Is cash-only good or bad for businesses, customers?
For some local businesses, credit cards aren't worth the hassle or the cost. Consequently, more entertainment spots – particularly restaurants and bars – want payment in cold, hard cash.
When Ruby Erickson, co-owner of The Soup House, 324 E. Michigan St., purchased the business with her mother three years ago, it was already cash-only, and so they decided to keep it that way.
"I just don't think it's necessary for us to take credit cards. Our transactions are for very little amounts: $6, $7, $8," says Erickson.
Erickson says not having to work with credit card transaction companies makes her job easier. She also appreciates not having to deal with malfunctioning credit card machines.
"We try to keep things simple over here. Old school," says Erickson.
Michael Schmidt is the business development manager for SwipeWorks, Inc., a company that works with Wisconsin-based small and medium-sized businesses with the mission to provide cost-effective credit / debit card payment options.
According to Schmidt, the overall cost of accepting credit cards for most businesses is between 1.75 percent and 3.5 percent or more. He understands the impact the fees could have on some businesses, but on the flip slide, believes businesses miss out on sales when they are cash-only.
"Studies have shown that the average ticket is higher for a credit card sale than a cash sale. Even for quick-service type restaurants, consumers paying with plastic are more likely to purchase the add-ons such as sides, and up-sells like specialty beverages," says Schmidt, the former owner of the now-defunct burger and custard chain, Bella's Fat Cat. "I definitely saw that to be the case in my former life as a restaurant owner."
Kaitlin Larson says she spends at least $100 a week at bars and restaurants and is very annoyed when she can't use a credit or debit card.
"When I go out, I don't bring a purse. I just want to tuck my card somewhere and not have to worry about carrying cash or anything else," says Larson.
Sometimes, bars or restaurants with a cash-only policy have an ATM installed on the premises so customers can access money if they were unaware of the policy. Some customers, however, do not find this adequate.
"Why should I pay an extra $3 or $4 to get cash? Shouldn't the restaurant pay for the transaction on their end?" says Larson.
Woodman's Markets has had a no credit card policy since it opened its first location in 1978. In 2004, the company started to accept debit cards along with cash or checks. Although some customers grumble, it works for the company because, it claims, that policy is in part why the stores are able to keep prices low.
"I don't doubt that a lot of businesses have good intentions," says Schmidt.
There are quite a few small, family-owned pizza restaurants that are cash-only including Lalli's Pizza, 8826 W. North Ave. and Maria's Pizza, 5025 W. Forest Home Ave.
Centro Cafe, 808 E. Center St., started out as cash-only with an on-site ATM, but switched to accepting credit cards about a year and a half ago.
Ruth Weill is the front-of-house manager, as well as a bartender and hostess, at Centro and has worked there since it opened in 2009.
"Customers were super happy when we made the change. Some understood our cash-only policy, but most, I think, were kind of annoyed," says Weill.
As mikeb said, when a business is cash-only, it is much easier to conceal profits from the IRS. ESPECIALLY when you have an ATM on the premises, which not only gives your customers the cash they need to pay you (while charging them $2.50 per transaction), but also is an available resource to help launder your money. Convenience for your customers... or having to send around 30% of your earnings to Uncle Sam... difficult decision.
Places like Soup House are almost worse then bars that don't accept cash because if I'm paying $5 for soup it's super annoying to use their ATM, which I pay a fee on in addition to the fee that my bank charges me for using another bank's ATM. Suddenly my $5 soup order is $10.
The Soup House on Michigan in Downtown is cash only. But, they have an ATM. Overall, though, since I rarely carry cash I don't go to the Soup House as much as I would 'cause it's just easier to pay with a card.
"Why should I pay an extra $3 or $4 to get cash? Shouldn't the restaurant pay for the transaction on their end?" says Larson. You already are paying extra when you use plastic. All of the swipe fees are a cost of doing business and those costs are added into the purchase price of each item and/or service that the business provides. The banks are making huge profits from the swipe fees therefore, the users of plastic are actually paying the fees to the banks. Small businessis have a more difficult time absorbing the additional costs and therefore genuinely appreciate cash transactions. In addition, a cash transaction can be accomplished in far less time than one involving plastic. p.s. Swipe fees on debit cards are higher than on credit cards.
It is a lot easier to conceal cash from the IRS. Can't do that with credit card payments.
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