https://www.cashtechcurrency.com/blog/infographic-breaking-down-the-cost-of-cash-in-retailConsumers often debate the pros and cons of using cash vs. debit vs. credit to make a payment. Some banks charge them fees to use their debit cards. If they use a credit card, they can buy now and pay later, but they have interest fees and annual fees to worry about.
But consumers aren’t the only ones trying to figure out which is the most desirable option. Merchants face their own costs from accepting cash, credit, and debit in order to meet consumer demand in this competitive sales environment.
If you’re wondering which payment method is costing you more, consider the unique costs associated with accepting debit, credit, and cash. As some costs are more obvious than others, the answer might surprise you.
The Cost of Accepting Debit and Credit
To accept debit and credit, your establishment needs to have adequate technology in place. This means you’ll have to acquire payment-processing services from your financial institution or a third party and you’ll have to rent or buy point-of-sale terminals, as well as pay for upgrades, maintenance, and repairs on these machines. You’ll also need to pay a monthly fee for the card network communication lines. These are your fixed costs.
Then there are the variable costs. And these include a set fee for every debit card transaction as well as a percentage fee for every credit card transaction. In addition, you may have to pay a minimum monthly charge and a flat transaction fee for accepting credit cards.
However, this is where the costs end with debit and credit payments. On the up side, you’ll benefit from increased efficiency and lower labour costs and you won’t have to pay for coin wrappers, bill straps, armoured car services, or other costs associated with accepting cash. Plus, these options reduce your risk of employee theft and counterfeit fraud and they allow for greater accuracy, so you can reduce your risk of losses due to human error.
Moreover, by offering your customers the option to pay with credit cards, you can enhance your opportunity for sales by enabling them to make purchases that might not have occurred otherwise, particularly when it comes to larger, more expensive purchases.
The Cost of Accepting Cash
Though accepting cash as payment might seem like the most advantageous option, because it eliminates monthly fees and allows for immediate liquidity, it actually has a very high cost and comes with unique risks of robbery, theft, and counterfeiting, as well as the risk of human error during the cash handling procedures. Labour costs are higher for cash payments because your employees have to manually count, sort, reconcile, store, and deposit them throughout the day. There are also the costs of secure storage, security measures, and investments in counterfeit detection training and technology in order to reduce risks. In addition, financial institutions charge fees for cash deposits and withdrawals as well as coin ordering. All of these expenses of cash handling add up considerably, and make it the most expensive payment method.
You might be surprised to hear that accepting cash is more expensive than paying credit and debit fees, but considering most of the expenses are not priced explicitly, you might not recognize the full costs of cash handling. Luckily, you can invest in cash management solutions to improve your bottom line by reducing the costs associated with accepting cash.