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Comment by matthewdgreen | Hacker News Reader

I worked in a smaller, independent guitar store for a few years in the 90s. We received enough cash and checks that once a day someone would have to walk over to the “night deposit” slot and toss a bag in. Our cash handling cost was equal to my salary for the 30 minutes it took me to make that walk, plus the risk that I would get mugged ($0 lost over a few years.) Often the owner would rake out enough to cover his spending needs, so there was an additional (slightly illegal) tax benefit to using cash. Armored cars and pickup only comes into play when you’re a big store doing loads of transactions, and then economies of scale probably keep the costs modest as a percentage.

Credit cards, on the other hand, can easily run you 30% on a $5 transaction here in the US, due to the unjustifiable fixed + percentage structure. Maybe it’s a little better in Canada.

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Add to the cost of handling cash:

- dealing with fake notes,

- mistakes in handling notes and change (mistaking a ten for a twenty, etc.)

- theft from the store (not just mugging on the way to the safety deposit box)

- employee theft,

- reduced transaction capacity; cash transactions can take much longer (customers finding the cash, employee counting it, employee making can age)

- requirement to ‘cash up‘ at the end of the day (I.e. ensure the till takings match stock sold)

- occasional trips to the bank to get change (which must be during bank working hours)

For an independent guitar store some may not be relevant, but for some businesses they could be significant.

Your bosses' bank would have been charging him a cash processing fee. Easy to forget!

A quick Google and found Danske UK's small business fees, 80p per £100 (or 0.8%). Without all the other costs associated that I mentioned that your boss took a lot of risks not handling. Obviously stores that 90% of transactions actually happen in can't take those risks.

And that 30% for a $5 is totally made up, that's not the fees charged.

I'm not from the US or Canada, but UK, so the first Google result is Square's fee that say 1.4% + 25p, so on £5 that's 32p, or about 6%.

Obviously that's for small transactions.

https://squareup.com/help/gb/en/article/5068-what-are-square...

Obviously bigger chains won't be paying anywhere near that much.

My point was cash has processing fees, and gave people some context for that.

I checked my local US bank (Bank of America business account) and for business accounts the processing fee appears to be 0.3% with the first $5,000-20,000 per statement period exempted. That is approximately 1/20th of the card fee for that 5 pound transaction you gave.

I think it’s easy to treat a factor of 20x as just another number. But at a certain point quantity is its own quality: the difference between 6% and 0.3% is so large that the second one might as well be zero.

> Credit cards, on the other hand, can easily run you 30% on a $5 transaction here in the US, due to the unjustifiable fixed + percentage structure. Maybe it’s a little better in Canada.

Are you sure it's 30%? Credit card fees are usually in the order of 3% + minimum fixed charge. Stripe is 2.9% + 30 cents.

There are some extra charges for manually entered cards, international cards, etc. but even if you max that out it's still only 11.2%, not 30%.

https://stripe.com/pricing

You’re absolutely right. I was thinking of smaller transactions. It’s “only” 11% for a cup of coffee. For comparison in my high sales tax city the tax rate is 6%, and that funds a huge fraction of our municipal infrastructure

The owner was probably still paying fees for the cash deposits, even via the night deposit box.

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