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SBE Council: The Cost of Cash

| SBE Council

CASH IS KING (of Hidden Costs)

Average cost of cash acceptance at a bar, restaurant surpasses 15%. Card and electronic payment options offer savings for many businesses, convenience and safety for consumers.

More businesses are shifting to cashless payment models. For many businesses, cash can be more costly, less secure, and inconvenient than electronic payments.  While most businesses offer a choice in payments, the movement to cashless payments is being driven by security, efficiency and cost-savings.

A recent Pew survey found 41% of Americans report using only cards to make their weekly purchases in 2022, up from less than 25% seven years prior. More than half of Americans between 18-49 report not worrying about carrying cash because “there are lots of other ways to pay for things.”

Why is cash expensive?

As the National Association of Convenience Stores (NACS) noted in an article titled “The Hidden Costs of Cash Management,” convenience stores pay employees 15-20 hours a week to count cash. NACS also reports full-time convenience store employees earn $14.33 an hour, meaning each store pays between $11,177 and $14,903 a year just to count cash. That is before calculating, according to NACS, other costs not present with card payments such as theft, safes or the cost associated with securely transporting cash from a store to the bank.

The IHL Group, a global research and advisory firm for the retail and hospitality industry, issued a report that found the cost associated with handling cash payments can run from 4.7% on the low end to more than 15.5% for bars and restaurants. For electronic payments, the cost can range from $1.43 to $4.40 per $100 transaction depending on the credit/debit or payment processor (VISA, MC, American Express, PayPal, Amazon Pay, or Apple Pay).

Cash costs can significantly outpace the costs associated with accepting and processing card payments, which also protects consumers from fraud and helps to lift “ticket spend” – the average amount spent by a consumer per transaction – for businesses. According to the 2023 NACS State of the Industry Report, the highest- performing convenience stores pay the highest amount of card fees, which demonstrates how accepting credit cards can generate more sales revenue and, ultimately, more profit.

Brick-and-mortar businesses are not the only ones facing high cash costs. Death Valley National Park stopped accepting cash payments after finding the park spent $40,000 to process $22,000 in cash entrance fees. This was due to the park’s remote location and 45-minute armored car ride to a bank.

Cash also creates security concerns. It can be risky to deal in cash because physical currency can be easily stolen. To prevent theft, businesses spend additional money on security measures such as on-location guards and armored cars for cash transport. Nevertheless, U.S. retailers lose $40 billion each year to cash theft.

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