Comment by whoisburbansky
2 years ago
It plays out this way because anything anyone buys with a credit card, reward card or not, ends up costing 2-3% more than it would otherwise have, because of interchange fees. If you have a rewards card, the CC issuer turns around and gives you, say, half of that back (1% cashback on everything) and keeps the rest. It's kind of like a tax break that you only qualify for if your credit score is above a certain threshold, but you have to pay into regardless of income/credit score.
> ends up costing 2-3% more than it would otherwise
This is a very simplified view. Cash handling is not free. Fraud levels with cash are different. Overall attractiveness of a small but cash-only business is different.
The alternative to credit cards that charge 2-3% fees shouldn't be cash, but rather debit cards with close to zero fees.
Cash handling isn't free, but a digital transfer that doesn't have rewards is obviously cheaper than a credit card.
Debit txs are not free. For big ($10B in assets) regulated issuers they are pretty low, but for everyone else they are close to 1.9%
[1] https://usa.visa.com/content/dam/VCOM/download/merchants/vis...
Debit cards get arbitrarily rejected. Some gas stations won't process them. The IRS ID verification for Covid stimulus wouldn't work with debit.
if the credit card merchant was able to extract 2-3% for using their network, what makes you think that a free debit card with low/zero cost wouldn't also be owned by the same credit card merchants and force the same fees to maintain their monopoly?
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There is a reason every concert and sports venue near me has gone cashless. It's not because they enjoy giving away 2-3% of their revenues but rather those places aren't active every evening and tend to turn over employees quickly. Handling cash is expensive and risky in that environment.
In a concert and sports venue concessions environment you're also prioritizing throughput much more than most businesses. Being cashless helps with throughput a lot - the employees don't have to wait for people to count their money, then recount it, and spend time making change.