Credit, debit, or cash…why care?

Ooo, your kisses
Sweeter than honey.
And guess what?
So is my money.
~Aretha Franklin, “Respect”

I was buying a bottle of amaretto to make truffles on Black Friday. I stopped by the liquor store (thank [insert deity here, if applicable] I don’t live in a dry county anymore). After I figured out what brand to get, I headed to the check out. “Cash, debit, or credit?” I used to work retail, so I’m accustomed to weird POS systems that require you specify. “Cash.” I complete the transaction and head out of the store. Out of habit, I check my receipt. “You saved 5% by paying with cash!” Ah, yes, I’d heard about this on the radio.

But why offer a discount for users of paper money?

Remember, I used to work retail. It was a small store, six employees max. It was there I learned that credit cards are expensive for retailers. A credit card company will snag a hefty fee for the “privilege” of accepting credit. This is why so many retailers request a minimum payment if you’re using credit. However, if the credit card company catches them doing that, they can have their “privilege” revoked. So the liquor store took a different route…instead of penalizing credit card customers (a five dollar minimum doesn’t discourage many in a liquor store, anyway), they reward users of cash or debit.

What’s the difference between using credit, debit, or cash?*

-The retailer takes a hit. Someone’s gotta pay for the fee, and the retailers usually pass the buck in the form of higher merchandise prices. Fees are usually a flat charge plus a percentage…hence the minimum charge rules. The bigger amount charged, the more profit the retailer has to offset the fee. Don’t get mad at them, though…it’s not their fault.
-The transaction doesn’t go through automatically. At least not with my bank. It can take several days before the payment goes through completely.
-You may find it less secure. Anyone can scribble a signature when you use credit.
-Cards that offer “rewards” may not be worth it. Remember, someone’s got to pay for all those. Here’s a hint: it’s not the bank.
-Different credit card companies charge different fees. If I recall, American Express and Mastercard are the two heaviest hitters.

-The retailer takes less of a hit. Debit costs less to process than credit, but more than cash.
-The transaction goes through automatically. I, personally, am a big fan of this. I don’t like having to look at a “pending” payment.
-You have to know your PIN. I find it more secure. On the flip side, if someone gets your PIN you may have a bigger problem than if it was a credit card.
-You can overdraw on your bank account and accrue nasty fees. Those of us with dual credit/debit cards have this problem, anyway.
-Some places don’t accept debit. This is where the dual credit/debit cards come in handy. Before I got one, it was cash or I had to use my straight credit card, and it made me unhappy.

-Almost no fee for the retailer. I’ve heard there’s a very minuscule fee from the bank, but it’s the cheapest form of payment, period.
-Transaction is finished immediately. And you’ll know what you have left to spend instantly.
-Much less secure. You can lose cash easily.
-No chance of overdrawing, going over your limit, or accruing fees.

Keep in mind that banks, retailers, and credit card companies have one goal: to make money. Some will try to come by it honestly, others not so much. Credit card companies are the most notorious of the three for scamming, swindling, and being generally assholish. My best advice in regards to credit cards: don’t use them. A credit/debit combo card, so long as the money all comes out of your bank account is fairly safe…you can get yourself into much debt with those. A straight credit card, however, can be a dangerous thing. Personally, I consider any charge made to a credit card as coming out of my bank account. That way I know I’ll have enough money to pay the bill off when it comes in and I’m not getting myself into debt. Never charge more than you can completely pay off when the bill comes in. I’ve negated this rule in the past (unemployed, out of money and food), but I paid my credit card off as quickly as possible.

In short, use cash when possible. Not only does it make the retailers happy, but it keeps you from getting hit with fees. If you don’t have cash, use debit. Only use credit if you absolutely have to.

*NOTE: I am by no means a financial expert. Most of what I know is general information gleaned from a variety of sources. It may be outdated or, in some cases, inaccurate. Different companies and different banks have different methods of doing business. I’m certain that the gist is accurate, but if you’re itching for exact details, contact or do research on your bank or credit card company.


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