General Ramblings on the Value of Cash Vs. Credit

It's the Holiday weekend and many of us are out and about (trying to stay cool for the most part) or maybe just huddled at home in the pool, or some of you are likely out at the Lake. Regardless, this is something we've seen floating around that we thought worth a share.

Last night we were at one of our favorite local eateries, and they are now adding a small surcharge on top of all orders paid with a credit card versus cash. I'd seen non-profits do this to help recover the costs of using credit to pay for sales or donations, but rarely a for-profit business. However, in this climate of what seems to be never-ending financial pressures, who are we to criticize a small business for doing what they need to do to stay profitable? Small businesses have endless financial burdens to meet such as payroll, taxes, rent or mortgage, licenses and fees, utilities, all sorts of regulations, and vendors who can change prices on them without notice for their essential goods and services they need to provide what they do for us - their customers.

Which then brings us back to the value of cash versus credit. Much of our world has moved into a 'cashless society' in what seems to be an unstoppable force of the future. But what is the difference, and does it actually matter?

Please note, the below has been pulled and edited from the world-wide-interwebs so we therefore cannot and will not vouch for it's accuracy. This is a 'make you think' moment, not a 'hard news' one. Here we go:

Why should we pay cash everywhere we can with banknotes instead of a credit card?

- I have a $50 banknote in my pocket.

I go to a restaurant and pay for dinner with it. The restaurant owner then uses the bill to pay for the laundry. The laundry owner then uses the bill to pay the barber. The barber will then use the bill for shopping. And so on.

After an unlimited number of payments, it will still remain a $50 bill, which has fulfilled its purpose to everyone who used it for payment and the bank has not profited from any of the cash transactions made.

- But if I come to a restaurant and pay digitally - card, and bank fees for my payment transaction charged to the seller are 3%, around $1.50 for that same $50 purchase. The same 3% fee will apply for each further payment transaction if also done via credit instead of cash. The payments made by the owner of the laundry shop, or payments from the barber, then the shopping done by that owner - if done by credit instead of cash will not be as profitable.

After 30 transactions (valued at $50 each), the initial $50 represents only $5 of profit, and $45 has been now made by the banks thanks to all of digital transactions and fees.

Small businesses need your help and this is one way to help ourselves too.

Consider pulling small draws of cash out at a time and use that instead of tap, credit, etc.

When this is put into perspective, imagine what each retailer is paying on a monthly basis in fees at 3% per transaction through their POS machine. If they have, for example, $50,000 in sales and 90% are by card, they are paying $1350 in fees in one month, $16,200 in a year. That comes out of their gross profit every month.

This could go a long way to helping that small business provide for its family.

It's something to think about folks, and we thought worth a share on a lazy Holiday Sunday. Everyone enjoy and be safe - and don't forget to shop local as much as we can in Boulder City!