We all understand that there are costs associated with accepting credit cards, from processing fees to those dreaded chargebacks. But what many merchants might not realize is the same holds true for cash transactions. There are costs involved with handling cash, and some of these costs can be quite substantial.
For starters, there are basic administrative expenses involved in dealing with cash. For example, the analytics and consulting firm Strawhecker Group estimates that the average retail store spends between 200 to 500 hours of labor per month counting, safeguarding and preparing cash for transfers to a bank.
Also banks don't provide their services for free. According to the Strawhecker Group, banks often charge up to $150 per month to handle a store's cash and coin deposits.
Then there is the unfortunate reality that cash gets stolen. In fact studies show that cash theft is the second highest reason for losses at stores. In the same research by the Strawhecker Group, it shows that employee theft for companies with up to 500 employees averages $342,000 annually. Another sad reality is that thieves are known to target businesses that seem to have a lot of cash on the premises. A full cash register is a very tempting enticement to many bad guys.
There is also the problem that counterfeit money introduces. It's a much bigger concern than you might realize, and especially worrisome to merchants because stores that receive counterfeit money bear much of the burden of being victimized by a counterfeiter. For example they are not compensated by the government with a genuine bill after receiving a fake bill. Instead they must rely on insurance to recoup their loss. If they have no insurance, then they have to absorb that loss.
So altogether, while it might seem at first that cash payments save you money, in the long run they require their own significant expenditures. Research conducted by Square shows that when you add up all the cost associated with handling cash, the total expense can range from 4.7% to 15.3% of a business's revenues. That's certainly a lot more than the 1 to 2% fees associated with payment cards.
Remember too, cash payments might be more convenient for you, the merchant. But that's not necessarily the case for your customers. More and more customers are choosing plastic because of the convenience it affords them. It's why trips to the bank and ATMs are becoming less and less common. People don't need nor want to carry around as much cash as they used to because of the ease, simplicity and safety offered by payment cards.
Of course there are still plenty of good reasons to continue to accept cash. For one thing, some states and cities require it. Also no retailer wants to be seen as discriminating against cash-reliant customers.
Still, the future of retail purchases is very much trending toward a cashless society. This has been particularly true during the COVID-19 epidemic as consumers look to minimize activities that might expose them to the virus.
The more you analyze the true costs of cash as well as consumer trends, the more accepting one should be of payment cards.
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