Are card fees causing high street inflation

[Karimbo]

For the record. I never ever had cash business.

But, why does everyone just presume any business that is cash only is evading tax?

A lot of these small takeaways that have long standing reputation still refuse to take card and operate in cash. Or are cash only for transactions below £10.

Everyone just says they are a laundering operation or tax dodging.

Not many people know this but these small card payments have disproportionately high card fees because of the fixed rate + percentage.

On a £4 transaction the card fee will be 26p. On an £10 transaction its 35p. 20p+1.5%

I wonder how outlawing the discriminatory card surcharges has cause inflation on the high Street, where average transaction values are £5-£10 and businesses have to increase their prices to retain the margins.

Even though I've never been in a position to take cash. I will always defend businesses on the high street who limit card payments any way thry can.

 

[Kerwin]

I haven't used cash in years. If I came across a business that was cash only I simply wouldn't be able to shop there. There is no way I would use an ATM to get cash just for one transaction.

 

[WaveJumper]

I have always said I would love to have been the person in the room that said "hay I have a great idea, lets make a plastic card that people can carry around and use to buy services and products with, and we will charge them a ridiculous amount of interest and we could also charge the retailers a percentage for accepting our card" what do think guys would this idea work. I bet that person got a nice little promotion.

 

[pentel]

hay I have a great idea, lets make a plastic card that people can carry around and use to buy services and products with, and we will charge them a ridiculous amount of interest and we could also charge the retailers a percentage for accepting our card

And so many people have fallen for this......

 

[Karimbo]

---

I haven't used cash in years. If I came across a business that was cash only I simply wouldn't be able to shop there. There is no way I would use an ATM to get cash just for one transaction.

as a business owner, i do the opposite. i always carry cash and pay with cash in small independant stores. I used to be that person who had an cashback card and would earn 4p on a £4 transaction while screwing the shopowner out of 26p with card fees.

the card fees on certain items may well be more than the VAT

 

[Bobbo]

I will always defend businesses on the high street who limit card payments any way thry can.

Businesses are of course free to do that, but they have to accept that in this day and age doing so is also limiting their customer base.

I usually have a single note in my wallet (which really is a card holder) but I am loathe to break it - last did so to get £1 coins for the pub pool table - but I think even those can be paid by card in some places.

 

[Mark T Jones]

Direct answer to your question - they are undoubtedly pushing prices up somewhat, so yes, will have some small impact on inflation.

There is however a broad assumption here that small businesses prefer cash, which hasn't been my experience.

My wife is often paid in cash. She'd rather card or bank transfer but knows that it's never a good idea to put up barriers to payment. As a result, she tries to pay in cash whenever we go out. Surprisingly often, small businesses either won't take cash, or will try to nudge us towards card payment.

In January, she had the odd situation of needing to pay a big wodge of cash into the bank to pay her tax bill - a process that involved a 25 mile round trip & a 40 minute wait in the bank.

 

[Paul Kelly ICHYB]

On a £4 transaction the card fee will be 26p. On an £10 transaction its 35p. 20p+1.5%

That's by using someone like Stripe.

Using a proper merchant account can reduce that to below 0.3% (no tx fee).

I went to a food market over the weekend (twice, in fact) and only one of the vendors (out of 6) took cash - all of the others (and, I understand, most of the 40 vendors) were card only. At the time, it was a pain for me as I had cash and couldn't be bothered to visit the bank to pay it in.

In a couple of my businesses, I take cards & cash. Every transaction is recorded. Cash only does look dodgy, even more so if there isn't a proper (till/epos) receipt. Lots of my clients lose business because they are cash only and no matter the amount of persuasion, they are happier with lost sales than they are 'letting the man know they are selling things'. A very sad, old-fashioned view of business.


BTW, I don't think these fees bear any relation to inflation.

 

[Paul Carmen]

No they're not. Card fees have been around for a long time, it's likely this is having either no impact on inflation, or at worst a tiny one.

Although you could argue that fewer people carry cash, this has been a gradual change and pales into insignificance compared to energy price increases, raw material price increases, food price increases, labour/hourly minimum wage rate increases etc.

In many smaller towns, and for many mobile type business, paying by cash is a real pain. You have to worry about floats, change and security for cash. Plus, either make long time consuming trips to the bank or post office, or pay for a security company to pick it up if you have high turnover.

 

[bovine]

Current trend across the majority of our customers is about 75% card, 25% cash. Some are just taking card and its working well for them. As has been stated, the card rates quoted arent representative of the rates most can achieve.

But dont forget the cost of handling cash. At the point of sale there is a risk of error and/or theft which means actual cash taken doesnt exactly match in drawer totals. Back in the day as a pos engineer (and sometimes even now) whenever you take out a cash drawer you then have to collect up all the coins sloshing around in the base. Sometimes the odd note found its way over. Nowadays there is the cost to pay in the cash at the bank, and lets not forget the time/salary cost to go to the bank to pay it in. Or the costs to get it collected. Time counting up the cash at end of day also adds up.

So the reality is there are costs to handling cash which are not as in your face as the % rate. But speed and accuracy of card should not be discounted. A pos with integrated card machine should be accurate and fast (most pos providers are not fujitsu!). End to end transaction time with a customer should be reduced increasing throughput.

To summarise, no I do not agree with the OP. And having been in this for a long time and I used dealt with the types of customers who mostly want to take cash and even worse dont have a decent pos system, there is a very good reason for that. They would openly tell us, or at least alude to it. Now we sell only systems and not basic cash registers we dont come across them thankfully, but they are still out there. Not all, but too many. Some even had pos systems that could be "adjusted" to alter sales figures but hmrc got wise to this and got some laws tweaked. Some pos companies got into a lot of bother from selling sales suppression software.

 

[WaveJumper]

I think the reality is a very large amount of people are living well beyond their means and racking up a lot of debt. We already hear in the press some have maxed out cards trying to keep a roof over their head or the heating on.

I get pretty annoyed with the cards offering cash back, my own bank at the moment is sending daily emails trying to get me to "upgrade" my account to this new all singing dancing one, that has a host of wonderful offers, which obviously I don't need, and want to charge me for it.......... how about they just reduce the interest on the card and bank transactions

 

[japancool]

Card fees, in and of themselves, will not cause inflation. The percentage part means they will go up in proportion to the price increase, so won't cause any extra inflation (in terms of percentage), and in fact, because of the fixed fee element, means they go up in a *lower* proportion.

You were paying £100 before, the card fee was, let's say at 0.6%+20p = 80p.
You pay £120 now, the card fee is 92p.

In other words, price has gone up by 20%, but the card fee has gone up only 15%.

 

[IanSuth]

But dont forget the cost of handling cash. At the point of sale there is a risk of error and/or theft which means actual cash taken doesnt exactly match in drawer totals. Back in the day as a pos engineer (and sometimes even now) whenever you take out a cash drawer you then have to collect up all the coins sloshing around in the base. Sometimes the odd note found its way over. Nowadays there is the cost to pay in the cash at the bank, and lets not forget the time/salary cost to go to the bank to pay it in. Or the costs to get it collected. Time counting up the cash at end of day also adds up.

Son's beer festival last week - £17.5k on the night - all transactions at a single secure point cash only, punters buy a strip of £10 of printed vouchers, bar staff have a pen around neck and just draw line through tokens to value of the drink.

That was in an SU where otherwise it is pretty much card only, but they didnt want to get terminals and an account for a 3 day event. cash could be paid into the uni cash office via night safe at end of evening and as they were selling from the cloak room hatch for the student nightclub and had security at the door was great. Entry to the event was able to be bought online via their student portal thingy or with card in the queue at a wall mounted terminal as that went through the uni beersoc account - for some licencing reason the drinks couldnt be done the same way.

As all transactions were in multiples of £10 and only 3 people had access to the actual cash it was great for an event with a lot of workers. Think they did about £40k over 3 nights (and a sat afternoon session)

 

[Bobbo]

Son's beer festival last week - £17.5k on the night - all transactions at a single secure point cash only, punters buy a strip of £10 of printed vouchers, bar staff have a pen around neck and just draw line through tokens to value of the drink.

That was in an SU where otherwise it is pretty much card only, but they didnt want to get terminals and an account for a 3 day event. cash could be paid into the uni cash office via night safe at end of evening and as they were selling from the cloak room hatch for the student nightclub and had security at the door was great. Entry to the event was able to be bought online via their student portal thingy or with card in the queue at a wall mounted terminal as that went through the uni beersoc account - for some licencing reason the drinks couldnt be done the same way.

As all transactions were in multiples of £10 and only 3 people had access to the actual cash it was great for an event with a lot of workers. Think they did about £40k over 3 nights (and a sat afternoon session)

Went to a beer festival with a similar tokens style payment system once.

Upside of system like that is unredeemed tokens end up as free money for the organisers!

Though the only reason I ended up with unredeemed tokens is due to catching on that a pint cost 6 tokens and you got a pint, whereas a half pint cost 3 tokens and you generally got at least 3/4 of a pint.

 

[Karimbo]

I think the reality is a very large amount of people are living well beyond their means and racking up a lot of debt. We already hear in the press some have maxed out cards trying to keep a roof over their head or the heating on.

I get pretty annoyed with the cards offering cash back, my own bank at the moment is sending daily emails trying to get me to "upgrade" my account to this new all singing dancing one, that has a host of wonderful offers, which obviously I don't need, and want to charge me for it.......... how about they just reduce the interest on the card and bank transactions

I am getting loads of market letters from capital on tap, a 1% cashback credit card for business. you can get your 1% back in vouchers - a perk they advertise which I presume is a nod and a wink to tell the buyer it would be essentially tax free because hmrc will never know about it.