You would be wrong in that assumption. Some businesses don't like paying the additional fees charged by banks when you use a credit card, they can be up to 8.5% according to a friend of mine that runs a locksmith. He would rather give 8.5% more service to the folks who come in the door. He has an ATM on site that will let you get a cash advance on your credit card if all you brought was plastic. It has a $3 transaction fee (plus what ever your bank charges). When people complain he says, "you can pay it or you can pay it." Then explains that he (like everyone else) would simply raise his price making that fee 'invisible' to you and let the banks get away with it. This way you have a choice (of sorts).

Your friend's rates seem a bit crazy. Square charges under 3%, and a dedicated merchant account can be less still.

Fees are nowhere 8.5% I've never heard that and have had a merchant account since the 80's at several businesses.

Not taking credit cards will cost you business in a retail location.

He's showed me bank statements, things like 'points' and 'cashback' and other 'features' of the card all seem to come back to the merchant as deductions against the amount billed vs the amount payed. He summed up the total billed (what he charged at the register) and the total deposited, and computed the difference, that difference was 8.5% rounded to the first decimal place.

Sure if he's doing small transactions but in general you shouldn't be allowing people to use a credit card to make a $2 purchase, right?

What is defined (in this thread) as "most cash businesses" would be to me businesses that would typically allow someone to pay with a credit card.

That wouldn't be a local bodega allowing some to pay for a pack of gum with a credit card. It would be a business allowing cc use in a typical case where the per transaction charge is not significant and you don't stand to loose business because you don't accept credit cards.

Examples:

You run a restaurant and your average ticket is $45. If you don't accept cc's you will generally loose business.

You run an ice cream stand and your average ticket is $5. Less expectation of being able to (or needing) to use a cc for a small transaction like that. Chance of loosing business: significantly less.

Entirely possible. for a long time in California it was illegal (state law) to require a minimum purchase amount in order to use credit cards I believe (but can certainly be mis-remembering) that this was only recently changed. And yes, his business does include a lot of 'small' transactions like someone coming in to get a key made etc.

On a related note, Fumiko Hayashi [1] has done a lot of research on the fee structures (much under the question of how one would regulate them and what constitutes an out of balance fee structure) but her papers are pretty accessible.

[1] http://www.kansascityfed.org/speechbio/hayashi.cfm

The actual fee charged could be close to 8.5% if you are charging mostly small transactions b/c they usually charge a percent plus a flat $0.30 fee.

Say you charge the customer $5: 2% + $0.30 is $0.40--8% of the total.

It depends on your transaction amount, the fees can easily exceed 8.5%. When I had no change the other day and paid 45 cents at a parking station with a credit card I can guarantee the fees were more than 8.5%.

We're talking about merchant fees here. Not what a credit card user pays etc.

That's exactly what I meant, I paid $.45 but the city likely paid $.31 in fees. Braintree for example would run 2.89% + $.30. That's a very high percentage (69%).

I always assumed it was to avoid card swipe fees. Margins at small restaurants can be incredibly thin, so a percent or two off each transaction could make a big difference.

Credit card fees cost money and credit card companies don't let retailers charge a higher price for credit card transactions, so the retailer has to get the hit.

However if your plumber or tradesperson gives a lower price for cash, then that's probably tax evasion.

Cash can be spent immediately, CC receipts not so much.

In the case of CC you'll get a payment 30 days later, so in VISA vs. cash, you're not getting the interest on the money, if you need to use the money you'll have to pay your bank interest, and you'll pay a processing fee on top of it.

About the only advantage CC has is that it's difficult for employees to steal from the register, so instead they steal the magstrips.

"In the case of VISA you'll get a payment 30 days later, so in VISA vs. cash, you're not getting the interest on the money,"

Wha? I get my Visa money within a day or two.

Amex and Diner's Club were the bad ones in my experience--regularly taking 30+ days to pay.

Avoid CC fees.