When people talk about handling cash, they forget about the annoyance of handling coins. More time was consumed tracking these 5 everyday pieces. Also, we had the security issues of locking up and depositing cash. People miscounted change, so shortages were a fact of life. Problems had to be dealt with like were any 20's counterfeit, Internal theft was always a concern. So in the end, we calculated the loss we took on accepting credit cards was better than accepting cash, unfortunately, we couldn't go cashless, but certainly wanted to go that direction.
Cash Free On-Board - Open Discussion
Posted 08 June 2018 - 05:52 PM
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- jis likes this
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Posted 13 June 2018 - 11:00 AM
Maybe it's different for multinational corporations, but the situation for small businesses is crystal clear: cards have a high fee cost to them, cash has no costs at all.
Except cash does have some costs, even to small businesses. It's just that those costs are typically in time and increased risk rather than in specific transaction costs. Cash still needs to be brought to the bank, change needs to be brought back from the bank, and there's always the chance of theft with cash (someone raiding the register drawer, stealing a deposit envelope/pouch filled with cash, etc.) Going to and from the bank takes time, and theft risk is real. The difference is that for most small businesses, the owner goes to the bank anyways (they may not have a setup to process checks electronically, and they still need/want to accept checks.) Theft risk isn't mitigated, but it's reduced as the deposit is typically done by the owner (so there's less risk of internal theft) and it happens rarely enough that it's not seen as a transactional cost of taking cash. Credit cards have fees on every transaction, and it's easy to see the cost, where the cost of cash transactions is almost a sunk cost and relatively static (and seen as low, as it affects time to some extent but not the amount of cash they have.)
Once a business gets beyond a certain size, especially once there's a number of physical locations, that calculus changes. Internal theft becomes more likely, armored car services may need to take the place of simple transactions at the bank itself, etc. That all costs money, and at that point the cost of a credit card transaction is seen as pretty comparable to the cost of dealing with the cash.
And then at some point you get large enough to have mass-scale electronic attacks to relieve you of your electronically-recorded money, and those losses start being larger than cash losses. :-P
There's always problems. I've found that cash is better if you need a guarantee that you can actually buy or sell something promptly, and credit cards are better if you don't really mind random failures and rejections requiring retrying the transaction a week later.
- cpotisch likes this
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