Yes, I’m that guy who charges his order off the dollar menu. Why? Because with tax it always ends up being $1.09 or some other terrible amount, and what am I going to do with $0.91 in change? All of a sudden the $1 double cheeseburger pretty much cost $2. Although it is nice, three years down the road, to add up all your change. It’s like finding free money. But at the time of the transaction, it’s really annoying.
So I like credit cards. Some prefer debit cards, and I think this is a mistake for a few reasons:
- Using credit cards can help build your strong credit report.
- When you pay them off each month, it’s always 0% interest.
- With debit cards, the money is gone from your account immediately. Even if you’re not earning interest, why not let the credit card company float that money for 30 days instead of you? Then if some emergency comes up, you’ll still have money in your account.
- Credit cards offer an additional layer of protection between your bank account and the outside world in terms of fraud, liability, and identity theft. Debit cards are directly linked.
- The rewards programs for credit cards are typically stronger than for debit cards.
- Credit cards often come with additional perks, like rental car insurance coverage or extended warranties on purchases. To my knowledge, debit cards do not.
- For me, I prefer to minimize the number of transactions on my checking account. Instead of pinging my account each time I make a debit card purchase, I can consolidate a month’s worth of purchases on my credit card, and then make one payment from my checking. Personal preference.
Other reasons why businesses should like electronic transactions:
- Easier, more accurate accounting.
- Cleaner.
- Less theft.
- Less counterfeit risk.
- Customers spend more.
Why the government likes credit cards:
- More accurate accounting leads to more tax dollars.
- They essentially “privatize” currency, meaning the government didn’t have to spend any money printing the money or creating the coins to fund the transaction.
- To a certain extent, customers spending more is good for the economy.
But there are some drawbacks to a plastic nation.
- Customers spend more than they would if they had to pay cash.
- Some people don’t pay off their cards and get buried in debt. Never really thought about it before, but it’s the interest payments from those people that are paying for my free flights on rewards miles. Oh well, no one forced them to spend more than they could afford.
- When enough people use credit cards, stores start passing along the processing fees to the customers, raising the price for everyone. This especially hurts the people who for whatever reason can’t get a credit card and have to pay cash. Typically the store pays a monthly fee to be able to accept credit cards, and then a $0.20-0.30 fee per transaction, plus another fee of 1.5-2.5% of each credit card sale.
Those fees are the reason you’ll see stores that don’t accept credit cards or institute a minimum order requirement. So maybe McDonald’s is only collecting $0.79 for that $1 cheeseburger. Surprisingly, I can only think of some gas stations that list a separate price for cash and credit customers. You’d think more businesses would jump on that, but I’m sure they have their reasons not to.
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Tags: economics
As someone who is for a cashless society, I agree with you about the advantages of credit cards over debit cards and cash itself. As a former taxi driver I have always thought that it would be far more safe, secure and convenient to totally get rid of cash. The government will collect more taxes and fund more programs for society and its ever growing needs. Every state and local police force will find it easier to apprehend criminals because not having cash will mean that every transaction, both legal and illegal, will leave an electronic fingerprint. The banking system and businesses will find that the cost of managing, counting, securing and transporting cash will be a thing of the past. This will lead to cost savings and efficiencies throughout national economies. Thank you.
thanks so much for this! I had an assignment to write an article about cashless societies and this helped immensly! But i do think that eventualy a contactless cashless society will effect retailers. I dont know if you have that in the US yet, but because the technology is expensive the retailers are effected. Thanks again, this information helped alot!
You all have no idea how close you are to losing all your protection under the Bill of Rights when America goes cashless. No privacy, you’re tracked everywhere you go and the government can freeze your account anytime they want. Identity thieves will still have easy access to your electronic funds for as long as there are ways to override your bank’s security. Better think about this before you agree to it.