Is Cash the Least Costly Payment Method?

    Dec 10 2015

    Topics: Cash Handling

    Many small businesses don’t accept credit cards, and others do so begrudgingly only to stay competitive by offering their customers the wide variety of payment options that they expect while buying goods and services.

    The fact is retailers believe that cash is the least costly payment method. After all, when they accept cash, they don’t have to pay high monthly processing fees like the ones associated with debit and credit. But these monthly fees are explicit and obvious, which is why merchants consider electronic processing payment methods to be costlier.

    You might be surprised to hear this, but cash can actually be the most expensive way to let your customers pay. You just don’t realize the true cost of handling and managing cash because the costs are hidden—the full expense is often a mystery to even the most diligent CFOs.

    Accepting cash can be very advantageous to merchants. It allows for immediate cash flow. It doesn’t require the implementation of POS terminals, card processing communication lines, or payment-processing services from an acquirer. You definitely don’t have to pay per-transaction fees when it comes to cash. And to the less technologically advanced business owners, it’s just simpler.

    But don’t be fooled. It’s not all advantages, benefits, kittens, and rainbows. The costs of accepting payment aren’t exclusive to debit and credit.

    There are risks and high costs involved in accepting cash. And these make it a very expensive payment method.


    One of the biggest expenses of handling cash comes from the hours of labour your employees spend every day on counting, sorting, reconciling, and depositing the cash that comes in from transactions. The average retailer spends 15 hours of labour each day on cash handling. This can easily result in over $60,000 a year, and even more for bigger establishments. Suddenly, those credit card fees don’t seem so high, do they?

    It takes more time to process cash transactions than card payments. And then it takes even more time in the back room to sort bills and coins by their denominations, count every single nickel, and reconcile your day’s profits. If an error occurs, then even more time is spent double counting and finding the mistake. All of this time really adds up.

    Human Error

    Card processing machines are accurate. They’ll get the right total every time. There’s no change to give back, so there’s no worry about paying out more money than you were supposed to. And since the funds are deposited into your account digitally, there’s no risk of miscounting your profits, losing some bills, or misreporting your totals.

    Accepting cash, on the other hand, is rife with error. It’s easy to mistake a $5 bill for a $10 dollar bill. It’s easy to lose track of a whole roll of quarters before depositing it. It’s easy to get distracted while counting at the end of the night, when you’re distracted, tired, and ready to go home.

    All of these errors will result in losses—and those losses can be pretty significant. They come out of your pocket.


    While there are minimal risks that come with accepting debit and credit, robbery, employee theft, and counterfeit fraud are all serious risks that come with accepting cash. It’s pretty easy for your employees to slip a few bills in their pockets when you’re not looking. It’s also easy to accidentally accept a high-quality counterfeit bill. Again, these become your losses. And to manage these risks, you’ve probably invested in a highly secure vault, armoured car services, and security cameras—and these are all added costs to accepting cash.

    Though debit and credit card fees can seem pretty high, if you process large volumes of cash, have poor cash management processes, and haven’t integrated cash management solutions, then accepting cash can actually be the costliest payment method.


     How to Improve Your Business With An Automated Cash



    Andrea Lombardi

    Andrea Lombardi

    Andrea joined the CashTech team upon its inception in 2003. Learning the business from the ground up, she now utilizes her expertise in account management, planning, and negotiation while managing the daily operations of CashTech’s sales, marketing, and logistics departments. Andrea holds a bachelor’s degree from the University of Western Ontario. She enjoys travelling and has a passion for personal fitness, including obtaining her kettlebell certification. Andrea lives in Toronto with her husband and two young sons.

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