pay taxes so we don’t have to” — but I hadn’t thought how much more annoying they are for women who don’t have pockets with loose change in them.
I can only afford to keep actual things of value in my wallet: my debit card, my dad’s Amex, and my Discover card that has a great rewards system.[From Reductress » White Woman Speaks: I Don’t Have Any Cash On Me]
Last time I went to a restaurant that didn’t take cash, it cost me $3 to get cash out of the ATM next door (compared to the 50 cents it would have cost the restaurant if I’d been able to use my card). I’m not the only person who has noticed a steep increase in the overall total social cost of payments, driven by attempts to shift private costs between stakeholders (in a sub-optimal manner).
Let’s use a transaction at a local juice bar in Prospect Heights, Brooklyn, as a real-world example. As a first-time customer, I ordered a $6 smoothie. When attempting to pay for the item, I was abruptly told: “Cash only! But, there’s an ATM for your convenience in the store.”
The surcharge-fee was $2. The problem here is that as a consumer, I’m now paying 33 percent more for the cost of my desired product. Had the merchant accepted debit/credit cards for a $6 purchase, they would have paid typically between 2.75 percent and 4.25 percent.
However, in this type of environment, the consumer is footing the transactional cost and actually paying 7.7 times to 12 times the rate the merchant would have paid in interchange.[From Consumers’ real-world cost of cash: A defining moment for ATM deployers and merchants | ATM Marketplace]
This is truly bizarre state of affairs. I guess for most of the people reading this blog (who are not, by and large, poor) the fact that is costs a dollar or two extra to buy drink doesn’t matter. As far as I am concerned it should be a condition of getting a business licence. If you want to take consumers money, you must by law accept debit cards with no surcharge. If you want to surcharge for credit, check, cash, old gold or cowrie shells then it’s up to you. But if you want to be in business, you should have to take debit “cards”.
If I had left the store, I never would have enjoyed a smoothie that day, as there were 15 other businesses that housed ATMs on the same street, all with similar cash-only policies or minimum purchase amounts for using a debit or credit card. Some merchants even charged 50 cents to $1 as a surcharge for accepting debit or credit cards.[From Consumers’ real-world cost of cash: A defining moment for ATM deployers and merchants | ATM Marketplace]
Gender issues aside, the numbers are telling us a simple story. Allowing merchants to accept cash is bad for society, bad for the economy and especially bad for people who are trapped in the cash economy. And it’s bad for women too. End the cash menace now!