Maybe my memory is faulty, but I never remembered having to pay a surcharge to use a credit card. Now everywhere I go there are signs saying that there is a 2.5-3.5% surcharge to use a car (and others that say that there’s a 2.5-3.5% discount for using cash, I assume to get around wording)
When everybody started using the “easy” POS systems like Stripe, Square, Clover etc which typically charge 1-2% more for credit card fees rather than the more competitive but poorly integrated processors like authorize.net or the random guy coming into your business.
My guess is that when they noticed suburban teens paying $200 for blue jeans in the early 90’s. After that it was anything goes. /s
Looks like no one here has run a cash business or has experience with the overhead that comes with dealing with cash. It’s not zero.
With credit cards, there is no need for cash drops, safes, drawer balancing, armor cars or employee theft. Banks actually charge businesses fees just for depositing cash.
Yeah.
It’s less trouble for, like, a two-person food truck. Perhaps that‘s what OP is seeing. But cash quickly becomes plenty of trouble.
Credit cards have hazards too though, like chargebacks/fraud. I read some horror story about that sinking a healthy business.
It’s always been the case. Now it’s just transparent, vs. being baked into the price of the goods. When the economy sucks, vendors do stuff like this to try and soften the blow (for themselves).
Was it really baked into the price of the goods when the price of the goods hasn’t changed?
If their costs went up by 3%, they could hold prices level by taking the credit card fee out and making it an explicit surcharge.
It sounds like a way of raising the price while incentivizing cash payment (because maybe just maybe they aren’t claiming all their cash sales)
The credit card companies have always tried to prevent merchants from doing this by inserting language prohibiting either credit card surcharges or cash discounts into the contract agreements with the merchants. Obviously, credit card companies want to make it easy and convenient for consumers to use their credit cards.
I can’t immediately find it, but at some point I think 10-15 years ago, some merchants sued the credit card companies over this, and they won a court ruling that said that the clauses forbidding cash discounts and surcharging are unenforceable. As a result, merchants are now free to do it, but there are various rules. And some state legislatures have started to get involved with regulating things.
A big part of it was the rise of credit card perks like cash back, supported by higher credit card fees. I gotta admit, why should the vendor be paying for our cash back?
They always have.
In the past it was just by increasing the prices of things to cover it.
Now they’re talking about why they’re doing it in the hopes we won’t be pissed at them and pissed at the credit card people.
I have not yet seen it normalized but I have seen the opposite. 5% discount for cash. I mean effectively its the same thing. EDITED - thought I would mention there was a well known burger place in my area run by some brothers who would only take cash. They had a sign with the location of the nearest cash machine. I think they decided the credit card machines were not worth the hassel and its the kind of place that had a line out the door the whole time they are open.
I’m my experience, most places like that set up their own ATM with absolutely extortionate fees as a way to get extra money.
im pretty sure the brothers did not want to deal with whatever you have to do to get an atm. it was a pretty lean operation with really just enough room for the grill, fryers, blender, prep area and register. Very limited counter seating in side and a few tables outside. still in winter big lines. people just take it to go.
I’ve seen shops that only take cash, with an ATM in the store.
I kind of get it for small shops. Even just reconciling the register every day is way easier with just cash.
Even just reconciling the register every day is way easier with just cash.
No, it’s the opposite. Humans make mistakes with cash, and the overall drag on the store’s operations (from needing a safe for large amounts of cash, physically transporting cash to be deposited at the bank, dealing with theft/loss) tends to be higher than credit cards.
That’s why a lot of places have switched to entirely cashless operations, because cash is slow and expensive for them.
A consumer incentive to use cash seems like a good thing. It’s not like there’s ever a scenario where credit card companies aren’t taking a fee to use their cards.
There are some decent laws here to stop this getting out of hand and make sure it’s reasonable.
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That’s been a thing since the beginning of the cards being implemented. In the US they’ve tried to make it illegal, but like, economics doesn’t work that way. The store owner needs to make a profit, so the fee is going to the customer.
Smaller local convenience stores in Canada, often had a CC charge added probably 20 or more years ago.
First time I personally experienced a credit/cash price discrepancy was around 2004, but I’m sure it was happening before that, I was just new to that level of economic participation.
In the early days of CC you were charged per transaction.
Then you weren’t.
Now they’re doing it again.
I’ve seen it vary by card and vendor many times.
Edit: by Early Days I mean when electronic clearing became ubiquitous in the early 90’s, as the clearing houses charged per cleared transaction. Before that you literally mailed the card that was imprinted via the credit card machine.
I’ve been in the POS business for 25 years, and deal with the credit card side a lot.
A very large part of this is POS companies often have a relationship with the credit card processor (or are owned by a processor), and make a lot of money from the processing fees. The higher the fee on the processing account, the more they make.
So they convince the merchant (restaurant or store) that they can have a free system by passing the cost to the customer. Often times they are just waiving the monthly subscription fee, but some will also give the merchant free hardware as well (with a multi year contract).
Then they jack up the fees on the processing side: Since the merchant no longer has to pay the 2.5% - 3% fee that they were paying before, they allow the credit card / POS company to charge them 3% - 4%, and then pass it to the customer.
