From a percentage perspectice, handling huge amounts of cash should be far more expensive; I know one of the operators over here in my country: If you are a supermarket chain and have three locations in one large street, they charge you for every stop a minimum fee + additional handling costs.

In the US, not since 2011 since the Dodd Frank act required payment card networks to allow merchants to offer cash and debit card discounts.

https://www.ftc.gov/business-guidance/resources/new-rules-el...

The card issuers used to prohibit it, not been the case in a while though. They used to prohibit having a minimum transaction amount or charging transaction fees to your customer too. It never stopped small merchants though

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Merchants pay what they’re charged on a transaction by transaction basis. That is unless they have some agreement with Stripe or similar that provides a fixed percentage.

If you get a full merchant account as a business, with IC+ billing or similar, your statement will itemize IC charges on every transaction and it’s based on the type of card the customer used.

If it’s Amex / Discover it might be 5% or more. This is why a lot of merchants are Visa and Mastercard only. If your customer has a cash back card, it will maybe be 4%. If your customer uses a no frills visa bank card, it might be 1.5%.

Across a large population of transactions it usually averages 2-3%. But if you have a B2B where all your transactions are from companies like mine, you’ll likely find it averages above 3%.

Businesses like stripe are betting that 2.9% is above the average they see across a very large population of transactions.

A rational merchant would know that they are also incurring costs for handling cash, and depending on the size of the business that cost can in fact be higher than the cost of handling cards.

In fact, the low end of cash handling costs for a business will almost always be higher than the card fees alone, but of course there are other costs in managing card payments too, so it's not quite that clear cut.

In particular, that is what happens when costs are imposed industry wide, as with credit card fees.

If the cost is only being paid by one vendor then that vendor can't raise prices or else customers would patronize one that had lower costs and passed on the savings. But if every vendor has to pay 3% then prices are going up 3%, because then the competition has no cost advantage they can pass on and people only stay in business if they're making enough to justify not doing something else. (3% is more than the entire net margin in many industries.)

the seller just charges whatever it get can get away with. 3% only has an impact when margins are closer to that percentage

> 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.

I kinda wondered about this forever as well. Then one day I was chilling in my local worker-owned cooperative bakery when the Brinks truck came by to do the bakery's cash pickup. Armed driver. Guard waiting next to the truck holding a long gun. Two guys (presumably armed) going into the business to get the cash and take it out to the truck. That's all pretty expensive!

Smaller family-owned businesses will just take cash to the bank - but it's super common for somebody to eventually surveil them long enough to rob them one day as they're transporting the cash to the bank.

It's pricey to handle cash!

Discount on cash IME is because they're not putting transactions through the till (POS) so they can commit [tax] fraud.

Ran a micro business in UK for 15 years, cash cost as much to deposit as card did - employee time (counting, reconciling, making deposit) and bank charges for cash deposits. It also slowed down transaction time (which was almost all IRL).

Fraud done by shop owners is one reason why they might still offer a discount, but also a lot of the time I simply think stores don't actually realise how much it is costing them.

E.g. they might not include staff time and incidental costs around cash transactions that aren't obvious because they're not linked to the individual transactions, such as reconciliation, time spent transporting the cash, costs of depositing the cash, insurance to cover storage of cash.

Also consider that it takes very little theft to tilt the balance, and even a tiny amount of theft by cashiers not putting through all cash transactions can make a big difference.

Here in Italy the answer would be that you cannot evade taxes if payments are tracked. I imagine that applies elsewhere too.

Cash can be misplaced. Stolen. Needs to be stored securely. Banks often charge fees for depositing large amounts. Security companies charge fees to transport said amounts. Counterfeit bills. Etc.

They also solve the problem of someone coming into the store with a gun and robbing the place for the cash in the register. And for the government, they solve the problem of stores not paying sales tax.

As I wrote elsewhere: You're seeing this from inside the USA. USA is not the world. What's translated as "Legal tender" when wanting to write in English is just the closest term. That doesn't mean that your local definition of legal tender then applies. Cash, to be specific, must be accepted as payment (with certain limited) exceptions, in my country. And still some places will refuse it. They even accept paying fines now and then because of it.

> egal tender only applies to debts.

I used to think that was true, but try paying parking fines, etc. with pennies. Legal tender has never been challenged in court to my knowledge

Same can be said about health insurance: private insurance negotiate lower prices than the non-insured due to collective bargaining.

Why would the merchant lower the price by 3% if consumers are willing to pay the current price?

I literally said it must be regulated. Depends what you mean by broken: for the business owners it’s not broken. For the users? Sure, but they are not stakeholders in the business. They are stakeholders in the society that an excessively successful business model is affecting negatively, hence: regulation.

The argument doesn't hold - if cards were only about getting sales which they otherwise wouldn't get - and the part about "getting sales which they otherwise wouldn't get", is true enough - then there's no reason to refuse cash payments. That's additional sales, right? But the fact is that more and more shops refuse cash payments entirely. "Pay by card or go somewhere else".

That depends on the country. There are many countries (including my own) where any business must accept certain parts of the cash payment system (around here a taxi doesn't have to accept the highest-value bank note, but the rest cannot be refused). And shops, of course. That's why newspapers bother to write articles about it.

Note that legal tender does apply to private entities when it comes to paying debts, at least in the US. Creditors must accept legal tender, or give up claim to the debt.

It’s true that private businesses can set pretty much any payment terms they want for a transaction that hasn’t yet taken place. But the moment you move to a situation where you owe money, they do have to accept cash.

They don’t have to accept cash in advance. They do have to accept cash for debts, such as when you have already eaten the meal.

They have to accept cash, huh?

* Cash Payment Method Will No Longer Be Accepted A Notice by the Patent and Trademark Office on 10/03/2017*

https://www.federalregister.gov/documents/2017/10/03/2017-21...

_Handling_ cash is expensive. I never thought of that until my SO started working in a shop. To and from the bank, with stacks of coins and notes.. and there's presumably much more than that for larger firms. In general I rely my statement on what merchants themselves are saying. Newspapers are writing interviews with merchants who (illegally) have stopped accepting cash, even though it's legal tender. "It's too expensive. It reduces our bottom line." That kind of thing. When I look around I see "Cards only" a lot of places.

Of course cash is expensive, you have to handle it, count it, transport it. Haven't you ever seen those heavily armoured cash delivery vehicles? I mean just think how inefficient cash obviously is in every aspect of how it works compared to modern tech.

Time spent totaling it, transporting it to from bank

Having to buy a register / point of sale which can handle it

Hoping you employees don’t pocket a few bills here and there

Hoping you don’t get robbed

> Generally and commonly used payment systems (ie cash) that cannot be centrally censored are the only way to avoid this. Presently that means physical cash, physical precious metals, and cryptocurrency. The first two are impractical for large-scale use.

Tether freezes accounts. Bitcoin gets confiscated. Eth forked when big stakeholders didn't like how the DAO went. And it's a bit hard to take seriously privacy concerns that propose a public transaction ledger as a solution.

(And of the three, only physical cash has actually been proven in large-scale use.)