TELECOM Digest OnLine - Sorted: Re: Touch Tone Grocery Shopping - Promise Never Realized?

Re: Touch Tone Grocery Shopping - Promise Never Realized?

Robert Bonomi (bonomi@host122.r-bonomi.com)
Sun, 13 Aug 2006 05:21:47 -0000

In article <telecom25.291.11@telecom-digest.org>, R. T. Wurth
<rwurth@att.net> wrote:

> hancock4@bbs.cpcn.com wrote in news:telecom25.290.8@telecom-digest.org:

>> Ironically, today supermarkets do take credit cards which annoys me
>> since it adds to the cost of the food. Indeed, pizza places, fast
>> food, and convenience stores take credit cards too.

> I'm pretty much a cash shopper myself, but I do wonder about the
> economics of credit cards vs. cash and checks.

> Disadvantages of cash or check/advantages of credit:

> 1.) Banks charge big cash depositing businesses a counting fee to
> deposit cash.

> 2.) Banks charge businesses a fee to deposit checks.

> 3.) Merchants bear the risk of bad checks, but for a fee can hire check
> guarantee companies to screen their checks at the point of sale and
> guarantee payment of those it approves.

> 4.) Banks charge fees to big customers for rolled coins and wrapped small
> bills used to make change. (What a racket--banks charge on both ends of
> the transactions!)

> 5.) Counting the cash tendered and making change slows up the line,
> perhaps enough to require adding staff.

> 6.) Stores were already required to put in electronic card-based
> payment systems as part of food stamp conversion from coupons to
> electronic cards, (either convert or lose all the business of food
> stamp customers) so none of the infrastructure costs are attributable
> to credit cards. (Note to non-US readers: food stamps are an
> agriculture subsidy/welfare program, whereby the poor receive
> coupons/electronic credits that can only be spent at qualified food
> merchants for the purchase of qualified foods (no liquor, candy or
> soda) processed in US factories from US agricultural products.)

> 7.) Handling all that cash poses several theft risks (embezzling
> cashiers, embezzling managers, armed robbers), and imposes increased
> security costs (installation of time-lock safes, armored car service
> fees).

> 8.) For merchants who require presentation of a physical card,
> validate the transaction with the issuer's clearing house and collect
> a customer signature along with a card imprint or magstripe data, the
> merahcnt's bank makes funds available at the close of the current
> business day and guarantees payment with no chargebacks for
> counterfeit or stolen cards (unless there is clear evidence of fraud
> that the merchant was in on). (Chargebacks from customer disputes are
> a separate matter).

> Advantages of cash and checks/disadvantages of credit cards

> 1.) Credit card clearing houses charge a considerable percentage fee on
> transactions.

> 2.) Disgruntled customers can generate chargebacks far after the date
> of the transaction, which also trigger the merchant's bank to assess
> penalty fees.

> Where does the balance of these factors lie? I have no idea, but it
> seems to me it's not necessarily the no-brainer in favor of cash over
> credit most folks would make it out to be. Is there anyone reading
> this looking for a subject for a thesis in economics? You are welcome
> to take this idea, research the numbers and run with it.

Most merchants would 'prefer not' to take credit cards. The 2-3% (minimum)
that card-issuers/clearinghouses charge _is_ a big bite out of profits.
Grocery stores, for example run a profit margin of about 4%. Either they
give up *half* their profits, or they raise prices.

Unfortunately, in many businesses, accepting 'plastic' is a "business
necessity -- too much of the competition does, and a significant share
of business will 'go elsewhere' (to somebody who does take plastic),
if you don't. You've got the 'unpleasant' choice to make, between
losing business, and losing profits.

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