Cash Costs Businesses More

[Lee]

With card payments having overtaken cash and checks as a payment option in the US last year, analysts and governments in several world regions are evaluating the direct costs and benefit of plastic payments. Analysis of merchant costs for payments in various retail sectors led researchers Daniel Garcia Swartz, Robert W. Hahn, and Anne Layne-Farrar to conclude that “payment cards appear to cost society less than cash”, according to the Paying With Plastic.org web site. Large cash transactions are almost twice as expensive as card payments, but again, cards benefit banks in terms of fees and float on credit transactions.

Regardless of transaction size, signature debit is identified by the researchers as “the cheapest payment method to society as a whole”, with cards “generally cheaper to society than cash or checks”. At discount stores like Target or Wal-Mart, cards and cash benefit society equally, but checks are more expensive at the two defined purchase sizes of USD 10 in cash for groceries and USD 125 for an electronics purchase by check. Ultimately, the analysts found the net cost to society for PIN debit and credit cards to be similar to cash for small transactions, and much lower than for cash or check use for larger payments.

Cash was “by far the most expensive instrument to society at either transaction size”, but the researchers found checks to cost much the same as signature debit transactions. Debit cards, initially issued as a cheaper payment option than cash or checks, are now a commodity and banks that levy fees on debit transactions may incur a customer backlash. Ken Howes, of Edgar Dunn & Co, has also advised that if merchant fees were levied on the basis of costs incurred by banks, a shift to more efficient payment types would occur, but debit would benefit due to being cheaper than cash or checks at amounts of USD 12 upwards.

http://www.epaynews.com/index.cgi?su...215212&block=1

Ive always wondered if it was true whether it was more cost effective for businesses to drop cash transaction altogether i guess it really is :eek:

Regards,

Lee

[gaystoryman]

That is interesting, one of the major outfits up here, Costco won't take plastic due to the cost of operation, bank fees in other words... kind of shows the difference between the two countries or maybe its just the regulations.

nice info. thanks.
Ian