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. You 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.”

Credit Cards, Media | Frank Curmudgeon | September 16, 2009 4:00 pm

14 Comments

By Jim, September 16, 2009 @ 7:23 pm

The parking meters here take credit cards.
By the weakonomist, September 16, 2009 @ 10:06 pm

Some meters will take cards but most are still relics of the past. It’s actually a reflection of the falling out of cash that even meters are moving into the plastic world.
By cjc, September 16, 2009 @ 10:06 pm

Living near Chinatown, I find that I use a lot more cash that I had before moving. A lot of merchants and restaurants are cash only. I find this kind of annoying.
By Kosmo @ The Casual Observer, September 17, 2009 @ 11:33 am

Speaking of cash registers …

We recently got a new Menards in town (about a mile from the old one – bigger and brighter).

The cashier and customer are actually on the same side of the register (you walk behind the cashier to leave the store) – making the register an inviting target for thieves (esp those who can distract the cashier for a second).

They are also designed rather poorly from an ergonomic point of view. The registers are very low, forcing cashiers to stoop every time they use it.

I seriously wonder how much thought they gave to the design.
By Andy, September 17, 2009 @ 1:36 pm

I suppose one advantage of using cash would be to avoid the possibility of your waitstaff skimming your card numbers and having a good time in Vegas (actually happened).
By Neil, September 17, 2009 @ 2:20 pm

Card skimming is the bank’s problem, not yours. Report it as soon as possible.
By gpr, September 17, 2009 @ 3:21 pm

The parking meters here take credit cards. It’s interesting to me how much more I put in them now. It used to be scrounging every bit of change to barely cover my time needed. Now, I always estimate my time too generously.

Plus, the next person can’t use my extra time.

I bet Boulder is getting rich, and I bet Frank could do the math. If this were at all interesting.
By mljhouse, September 17, 2009 @ 6:23 pm

Card skimming is the bank’s problem, not yours? Even if you don’t end up out any money, identity theft can be a huge hassle consuming prescious time, wrecking your credit…and you usually end up out some money anyways. That’s why I still use cash in many situations.
By Mark Arsenal, September 18, 2009 @ 2:06 pm

Keeping a few months’ worth of cash in your mattress is still advisable in case there’s a bank holiday (a very real possibility with the FDIC almost insolvent); or in places prone to natural disasters, in case there is a long-term loss of electricity or other vital services.
By gpr, September 18, 2009 @ 5:46 pm

Mark: you know what’s interesting? When there is a power outage, the stores can’t sell you anything. Not for cash, credit or whompum. None of their machines will work. Heck, you’d be lucky to get in thru the auto doors.

I think a better commodity for your scenario might be shotgun shells. I hear they’ve gone up more than gold.
By Mark Arsenal, September 18, 2009 @ 6:19 pm

@GPR:

True, but your neighbors might have some extra stuff, and if it came down to sharing with people who had plastic cards and people who had cash, I think they’d be more likely to go for the cash.

In the case of a real long-term system failure, merchants would find a way to move their inventory.

Shotgun shells do not work well in a dense, urban environment like mine (where the guns are illegal anyway). Strong community connections, first aid supplies CPR training, and bottled water go a lot further, regardless.
By Professor Lembach, March 11, 2011 @ 3:44 am

Until hookers, drug dealers, and strippers can take cards, cash will always have a place. At least among professional athletes and entertainers.
By AntiGlobalist, February 10, 2012 @ 10:01 pm

The problem with an all card society isn’t the hooker theory, its the oligopoly fear. To be a player in ACCEPTING payment for services dwindles from 5 to 4, and possibly from 4 to 3 soon, the issue is the control of commerce. It’s VERY hard for a new card provider to make a name in the world to be accepted globally. Paypal made a name, but could you name another?

I’m not worried about uncle sam knowing I have a vice for dr pepper over coca cola, what I am worried about, is a business owner only being able to sell coca cola because the card they accept is in an agreement with coca cola. Visa has the right to do that if they desire.

You have to look at the whole picture, and not get caught up with the minority of transactions that completely rely on cash. Start looking at all that would rely on companies allowing the transaction.
By Paul Williams, June 7, 2012 @ 4:23 pm

Don’t worry, we’ll all be able to accept cards soon. Check this out: https://squareup.com/ They’re shipping free card readers now.