End of Credit Card Rewards? [The Credit Card Competition Act]

[Rothman]

I strongly oppose raising the price for everyone in place of a credit card fee. The business doesn't have to pay this fee for cash users, and the fee is much lower (a flat amount rather than a percentage) for debit users for large purchases. Raising the price for everyone would effectively force these users to pay the credit card fee.

Heh.  This ship sailed a long, long time ago.

[HighwayStar]

And no, handling cash isn't exactly free as well

This. Cash has many costs, possibly more than credit cards. You have the cost to deposit at banks, you have the cost for secure transport to banks, you have the cost for security on site (ie. a safe, etc), you have the risk of loss due to internal or external theft and robbery, etc. Machines to accept cash automatically have moving parts that break down and require service, as well as the need for cash to be removed regularly. I have a very hard time believing that the total cash cost to something like a grocery store is not at least 1-2%.
Hence my theory that cash customers are not subsidizing credit card customers but rather covering the different but still real costs of cash.

[Scott5114]

And no, handling cash isn't exactly free as well

This. Cash has many costs, possibly more than credit cards. You have the cost to deposit at banks, you have the cost for secure transport to banks, you have the cost for security on site (ie. a safe, etc), you have the risk of loss due to internal or external theft and robbery, etc. Machines to accept cash automatically have moving parts that break down and require service, as well as the need for cash to be removed regularly. I have a very hard time believing that the total cash cost to something like a grocery store is not at least 1-2%.
Hence my theory that cash customers are not subsidizing credit card customers but rather covering the different but still real costs of cash.

Having worked in businesses that accepted a great deal of cash, I can confirm that pretty much nothing about this post is true. If you're running something like a fast food place you are not going to have an armed car show up to collect your piddling $1,000 deposit—you send the manager to the bank to hand it in through the commercial drive thru window. And a safe is a one-time cost, not 3% of every transaction from now until the end of time, so there's no way it's going to be more expensive.

The only time cash handling expenses become more than negligible is when you're regularly dealing with amounts over $10,000 and you need machines to count it all. That's basically banks, casinos, and dispensaries. Nobody else needs that.

[jeffandnicole]

And no, handling cash isn't exactly free as well

This. Cash has many costs, possibly more than credit cards. You have the cost to deposit at banks, you have the cost for secure transport to banks, you have the cost for security on site (ie. a safe, etc), you have the risk of loss due to internal or external theft and robbery, etc. Machines to accept cash automatically have moving parts that break down and require service, as well as the need for cash to be removed regularly. I have a very hard time believing that the total cash cost to something like a grocery store is not at least 1-2%.
Hence my theory that cash customers are not subsidizing credit card customers but rather covering the different but still real costs of cash.

Having worked in businesses that accepted a great deal of cash, I can confirm that pretty much nothing about this post is true. If you're running something like a fast food place you are not going to have an armed car show up to collect your piddling $1,000 deposit—you send the manager to the bank to hand it in through the commercial drive thru window. And a safe is a one-time cost, not 3% of every transaction from now until the end of time, so there's no way it's going to be more expensive.

The only time cash handling expenses become more than negligible is when you're regularly dealing with amounts over $10,000 and you need machines to count it all. That's basically banks, casinos, and dispensaries. Nobody else needs that.

So those armored cars pulling up to the doors of businesses are just window shopping while they run around from bank to bank?

[kphoger]

And no, handling cash isn't exactly free as well

This. Cash has many costs, possibly more than credit cards. You have the cost to deposit at banks, you have the cost for secure transport to banks, you have the cost for security on site (ie. a safe, etc), you have the risk of loss due to internal or external theft and robbery, etc. Machines to accept cash automatically have moving parts that break down and require service, as well as the need for cash to be removed regularly. I have a very hard time believing that the total cash cost to something like a grocery store is not at least 1-2%.
Hence my theory that cash customers are not subsidizing credit card customers but rather covering the different but still real costs of cash.

Having worked in businesses that accepted a great deal of cash, I can confirm that pretty much nothing about this post is true. If you're running something like a fast food place you are not going to have an armed car show up to collect your piddling $1,000 deposit—you send the manager to the bank to hand it in through the commercial drive thru window. And a safe is a one-time cost, not 3% of every transaction from now until the end of time, so there's no way it's going to be more expensive.

The only time cash handling expenses become more than negligible is when you're regularly dealing with amounts over $10,000 and you need machines to count it all. That's basically banks, casinos, and dispensaries. Nobody else needs that.

So those armored cars pulling up to the doors of businesses are just window shopping while they run around from bank to bank?

Don't tell me there are armored vans transporting cash from AutoZone and Olive Garden to the bank every night.

[Scott5114]

And no, handling cash isn't exactly free as well

This. Cash has many costs, possibly more than credit cards. You have the cost to deposit at banks, you have the cost for secure transport to banks, you have the cost for security on site (ie. a safe, etc), you have the risk of loss due to internal or external theft and robbery, etc. Machines to accept cash automatically have moving parts that break down and require service, as well as the need for cash to be removed regularly. I have a very hard time believing that the total cash cost to something like a grocery store is not at least 1-2%.
Hence my theory that cash customers are not subsidizing credit card customers but rather covering the different but still real costs of cash.

Having worked in businesses that accepted a great deal of cash, I can confirm that pretty much nothing about this post is true. If you're running something like a fast food place you are not going to have an armed car show up to collect your piddling $1,000 deposit—you send the manager to the bank to hand it in through the commercial drive thru window. And a safe is a one-time cost, not 3% of every transaction from now until the end of time, so there's no way it's going to be more expensive.

The only time cash handling expenses become more than negligible is when you're regularly dealing with amounts over $10,000 and you need machines to count it all. That's basically banks, casinos, and dispensaries. Nobody else needs that.

So those armored cars pulling up to the doors of businesses are just window shopping while they run around from bank to bank?

Don't tell me there are armored vans transporting cash from AutoZone and Olive Garden to the bank every night.

Really...if it wasn't cash, I really want to know what the hell what Burger King was putting in those envelopes that made it so important for me to take them to the bank every day...

[kalvado]

And no, handling cash isn't exactly free as well

This. Cash has many costs, possibly more than credit cards. You have the cost to deposit at banks, you have the cost for secure transport to banks, you have the cost for security on site (ie. a safe, etc), you have the risk of loss due to internal or external theft and robbery, etc. Machines to accept cash automatically have moving parts that break down and require service, as well as the need for cash to be removed regularly. I have a very hard time believing that the total cash cost to something like a grocery store is not at least 1-2%.
Hence my theory that cash customers are not subsidizing credit card customers but rather covering the different but still real costs of cash.

Having worked in businesses that accepted a great deal of cash, I can confirm that pretty much nothing about this post is true. If you're running something like a fast food place you are not going to have an armed car show up to collect your piddling $1,000 deposit—you send the manager to the bank to hand it in through the commercial drive thru window. And a safe is a one-time cost, not 3% of every transaction from now until the end of time, so there's no way it's going to be more expensive.

The only time cash handling expenses become more than negligible is when you're regularly dealing with amounts over $10,000 and you need machines to count it all. That's basically banks, casinos, and dispensaries. Nobody else needs that.

So, 0.5 hour of manager time daily - say $10  - to count and deposit $1000. That's 1% right there...
At least Chase has no fees for up to $5000 monthly on a business account - I assume that means fees over $5000 monthly?

[hbelkins]

Don't tell me there are armored vans transporting cash from AutoZone and Olive Garden to the bank every night.

"Did someone say Olive Garden?"

-- Rothman, probably

[kphoger]

So, 0.5 hour of manager time daily - say $10  - to count and deposit $1000. That's 1% right there...

But that cost isn't coming out of the business's pocket—except, I suppose, if the bank is out of the manager's way home and he claims mileage or something.  Or am I missing something (which is likely)?

[Scott5114]

When they would send me to the bank, it was always around 2 or 3pm, when it was dead slow and there wasn't much for me to do anyway. But if they hadn't sent me, they would have had to pay me for that time anyway. Also, this was in 2008, so half an hour of my time was worth $3, not $10, so it was 0.3% of the deposit, not 1%.

[HighwayStar]

Having also worked in a business that accepted a great deal of cash, I can say that we had an armored car come for the cash, and no manager was dropping it off at any bank. I see other armored cars at businesses, so I assume for at least those businesses they are paying for transit. For some smaller businesses I suspect the manager dropping it off at the bank is more common.

Banks also charge a fee to business to deposit cash above a certain amount. From NerdWallet.

What it is: You can deposit only a certain amount of cash at many banks. After that, you'll be charged a fee to process all those bills and coins.
How much it is: Usually about 20 cents to 30 cents for each $100 you deposit above the cash handling limit.

So that by itself is 0.2%-0.3%.

Other's have done estimates in this area. Here is one by IHL Group
https://www.businesswire.com/news/home/20180130005244/en/New-Research-IHL-Group-Shows-Retailers%E2%80%99-Cash-handling/?feedref=JjAwJuNHiystnCoBq_hl-fLcmYSZsqlD_XPbplM8Ta6D8R-QU5o2AvY8bhI9uvWSD8DYIYv4TIC1g1u0AKcacnnViVjtb72bOP4-4nHK5iej_DoWrIhfD31cAxcB60aE

They come up with a cost of 4.7% to over 15%. I'm not sure how correct this is, or if I fully buy the upper end estimate, but I think it confirms my thinking that cash is probabally 1%-2% in many instances.

[Rothman]

Don't tell me there are armored vans transporting cash from AutoZone and Olive Garden to the bank every night.

"Did someone say Olive Garden?"

-- Rothman, probably

Given how popular it is in areas that lack taste, I wouldn't be surprised if deposits warranted an armored truck in some instances.

[Scott5114]

Having also worked in a business that accepted a great deal of cash, I can say that we had an armored car come for the cash, and no manager was dropping it off at any bank. I see other armored cars at businesses, so I assume for at least those businesses they are paying for transit. For some smaller businesses I suspect the manager dropping it off at the bank is more common.

Banks also charge a fee to business to deposit cash above a certain amount. From NerdWallet.

I just looked at the terms and conditions of my business account and found no such fee in the fee disclosure. The only fees are based on the number of transactions performed per month above 200, or you can opt for a flat monthly fee. So if a business wanted to reduce the cost of processing cash, apparently all they'd have to do is switch to this bank. (This is the same bank the local casinos use, and I'm guessing that's why.)

I would also imagine that if you're regularly depositing enough cash in a bank that they're contemplating charging you a fee over it, you probably also have a direct line to an executive with the authority to waive the fee. (Or else you should switch to a bank that's small enough that you have such leverage.)

[freebrickproductions]

Having also worked in a business that accepted a great deal of cash, I can say that we had an armored car come for the cash, and no manager was dropping it off at any bank. I see other armored cars at businesses, so I assume for at least those businesses they are paying for transit. For some smaller businesses I suspect the manager dropping it off at the bank is more common.

Banks also charge a fee to business to deposit cash above a certain amount. From NerdWallet.

I just looked at the terms and conditions of my business account and found no such fee in the fee disclosure. The only fees are based on the number of transactions performed per month above 200, or you can opt for a flat monthly fee. So if a business wanted to reduce the cost of processing cash, apparently all they'd have to do is switch to this bank. (This is the same bank the local casinos use, and I'm guessing that's why.)

I would also imagine that if you're regularly depositing enough cash in a bank that they're contemplating charging you a fee over it, you probably also have a direct line to an executive with the authority to waive the fee. (Or else you should switch to a bank that's small enough that you have such leverage.)

I think it does largely come down to the business in question and how it's run. I know at Publix, we regularly had an armored van show up around the middle of the day to replace the money in the safe. I think they also handled the ATM on the side of the building?

[ZLoth]

When businesses charge the customer the 3% separately for using a card, they're just adding on to their bottom line because they can, and an insignificant amount of people switch their payment choice. That expense was already factored in to the product's cost.

The 3% additional charge is becoming more and more common at restaurants; I saw it both last night for dinner and this morning for breakfast.  I haven't accepted the practice; I pass that charge right back to the server in the form of a reduced tip.  A 20% intended tip on the pretax bill becomes closer to 16% because the 3% charge is applied to the sales tax as well.  Is it "fair" that I make the server pay?  Not really, but if management is adding this charge "because they can", I'm passing it on "because I can" as well.

It's when those mandatory fees "disguise" the true cost of the meal or service, that's the issue. In San Francisco, restaurants have been passing along the costs of the city-mandated health care fees as an mandatory surcharge instead of including it in the price of the meal and, gues what? Tips have gone down. The same with the hotels which advertise a certain per-night fee, but oh yeah, also include a non-removable "resort fee".

It is a very conscious choice that I make that I carry very little cash in my wallet... maybe $20. My checkbook, as a insecure fiscal instrument, lives in a secure place at home, and I am only on my second book of checks since I moved to Texas. The credit card I use has a higher interest rate (but I pay it off, so 12% of $0 carried balance is $0), but I have used the accumulated awards to pay for home appliance updates including a microwave (my mother carbonized a meal making it stink, requirement replacement) and a washer/dryer. So, eliminating some of those rewards programs may have unintended consequences as some of those rewards program help offset a chunk the cost of a family vacation.

[jeffandnicole]

When businesses charge the customer the 3% separately for using a card, they're just adding on to their bottom line because they can, and an insignificant amount of people switch their payment choice. That expense was already factored in to the product's cost.

The 3% additional charge is becoming more and more common at restaurants; I saw it both last night for dinner and this morning for breakfast.  I haven't accepted the practice; I pass that charge right back to the server in the form of a reduced tip.  A 20% intended tip on the pretax bill becomes closer to 16% because the 3% charge is applied to the sales tax as well.  Is it "fair" that I make the server pay?  Not really, but if management is adding this charge "because they can", I'm passing it on "because I can" as well.

It's when those mandatory fees "disguise" the true cost of the meal or service, that's the issue. In San Francisco, restaurants have been passing along the costs of the city-mandated health care fees as an mandatory surcharge instead of including it in the price of the meal and, gues what? Tips have gone down. The same with the hotels which advertise a certain per-night fee, but oh yeah, also include a non-removable "resort fee".

It is a very conscious choice that I make that I carry very little cash in my wallet... maybe $20. My checkbook, as a insecure fiscal instrument, lives in a secure place at home, and I am only on my second book of checks since I moved to Texas. The credit card I use has a higher interest rate (but I pay it off, so 12% of $0 carried balance is $0), but I have used the accumulated awards to pay for home appliance updates including a microwave (my mother carbonized a meal making it stink, requirement replacement) and a washer/dryer. So, eliminating some of those rewards programs may have unintended consequences as some of those rewards program help offset a chunk the cost of a family vacation.

The reason why we can travel as much as we have is because of those credit card reward points.  Now granted, I'm one of those people that earn the points via spending, not traveling.  But I purchase nearly everything I can on Credit Cards so my point totals rise fairly quickly (unfortunately that also means I'm spending too much, but I digress...).  And we don't carry balances, so I'm not spending money on interest negating the points earned.

In the industry, the companies would rather see users of their branded cards use them for spending at their locations, rather than just using the freebies they earned from general credit card spending.  But, hey, they allow it so it occurs.  Often.

As far as resort fees go, it's best to just factor them into the total price and pretend they don't exist.  The companies do it to reduce the fees they are charged from 3rd parties, such as Expedia and such since 100% of the fee goes to the hotel.  What probably pisses people off more is what you 'get' for such a fee, which people rarely use, or is included in most hotel stays anyway:  Free local calls.  Free coffee in the lobby.  Free Newspaper.  Free basic internet.  Free use of the elevator.  Complimentary shower water.  In-room safe.  Doors with hinges.  Uncomfortable pillows.  TV remote with slow response time.  Glass in window.  You get the idea...doesn't matter what they say - you were going to have it anyway.  Irocnically, one of the things often not mentioned is use of the pool.

In cities like Vegas where every main hotel on the Strip has a resort fee, there's not much one can do to avoid it.  But in some cities where only some hotels have resort fees and some don't, that $25 can easily sway people away.  At least it does for me.

[jeffandnicole]

Maybe I'm just a little shocked at how few people have noticed armored cars operating at businesses.  Or maybe that's done purposely - try to get to businesses during slow times when people are less likely to notice them. 

Don't tell me there are armored vans transporting cash from AutoZone and Olive Garden to the bank every night.

They usually don't pull up at night.  They operate during the day.  Deposits and till money are left in the safe overnight, and the next day are transported via armored car.  They also can provide money to the business to make sure they have plenty of change available.

Really...if it wasn't cash, I really want to know what the hell what Burger King was putting in those envelopes that made it so important for me to take them to the bank every day...

That's 1 business out of hundreds of thousands. These armored cars exist in every state, including states without casinos.  There's only so many banks in an area.  What your BK did doesn't mean every BK operates in the same manor.  $1,000 is also, well, small.  Go to a business where purchases are $50 - $100 each transaction rather than $5 - $10, and you'll probably get a different response as to how cash is handled.  Even if a minority of those transactions are cash, that's still a lot of money.  Supermarkets, department stores, drug stores, high-volume convenience stores, etc all will have a lot of cash on hand, more than what they're willing to give to any store employee to take to the bank. 

Different areas of the country do things differently too.  You mentioned the Commercial drive thru window, which is often the window closest to the building.  In this area, we rarely have 'Commercial' drive thru lanes - the window next to the business is for everyone.  I remember having a boss one time that had moved up from Florida, and he was constantly irritated at how different things were in NJ compared to FL when it came to operating businesses.  Obviously, the rest of us were used to it, but he never did come around - eventually he left and moved back south.

[Scott5114]

I dunno, if you want to believe that armored car transit is more common than it really is I don't really have a means to stop you. I don't doubt that it exists; I've seen it too. I just don't believe it's the default means of getting money to the bank. For every Walmart a town has where armored car transit makes sense, it has ten fast food joints, nail salons, and vape shops for which an armored car would be overkill.

[jeffandnicole]

I dunno, if you want to believe that armored car transit is more common than it really is I don't really have a means to stop you. I don't doubt that it exists; I've seen it too. I just don't believe it's the default means of getting money to the bank. For every Walmart a town has where armored car transit makes sense, it has ten fast food joints, nail salons, and vape shops for which an armored car would be overkill.

I haven't said a single thing you're insinuating.  Where did I say it's the default method of transporting money, or where every fast food joint, nail salon and vape shop uses them?  Would a McDonalds in Times Square use an armored car service? Probably.  Would a McDonalds in Chamberlain, South Dakota use one?  Less likely.

[kkt]

At least when it comes to brick-and-mortar stores, I've seen $10 minimums for credit card purchases more often than outright cash-only policies.

I've seen several physical sellers that change a fee for credit card transactions under $10.

[hotdogPi]

At least when it comes to brick-and-mortar stores, I've seen $10 minimums for credit card purchases more often than outright cash-only policies.

I've seen several physical sellers that change a fee for credit card transactions under $10.

This doesn't really make sense — credit is a percentage, while debit is a flat amount.

[kalvado]

At least when it comes to brick-and-mortar stores, I've seen $10 minimums for credit card purchases more often than outright cash-only policies.

I've seen several physical sellers that change a fee for credit card transactions under $10.

This doesn't really make sense — credit is a percentage, while debit is a flat amount.

Credit is a % with a minimum fee.

[ZLoth]

That's 1 business out of hundreds of thousands. These armored cars exist in every state, including states without casinos.  There's only so many banks in an area.  What your BK did doesn't mean every BK operates in the same manor.  $1,000 is also, well, small.  Go to a business where purchases are $50 - $100 each transaction rather than $5 - $10, and you'll probably get a different response as to how cash is handled.  Even if a minority of those transactions are cash, that's still a lot of money.  Supermarkets, department stores, drug stores, high-volume convenience stores, etc all will have a lot of cash on hand, more than what they're willing to give to any store employee to take to the bank.

Which brings me to a slight irritation... the ban on cashless business. If you accept cash, you have to keep enough cash on-hand in order to make change. That opens you up to possible theft due to large amounts of cash. Now, for some businesses like fast food restaurants, grocery stores, and laundermats, where the typical value of a transaction is low and the number of corresponding transactions is high, yes, it makes sense to accept cash. For other businesses where the value of transactions is high, they should be allowed to go "cashless" and accept credit cards or electronic transfers for payment to avoid the risk of cash theft. It's their business, let them face the consequences of their decision. Yet, the states of California, Oregon, Montana, Colorado, Tennesse, Pennsylvania, New York, Massachusetts, Rhode Island, Connecticut, New Jersey, and Deleware have told business "No, you must continue to accept cash."

Of course, you are also looking at the person who would prefer that the credit card processing machine be brought to the table and a pin entered to process a credit card transaction rather than put the credit card on a tray. (Some restaurants do provide a QR Code to pay at the table.) This is on top of the elimination of the easily-copied magnetic stripe in favor of the card chip.

[algorerhythms]

Of course, you are also looking at the person who would prefer that the credit card processing machine be brought to the table and a pin entered to process a credit card transaction rather than put the credit card on a tray. (Some restaurants do provide a QR Code to pay at the table.) This is on top of the elimination of the easily-copied magnetic stripe in favor of the card chip.

Living in a country where this is the norm, it's weird to go back to the U.S. where the waiter just takes your card somewhere and does something with it.

[jeffandnicole]

Yet, the states of California, Oregon, Montana, Colorado, Tennesse, Pennsylvania, New York, Massachusetts, Rhode Island, Connecticut, New Jersey, and Deleware have told business "No, you must continue to accept cash."

Although since the pandemic, sporting complexes seem to have a permitted work-around, where they only take credit, and cash people can go to an exchange machine to receive a debit card in exchange for their cash.  I think the Linc in Philly has 2 machines.  They have at least one at Citizens Bank Park in Philly also, but I've never seen it.