If it’s a small business and I have cash, I pay with cash to save them that charge on the credit card or debit card. It doesn’t cost me more to pay then in a way that helps their bottom line.
Did you read what i wrote above? They may not understand it, but cash costs them something to process as well, and it could be more than the 3%. It’s possible, even likely, that by paying in cash you are costing them more than if you use a card – but you’re helping them evade taxes.
A lot of people are very poor right now. I am not going to judge anyone who is struggling to get by, who pays their staff in cash, gets paid in cash, or goes to restaurants that only accept cash.
Once again, you’re falling for the “right now” fallacy. It’s always the case that it’s a “struggle to get by”. Now is no different. When things “improve”, are you going to “judge people differently” and use your credit card more? They are insisting on cash so they can avoid taxes, and you are assisting them in that illegal behavior. Don’t try to sugar coat it with that “I’m help the poor workers”. That’s a load.
BTW that “BMW” thing is not coming from “big business” BMW. It’s the dealer. But it is meaningless in the context of this discussion anyway – paying for a $6000 BMW oil change has nothing to do with illegal tax avoidance one way for the other – in that case, unlike a small restaurant, it’s clear processing a check is no different in cost than processing a credit card. And do you pay your BMW oil change bills by cash? I doubt it.
I understand where you’re coming from, but the speed limit analogy isn’t exactly a good one. There are mostly two speed limits – the posted limit and the real limit. Modern roads are engineered to safely accommodate traffic at speeds well above the posted limit. But legislatures know that to keep speeds below that real limit, given human behavior, it’s necessary to establish posted limits well below that safe point. That’s why (1) there are those posted limits but (2) they are essentially never enforced. It’s only when one speeds beyond the “real” limit that enforcement kicks in. An imperfect but workable solution to keep traffic safer. However, that logic doesn’t apply to taxation. There is no “posted” taxation rate vs. “real” tax rate. There is only one tax rate and we are all obligated to abide by it.
We can argue about how much higher restaurant prices would be across the board if there were no hanky panky. But I’m confident it would not be anything remotely like enough to give diners any pause about eating out. Taxes aren’t that much in the context of the full range of business costs, so if they were fully paid it couldn’t force prices up all that much. But since profits are a small fraction of costs, tax cheating can have a more significant impact on profits and be a temptation to cheat. But cheating it still is. And the key is it wouldn’t be necessary if everybody were to conform to the law, and prices were forced up just a little; it’s poor enforcement that allows it to persist.
For customers yes. But there are only two reasons restaurants insist on cash only. One is the mistaken belief it is cheaper. The second, the real one, is to cheat on their taxes. And you can sometimes see that by the fact that they also refuse to accept debit cards, which don’t cost them the fee.
Debit cards in US do have fees for the business
Also sometimes a place will take cash only then have an ATM machine prominently placed & you are charged a fee for using it.
Not sure in other countries this applies only to my knowledge of US.
@johnb Since you brought up taxes, I do know the IRS wants to charge me a fee to use a credit card to pay my estimated taxes, but no fee if I do an ACH (wire)/e-check.
I found it kind of funny that they want me to pay a fee, to pay them tax, on my money… feels almost like double taxation.
To avoid my brain exploding, I just do the ACH (wire)/e-check option to make my estimated tax payments.
I know someone who was an IRS auditor for many years. They audited a lot of restaurants…
Any business I deal with that requests ‘cash’ does not want a debit card, does not want a check, they want cash money. A lot of businesses are doing this now, way more than just restaurants. Not sure how the IRS will be able to enforce the reporting of ‘cash’ as they don’t have enough people to monitor the typical cash businesses even now. Although maybe if they digitize cash…
I wanted to enact a policy like this about 20 years ago at some establishments I was involved in, my CPA gave me a “hard NO” on the idea. At the time his stance was offering a discount for cash would be a lightning rod for an IRS audit, thus I never did. Now I send him every single article or evidence of the policy to him and demand he refunds me all the lost revenue.
( No I’m not holding my breath, but when he does piss me off these are the checks he gets. Yes, I literally made him cash / deposit this check)
AFAIK that difference is not due to regulation. The underlying processing cost to banks for both credit and debit card transactions is actually very low, and pretty much the same for both.
Yes there is a big difference in the processing fees they charge, but AFAIK it is because the banks experience certain losses on cc’s that they don’t experience on dc’s, and the differing fees relate to that.
They charge higher fees to merchants for cc’s to cover losses from a certain percentage of eventual defaults, which don’t happen with debit cards because with them the money is, well, debited from the user’s bank account immediately anyway so there no risk of loss to the bank. But credit cards are actual loans which in some cases never get paid back.
That in turn is why they offer cash back and airline miles on (some) credit cards but never on debit cards. Those who have a good credit rating are the ones who can get those “reward” credit cards; the banks can offer rewards to those clients because they know those with a good credit rating are far less likely to default, so they can offer the card at a “cut rate” to them, which they achieve via the rewards, not by a different merchant fee.
So the merchant fee for cc’s is way more than for dc’s. This tells you that businesses who refuse to accept debit as well as credit cards are not doing it to save money on fees, because for debit cards there is no material saving. They are doing it to hide revenue, which they do mostly so they can cheat on their taxes. There is no other rational motivation to refuse debit cards.
Well, that’s a little different. The IRS doesn’t accept cash anyway, but their cost of processing a check is tiny compared with their cost of processing a credit card fee. They obviously have no business incentive to accept credit cards, and for them it would be a real cost to do so. Last I heard, the IRS doesn’t try to evade taxes
IIRC, my state will accept a debit card for a tax payment, but not a credit card obviously (without you covering the fee). In any case, a direct ACH transfer is the generally the way to go – it’s what I do too.
With the footnote that this does not apply when the card is being used as a guarantee, e.g., to rent a car, or establish an online selling account. In these cases, the money is not debited right away, so a credit line is needed. (My father needed to rent a car, but had no credit cards. Even when he offered to put up a deposit of the value of the car, the company wouldn’t budge. Eventually, he called the president of the college where he taught and the president was able to convince the company to take his credit card as guarantee.)
this thread has a lot of humor. obviously many posters have never run a business that relied on plastic for payment.
why do rental cars (and others) not accept debit cards? because a debit card is only good for the amount in the account at the time the debit card is charged.
charges/costs ‘after the fact’ on a closed debit account… are a problem.
debit cars charge less fees than credit cards. simply because debit cards do not have “losses” - putting more on a debit card than is in the account . . . debit card refused.
my personal recommendation is: do not never ever use debit cards. anything goes wonky, you have zip comma zero legal protections - credit cards are seriously more “protected” from a consumer point of view. for the anti-crowd: forget it - issues with debit card charges are resolved exclusively by bank policies - which may not coincide with personal interests.
eateries doing cash only and tax avoidance… if the IRS decides you need a full blown audit, they will be tracking your expenditures vs your declared income.
if you’re buying $100,000 of beef from supplier X, but only selling $10,000 dollars in beef . . . you got a lotta 'plaining to do…
totally avoidable - buy cash from every supplier of everything you need . . . slightly not manageable, but technically possible. you’ll be paying top dollar for local cash purchases which makes creating a profit even more troublesome.
waitstaff not reporting tips… only goes so far. again with the audit schufft . . .
x many hours, compared to colleague hours,+local+national averages . . .
cheating works to a degree, but not anything close to 100%
Here’s another one: I recently had to pick something up in a locally owned smallish South American grocery store. I charged it & didnt notice any kind of sign stating there would be a service chg for using a credit card. Noticed it when I took the receipt out of my wallet: they added a $1.85 fee! Will think twice about shopping there (it was for a hard to find ingredient for a Passion Fruit dessert).
True, but again, that’s a little different. In the rental car example, it’s not a choice between cash and plastic; it’s between two different forms of plastic. As Tom also points out, debit cards won’t work for large deposits because the available amount is limited by the amount the person has in his bank account. Credit cards do work because the limitation is the amount of the credit line, which for most people is way more than what they happen to have in their bank account. The rental car place simply places a hold on a large amount of your credit card’s limit, and if they have to bill it later they get their cash from the bank, and the bank has to get it back from you; they’re not gong to let you drive off in their car only with your bank account as guarantor. If they need to collect, they get it from the bank, not from your account which by then could be drained anyway. As an aside, cash wouldn’t work because the counter at your local rent-a-car place isn’t set up to accept and guard, pick a number, $20,000 in cash. Moreso, if it’s a one-way rental, how would the renter realistically get his deposit back? Theoretically possible, but in the real world not gonna happen.
