Credit cards and cash have their place but the story being told doesn't track with experience.
First, businesses are increasingly differentiating pricing between cash and credit card - this is most obvious in gas stations where the price you see on the big sign is the cash price and not what you practically end up paying. Or the various restaurants and other businesses that offer cash discounts. While this is relatively new, the earlier manifestation of this is the credit card fee - eg try paying your tuition or utilities using a CC and you'll immediately find this option costs more.
Interestingly all the above usually hover around 3% so it's tellingly the rate the merchants themselves perceived CC use and infrastructure cost them.
Second, credit cards are clearly good for business volume. Most people have had the experience of wanting to buy something unplanned and not having the cash on them, but buying it anyway via credit card. On a larger scale, hard to imagine on-line shopping without a credit card.
Third, I don't find cash-only businesses cheaper. In my town there's a cash-only barber, pizza place, and ice cream shop and they cost just as much as the credit card taking ones. In every case the dynamic is there are long running businesses with sufficient clientele that they never bothered, but they don't use absence off CC fees/infrastructure to generate a consumer savings.
Fourth, poor people can play the point game too. As a broke college student I was very fond of my Exxon Mobil card that gave me cheaper gas. Now I don't really care about an extra ten cents on a gallon as much.
I was confused by this (because I rarely carry cash) until I saw your response below. I think OP might be using credit/debit card interchangeably? I don't use my credit cards unless I have to, but my debit card is used daily.
Are you in the U.S.? As an American I use a credit card for nearly 100% of my purchases, on a daily basis. I pay my bill in full each month. I might pay a 2–3% surcharge on a subset of those purchases, but I am reasonably sure I get more than that back in rebates. My Amex offers 2% back on groceries and the grocery store doesn’t charge extra for credit card purchases.
I basically never use my debit card for anything but ATM transactions, and the only time I have any cash in my wallet is when I have recently gone to a cash-only bar or to Las Vegas.
Literally between posting the above and now, I went to a rural bike ride with my family. Didn't bother to bring cash. Ended up riding past an antique shop and bought my son an old school tractor toy via Google Wallet.
I just use debit cards and Venmo for everything. I’ve never understood why I’d use a credit card when I can just use the debit card and pay no fee. I’ll never afford a house anyways so the credit score argument is meaningless to me.
Our family uses credit cards for everything. We don’t pay fees, the merchants do. We get the benefit of being able to settle disputes easily, getting cash backs, having extra insurance on certain goods, and not having to carry any easy-to-lose cash. We don’t spend more than we can afford, and we pay in full at the end of the billing cycle.
One big reason to use credit card is that it gives window to settle problems. You have month to charge back before have to pay bank. If hotel places hold, it comes out of the credit limit not your bank balance. If someone makes fraudulent transactions, it isn’t your money and you can still pay rent.
If you pay the balance on time, you are getting free liquidity from the bank. But they get if you don’t pay off the balance.
As I understand it the cc company takes the fee money from the buyer and it's usually more than the cash back and gambles with it until they give some cash back to the buyer and then pockets the rest. If you have millions of those transactions taking place then you have a huge pool of gambling money available. They also hold the sellers money for a while usually longer than necessary to also boost that pool. Edit: a less cynical view is that you are essentially loaning that money to the credit card company and then it pays you back but it keeps the interest
//Edit: a less cynical view is that you are essentially loaning that money to the credit card company and then it pays you back but it keeps the interest
It's literally the opposite. The credit card lends you money for free - if you pay your bill every month.
That's the "credit" in "credit card" - they are extending a line of credit to you, not the other way around.
There are plenty of credit cards in US with 2% cashback on any transaction and no fees if you pay bills on time (usually 20-30 days after statement closes). Some of them even throw in small sign in bonus.
So we're on topic: as the article points out - I use cash back cards so other people (like you) subsidize my spending. There are other major benefits to using a CC but anyway..
You are, apparently, well-off enough to have enough money in your venmo/checking where you don't think about it too much but I think the OP was referring to the less well-off but common situation where you are spending a little over your current ability - be it physical cash on hand (not your situation) or the amount available in your account.
I honestly don’t know what you’re talking about. I’m juggling a few hundred dollars in my checking account all the time. Is that well off? I don’t think so.
In the US debit card fees are capped (https://www.federalreserve.gov/paymentsystems/regii-average-...). The cap is low enough that there isn't enough to fund rewards like we see on credit cards. IIRC there were debit card rewards when they first came out but those went away with the fee caps.
First, businesses are increasingly differentiating pricing between cash and credit card - this is most obvious in gas stations where the price you see on the big sign is the cash price and not what you practically end up paying. Or the various restaurants and other businesses that offer cash discounts. While this is relatively new, the earlier manifestation of this is the credit card fee - eg try paying your tuition or utilities using a CC and you'll immediately find this option costs more.
Interestingly all the above usually hover around 3% so it's tellingly the rate the merchants themselves perceived CC use and infrastructure cost them.
Second, credit cards are clearly good for business volume. Most people have had the experience of wanting to buy something unplanned and not having the cash on them, but buying it anyway via credit card. On a larger scale, hard to imagine on-line shopping without a credit card.
Third, I don't find cash-only businesses cheaper. In my town there's a cash-only barber, pizza place, and ice cream shop and they cost just as much as the credit card taking ones. In every case the dynamic is there are long running businesses with sufficient clientele that they never bothered, but they don't use absence off CC fees/infrastructure to generate a consumer savings.
Fourth, poor people can play the point game too. As a broke college student I was very fond of my Exxon Mobil card that gave me cheaper gas. Now I don't really care about an extra ten cents on a gallon as much.