Cash is Not King

I still don’t get the debit card thing. But according to the WSJ, there is a new trend I do understand: establishments accepting cards but not cash.

Slips of paper and metal disks are an inefficient and archaic form of money. Chicklet-currencyYou have to go to an ATM to get some, and often pay a fee. To use it, you have to wait for the clerk to make change. You have to carry it around. And then there is the growing pile of coins most of us have at home.

And don’t get me started on parking meters. Offering me a nice parking space for half an hour in exchange for a quarter, and only in exchange for a quarter, is more scavenger hunt than transaction.

Plastic pushing out paper has been a long brewing trend. I can remember when grocery stores didn’t take cards. I still feel a little funny charging things there. Today we take for granted that we can use plastic just about anywhere, even in places, like taxicabs, that a generation ago would have seemed implausible as potential users of cards.

It’s now actually hard to think of cash-only places. Most parking meters. My favorite burger joint in Cambridge. The vendors who work the grandstands at Fenway. (Although the concession stands and the waitresses in the premium seats take cards.) I’m hoping the hot dog guys hold out for a while longer. There is something reassuringly nostalgic about passing the dogs down the row, the money in the other direction, and then the change back.

From the merchant’s point of view, taking cards costs a small percentage of the bill, but that’s a tradeoff most of them made their peace with long ago. Making it easier and more convenient for customers to spend money is good for business.

And cash is not without its costs to the business owner. There’s the cost of paying a cashier to make change. And there is the unfortunate tendency of some of your employees to slip a little bit of it into their pockets.

(If you think about it, a lot of the way stores are traditionally arranged is to make it hard for employees to steal cash. Having a few centralized cash registers is an obvious example. And charging $14.95 instead of $15 has more than a psychological appeal. It forces the salesperson to go to the register to make change.)

Not only is cash not costless for the merchant, it gets proportionally more expensive as fewer customers use it. There is an unavoidable overhead to maintaining a cash register full of small denominations to make change. As the customers paying the old school way becomes a dwindling minority, that register starts to look like an expensive convenience that benefits a small number of people.

Which is, I suspect, what inspired the establishment in the Wall Street Journal article to go all-plastic. The restaurant, ironically (appropriately?) called Commerce, found that “more than 90% of customers had already made the switch to plastic.” Given that this is the sort of place where a plate of spaghetti costs $23, I’m betting that proportion was significantly higher than 90%.

And in case you are wondering, it is perfectly legal for a business not to accept cash, provided they state this in advance. It’s a free country and you can agree to whatever terms of payment in your contracts you like.

About the only argument I can think of in favor of cash is that it does not leave a paper trail. But I am suspicious of those who think not generating a record of their transactions is important. As the WSJ quoted the blog Eater (but rudely did not link to) this is “bad news for mobsters, drug dealers and The Real Housewives of New Jersey.”


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