Why Businesses Value Cash

Nov 13, 2023


While ‘swipe fees’ associated with card payments are largely hidden from consumers, business owners are very aware of them and face difficult decisions about how much they absorb—at the cost of their profit margin—and how much they pass on to customers.

NPR spoke to Victor Garcia, owner of Texas’s SolDias ice cream shops, who says he spent more than $25,000 on credit card fees last year, leading him to post signs at his two shops near Fort Worth asking customers to reconsider if they plan to pay with a card.

Image credit: Victor Garcia

The lack of awareness of transaction fees—which are considerably higher in the U.S. than in Europe, where regulations cap them at a lower percentage—is a problem felt most keenly by smaller enterprises. Many customers are not aware that they can help support small businesses by paying cash, which avoids the fees altogether.

Most are shocked [by the signs]. Half of them say, ‘Gosh, I have no cash. I wish I did.’ People don’t know. They just say, ‘Hey, I get points, so I’m going to use my card.’
"Victor Garcia, Owner of SolDias ice cream

Businesses are taking different approaches to card fees, with some adding a surcharge for paying with card that will cover the percentage—typically around 2.25 percent—that must be paid to the card provider for processing a sale. Many retailers simply raise their prices, meaning everyone covers the cost of card fees regardless of how they pay.

In general, these fees are just baked into the cost of everything we buy. Even consumers who are cash payers and maybe can’t even qualify for a credit card pay more for every good they buy than they really should. It is unfortunately a very unjust system, and one that’s hidden from most of us so that we really don’t even know what’s happening.
"Doug Kantor, Committee Member of the Merchants Payments Coalition

Swipe fees are determined by the Visa and Mastercard networks, which are dominant within the credit card processing market. Major retailers can sometimes make deals to secure lower fees, with Costco being one example of a company paying lower fees in exchange for only accepting Visa cards. The majority of businesses lack the power to negotiate concessions.

A bipartisan group of lawmakers is advancing a bill that would force credit card issuers to allow networks other than Visa and Mastercard to process payments, creating more competition in the card payments space. While this may see swipe fees reduced, however, they will continue to take a cut of business sales, meaning lower profits or—frequently—higher prices for customers.

The answer? Pay cash, to support businesses and help keep costs down for everyone.

Last Updated: Nov 13, 2023