Monday, August 29, 2011

In Defense of the Cash Economy

We recently returned from vacation in Berlin, where they operate pretty much on a cash basis. Many stores don't accept credit cards at all. While this was a pain in the neck to have to carry a bunch of cash on hand at all times, I realized that it made me a lot more aware of how much money I was spending. Which means I probably spent much less than I would have otherwise.

It was really when I bought a sweater at a little boutique and wanted to pay with my credit card that I found out one of the main reasons stores prefer cash -- the high fees charged by the credit card companies. Because I was not from Europe, the store was very accommodating to accept credit card payment from me.

I returned home still thinking about this whole issue of credit card fees, and two days later received notice from my bank that it would be ceasing its whole Rewards Program (you know, the ones based on how many points you rack up using your check card or credit card for everything?). And of course my bank blamed recent legislation limiting the fees they charge retailers for the fact that they could no longer sustain the rewards program.

Well, good riddance. I will not miss saving up 10,000 points just to get an electric toothbrush.

But the main point I wanted to make about this whole thing is that small retailers are really hurt by these fees. Especially if you walk in to make a $10 purchase that they have a $1.00 margin of profit, and then have to pay 30-40 cents to Visa for your use of a credit card. Plus, they pay a monthly fee for the ability to accept credit cards.

So, if you would like to know a simple way to support the small businesses you love, I encourage you to pay cash at those businesses. You are helping them with their bottom lines!

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