“Cash is expensive, we need to be using it less.”
This self-serving quote was made by Steve Perry, executive vice president of Visa Europe, in an article that appeared in the Telegraph in the United Kingdom. To justify this statement Perry says that supermarkets in the UK are introducing cashback, a program to promote the use of credit and debit cards over cash because cash is more expensive to handle.
It may be the case in the UK that cash is more expensive to handle, but in the United States, we are seeing consumers and some small businesses moving in the opposite direction. This past week, credit reporting agencies and the credit card companies reported that the average credit card debt has fallen to its lowest point since 2002. Delinquency rates fell by 17-percent to the lowest point since the start of the current recession. Americans are buying fewer items on credit and using what income they have to pay off credit card debt.
With the economy in a stall, the U.S. Mint exceeded its 2009 output in July 2010. And even before the August Federal Open Market Committee meeting, it was speculated that the Federal Reserve would order more paper notes from the Bureau of Engraving and Printing. Since the FMOC meeting, Federal Reserve Chairman Ben Bernanke said that the Fed will do whatever it takes to stimulate the economy.
Aside from the economy another factor turning people away from credit cards is the environment created by the banks prior to the implementation of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Public Law No. 111-24 [TXT] [PDF]), also know and the Card Act. Between the bill’s passage and recent enactment, the banks have been raising fees on consumers and businesses in order to make up for what they saw as a potential loss of income. Rather than make it better for the consumers in the spirit of the Card Act, the banks showed their bald-faced greed making the using of credit cards more expensive than cash.
Even though Canada is debating on eliminating its 1-cent coin and others are pushing credit card technology onto the smart phone, small businesses are looking to save the cost of credit card handling by offering a discount for paying with cash. Credit card processing costs from three to five percent per transaction plus account fees. Some small businesses are offering their customers a discount of their credit card processing fee if they pay in cash.
Receiving a discount for paying using cash is not a new idea. There was a time, before the Card Act, when gas stations used to offer one price for cash purchases and another for credit card purchases. However, the convenience of using credit cards at the gas pump made this option unattractive. Even though the costs for using credit cards have been added to the price of gas, the elimination of this dual pricing was welcome. Recently, some independently owned stations have been offering a discount for using cash or for using the company’s credit card. The psychology of receiving a discount may make dual pricing more palatable in this environment.
As people are pulling away from credit cards, small businesses are looking to cut costs by offering discounts for paying with cash, and even with the rise in savings rates, it appears that the report of cash’s eventual demise appears to be greatly exaggerated. For numismatists, this means that our hobby will continue to grow with new, fresh material for years to come. And considering the bad economic news, this is good news. Happy collecting!