Why Paying in Cash Could Cost You Extra
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Here's your money briefing for Friday, June 7th. I'm J.R. Whelan for The Wall Street Journal. Paying with cash used to be a way to get a discount at a store and avoid paying credit card processing fees. But consumers paying with paper money are being hit with fees as well.
For some businesses, it is more cost effective to avoid those credit card processing fees and just take cash. But for other businesses, it's more of a hassle. And so they're cutting that part completely out.
We'll talk to Wall Street Journal personal finance reporter Oyin Adedoyan after the break.
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Consumers who want to make purchases with cash are often hit with fees. Wall Street Journal personal finance reporter Oyen Adedoyin joins me. Oyen, the Federal Reserve says that cash was still the third most popular form of payment after cards and mobile devices last year, accounting for 16% of all spending.
What is the episode about and who is the guest explaining cash fees?
Who's still using cash and why?
A lot of people are still using cash, predominantly older people, people who just prefer cash for small transactions here and there. It's still a really popular payment method, especially amongst people who are maybe lower income or get paid primarily with cash.
I guess maybe people who just don't have credit cards?
Exactly. And so that's who financial advisors refer to as underbanked or unbanked. And there's a lot of people in this country who don't have an association with a particular bank or don't have access to debit or credit cards. There's another group of people who prefer to use cash and they have debit and credit cards. I spoke with a lot of them and they say that cash just feels more anonymous in a way. They often feel like when they spend money on a credit or debit card, that's a transaction that's being tracked. But when they spend cash, they feel like they could spend it anywhere. It's also really helpful for some people to budget. Once they spend a certain amount of cash on hand, they know, OK, that's it.
That's been my limit for the day. Versus when you're swiping a credit card all day, it's really hard to know how much money you've spent.
Oh, it's so easy to swipe plastic.
Absolutely. It's painless.
How about young people like teens who might not have credit cards? What happens when they want to pay cash?
young people are virtually underbanked. And I spoke with many parents and they said that it's been tough sending their kids to zoos or amusement parks or concerts, many of these places that have gone cashless since the pandemic because they have to wrestle with, should I give my kid my credit card for the day? Should I give my kid my debit card for the day? Should I just let them Venmo their friends? I spoke with one parent who actually gets a prepaid debit card for her son every summer when he goes to camp. And she says that they charge her a $6 activation fee just to get the card started.
Just to start the card?
Absolutely. And she says, you know, throughout the summer, her and her husband are adding even more money to the card, loading it up as their son needs it.
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