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.