Cash or Card

Tristan88

I have recently been seeing a LOT of shared articles online saying that using cash to pay for purchases and services is better for the merchant than using debt card transactions... These posts are usually linked to entire Facebook pages and websites stating as much.

This is incredibly frustrating to see as I do not believe this to be the case! Though it might have been at some point in the past.

These posts state that if I paid for a £50 meal in cash, that restaurant owner can then take that full £50 to the dry cleaners and pay for his dry cleaning bill. The dry cleaner can then take that full £50 to the shop and buy £50 worth of shopping and so on.

But if I paid by card, the card company would take a percentage of that transaction, which it would then do again to the restaurant owner when he paid for his dry cleaning and so on.

I believe what this post just seems to skip over is all the steps between taking cash and using it, like banking it, business tax and insurance for having cash on the premises (which would increase to cover the amount of cash held on the premises surely?)

You cannot just take £50 cash from someone as a business and not have to pay or declare anything??

I know there is a charge for card transactions(2.5% in some cases), but when you add all the costs and steps involved with actually handling cash, surely it at least balances out?

Add to that the fact that cash is not as safe as card transactions, for instance if someone steals £50 cash from me, they can use it wherever they like and it cannot be traced, which is why drug dealers and criminals tend to use cash rather than bank transfers?? 

But if someone stole my card, the first place they use it it is tracked, as well as every place they use it after that, but each time they use my card I get a notification on my phone saying I have spent money, at which point I freeze the card and report it as stolen, the bank and police would then have the exact time and location the card was used which would enable them the check CCTV footage of the thief. Even if they use the card online, nowadays most transactions above a certain amount require verification via your banking app, which unless they stole your phone and somehow managed to get your fingerprints, they would not be able to approve the purchase. And lets be honest, you can lose your card and not notice for a few hours (Or days in my case as I only use my watch for purchases nowadays), but if you lose your phone you will notice more quickly at which point you would also notice your card is gone, which is then a simple case of going to your bank and freezing the card.

I have searched this site and the web trying to find any articles that go into this in depth and have any kind of factual evidence to say one way or other, but I cannot find anything that looks into this topic... And I would really like to be able to confirm or deny these posts... But I cannot help but believe they are completely untrue.

Can you help?

tightauldgit

Most small businesses (including me) couldn't care less if you pay by cash or card as long as you are actually using us and the tiny difference between cash or card payments doesn't matter anywhere near as much as the decision not to buy something from Amazon or Tesco and actually use a small local business.

The kernel of truth is that yes card transactions take a cut of every transaction so cash is slightly better from that angle - and to be honest unless you are handling lots of cash then the costs of banking etc don't outweigh that. BUT handling cash is a pain because you need to have change to hand, and you need to take cash to the bank and nowadays your local bank can be 30 miles away, and it can easily be lost or stolen or pocketed by dodgy staff.

For that hassle factor generally I don't really have any preference for cash. The only real significant reason for a small business to prefer cash is so they can not declare some of it through the books and reduce their tax bill. But I don't think that making tax evasion easier should really be a reason to recommend cash.

In short, if Facebook groups want to know how to help small businesses they'd probably be better off organising a boycott of Tesco than trying to persuade people to use cash.   

JetpackVelociraptor

I've seen these posts. They originate from an organisation called "Turning Point", which is an american right-wing organisation, as per wikipedia: https://en.wikipedia.org/wiki/Turning_Point_UK. Given their background I think they would be very happy for everyone to dodge all the tax they can.

My personal experience in my family business is that cash or card makes no difference for us. Customers generally like having the convenience of using their card, phone or smartwatch to buy stuff. For high value orders, lots of people like the reassurance of using a credit card and the protection it gives them. Meanwhile my company pays a small % fee to process card payments and has a bank account set up to deal cheaply with incoming payments from the merchant service. Processing cash payments costs the same as you have to put them in the bank, and the bank charges us more to process cash. You have options as a business to choose an account that offers lower charges on cash payments in exchange for higher charges on other payments, but that doesn't work unless your business is mostly cash.

Or of course if you or people you work with don't pay taxes...

cannugec5

I have a small business making and selling homemade jam, both to local hospitality venues and at a farmers market. 

It amuses me that every market a customer will say something along the lines of ‘ I suppose you don’t take cards?’  and when I reply that actually I do, they proceed to pay with cash! 

I really don’t mind either way. Getting the sale is the important part. Businesses certainly don’t pay me in cash so having both is very convenient. 

goater78

A couple of local businesses to me have signs that say they prefer to be paid in cash as they lose out in card charges. 

donnac2558

The chemist I use for prescriptions etc has a notice saying cash only. If I want to buy something and don't have enough cash, have to leave cross the road and use the ATM.   Which is a hassle.

My hairdresser also is cash only.

jon81uk

goater78 said:

A couple of local businesses to me have signs that say they prefer to be paid in cash as they lose out in card charges. 

And there are other small businesses who moved to card only as the insurance for holding cash on the premises got too high following burglaries.

MattMattMattUK

I no longer work in the sector, but still now a lot of publicans and the situation for pubs is that cash is an expensive paid in the behind.

Card: Clear audit trail, money is in the bank account within two days, insurance is less, removes employee pilfering, removes cash handling errors, removes cash handling fees, removes the need to travel to a bank or pay for cash collections, quicker to process the transaction, minimal time to cash up, no on shift cash moves needed. Card costs in the 0.8-1.4% per transaction, lower than the costs of handling cash.

Cash: No solid audit trail, cash is only in the bank when taken to the bank, then takes a day to clear, higher insurance cost, risk of employees pilfering, prone to cash handling errors, cash handling fees, change fees, time to take cash to the bank, or having to pay for cash collection and change delivery, longer handling/processing time per transaction, requires time to cash up, on busy shifts multiple cash/change moves need to be managed. Total fees and costs for cash generally work out in the 2-4% range. 

Suppliers want paying by bank transfer or card payment so in most cases having cash is largely useless, it is not a way to avoid fees. Total cost of handling cash is higher than total cost of card transactions and cards are much easier to manage on top of that. 

mr_stripey

there's a couple of cash only pubs in our town. I deliberately don't use them as I prefer to pay by cash.

The only merchant who I have to pay cash is the barbers who stubbornly refuse to accept cards. I probably withdraw £20 a month for that. Everything else is on card and that suits me fine.

Belenus

mr_stripey said:

there's a couple of cash only pubs in our town. I deliberately don't use them as I prefer to pay by cash.

Had you been in the pub when you typed that?  

Albermarle

I am relaxed paying by cash or card, however I always have some cash on me. Partly from habit, but also I have been/seen a few situations where it still helps.
Card machine broke at our local swimming pool- cue weeping kids who could not get in as parents had no cash on them. 
Parking pay machine only worked with cash, as card payments not working/taking ages to authorise.
Kiosk at sports event only took cash .
Etc.

So it is not really sensible to go around with no cash at all ( in my opinion )