Cash versus credit story

[Dan in MI]

I may mess this story up as I couldn't find an original, so I had to use my rusty memory, but you'll get the idea. (I hope)

CASH

A florist goes to the local garage to get some work done on his car. The bill is $100. He pays with a $100 bill. The garage mechanic owes the baker $100 so he hands over the $100 bill to the baker. It just so happens the baker owes the butcher $100. He uses that same $100 dollar bill to pay the butcher. The butcher owes the cobbler a $100 so he in turn he pays the cobbler. And finally the cobbler owes the florist a $100 and pays him. In that one day the same $100 bill paid off five debts just by switching hands and returning to the originator of the payment chain.

CREDIT

Now this time the florist pays by credit card. The CC company charges 3%. The mechanic now has $97 to pay his hundred dollar bill. He must add $3 of his own money to make the full $100 payment to the baker. He also pays with a CC. Now the baker only gets $97 too. So when the baker pays the butcher, he has to add $3 to cover his bill, which he pays with a CC. And so on down the line. By the time the $100 dollars gets back to the florist there is only 85 of the original $100 left. The other $15 was taken by the CC company and the difference made up from each person's personal savings at every transaction. Everyone loses with a credit card.

Now this was written before a business would also charge the 3% up front. That means there is the potential lose up to 6% on every transaction.

 

[Wvfarrier]

Many business charge the consumer that 3% cc fee. So in essence the consumer is paying $103 for an item priced $100 (not including sales tax)

 

[375hh1973]

Still rarely use cash.

Have some on me for emergencies. Also some hid in truck.

Its been there a loooooong time

 

[contender]

To many people,, that 3% isn't seen,, so they don't care. But to a company,, that 3% multiplied by tens of millions of customers adds up to a LOT of money. And guess what that company is,,? The CC companies.
Ever wonder WHY they are willing to accept the scammers & not try & prosecute them? It's a small cost of doing business, AND they can go up on their "fees" occasionally.

 

[gjgalligan]

A lot of companies just incorporate the 3% into the price to begin with. That way it looks like they are not charging the CC users extra but they are actually making 3% more off the cash payers.

 

[GypsmJim]

The $100 bill is barter. Everyone owed everyone money. Everyone paid their bill and all were satisfied.

The CC scenario is basically the same thing. Everyone got paid and all were happy. HOWEVER, they all used a bank to facilitate the transactions. To that end, the bank made a justifiable profit of $15 for their services.

In the end, we all have to decide whether losing 3% of our money is worth the convenience.

 

[flyer898]

When purchasing items other than face to face, I get a lot for the 3% cost of using a credit card: I get some fraud protection, I get insurance against damage in shipping, I don't stand in line at the post office to buy a money order, and I don't spend money for postage and tracking. I think I get pretty good value for my 3%.

 

[Bear Paw Jack]

What people are missing is, now, they have made the credit card payment at almost 25% interest. Credit card companies spend millions advertising credit cards to you. Every one I know claims to make their credit card payment before the interest is added. But millions of people have credit card debt and lots of it. Warren Buffet has said that if you have credit card debt, you may never get it paid off. The debt will double every (roughly) three years. Truth is if you wait to pay your credit card bill when it comes in the mail, you better look closer to see how much interest was included.
Hence I carry cash, and pay with cash, except utility bills and I use a check.
Not arguing that it's hard to buy a plane ticket or rent a car without a credit card, and as soon as I buy a ticket, I go to the credit union and pay it off, even if it's just pending.
Bottom line is, credit card companies are literally getting rich off someone's credit cards.

 

[JackBull]

When ever I make a big purchase or paying for service I offer cash, no one gives a discount for cash. Looks like costs are built into the system.

 

[gjgalligan]

What people are missing is, now, they have made the credit card payment at almost 25% interest.

I haven't paid any CC interest in close to 20 years. If I don't have the money to pay the bill at the end of the month then I don't charge anything.
Since I got out of debt it has been surprising how much more money I have in my pocket.

 

[Dan in MI]

I have never had a CC bill with interest, expect for a one time lost check in the mail, since 1996. I have heard of a reason that doing this is bad and I can see the logic. You still often buy more when you drop the card versus cash.

 

[GypsmJim]

Bottom line is, credit card companies are literally getting rich off someone's credit cards.

That's true, but the people that are paying the CC companies are the ones that lack fiscal responsibility.

If you are just plain poor and need the credit to exist, then I get it. But all too often people are just living beyond their means because it's just so easy.

If you use the card only for necessities and pay it off in 30 days, then YOU are the one that is making money off the bank.

 

[Cofaler]

A restaurant I frequent in town shows a cash price and a card price on the bill. The owner told me he was 'eating' about $55,000 in fees a year in CC fees. I pay cash around town and mail checks for most things, but still use the convenience of debit cards for monthly bills.

 

[GypsmJim]

When ever I make a big purchase or paying for service I offer cash, no one gives a discount for cash. Looks like costs are built into the system.

That's right. So, use the card and let the bank pay YOU 2%. If you pay cash anyway you pay full price.

 

[GypsmJim]

I have never had a CC bill with interest, expect for a one time lost check in the mail, since 1996. I have heard of a reason that doing this is bad and I can see the logic. You still often buy more when you drop the card versus cash.

When I was working full time and traveling a lot, I simply paid my bills every time I got one, but I didn't keep track of them.

One month my CC bill showed interest, and showed that I didn't pay my bill the previous month. I called them and said that I didn't get last month's bill, so they deleted the interest and I simply paid the full amount.

Next Spring when I was putting the snow shovels away and cleaning the garage, I found the bill in the corner behind the garbage can. OOPS. Nevertheless I did not pay any interest and the bank was quite understanding.

 

[Yaworski]

Fun thing with credit is that the merchant gets to pay that 3% fee on the sales tax too. So if he collects $1,000 in sales tax, he really only gets $970 but still has to pay the state $1,000.

We pay alot for the convenience of paying with plastic and we don't get it back with free air miles or Chipotle gift cards.

 

[Ale-8(1)]

One month my CC bill showed interest, and showed that I didn't pay my bill the previous month. I called them and said that I didn't get last month's bill, so they deleted the interest and I simply paid the full amount.

I had the same experience, once. But I didn't find the original bill, ever. :

 

[Mobuck]

^^^This happens often apparently. When I pay a bill, I record the check number and mailing date. Several times, simply knowing this information has turned the tables on late fees or whatever.
The thing that really irks me is being charged $2-3 to have the bill mailed to me vs 'online' notice and I assume using another card of some sort to pay the original card used for purchase.

 

[375hh1973]

That's true, but the people that are paying the CC companies are the ones that lack fiscal responsibility.

If you are just plain poor and need the credit to exist, then I get it. But all too often people are just living beyond their means because it's just so easy.

If you use the card only for necessities and pay it off in 30 days, then YOU are the one that is making money off the bank.

That's what we do.

Everything goes on Delta SkyMiles Amex.

Pay it off immediately.

Have used cash 3x in 2025 so far

 

[GypsmJim]

Fun thing with credit is that the merchant gets to pay that 3% fee on the sales tax too. So if he collects $1,000 in sales tax, he really only gets $970 but still has to pay the state $1,000.

We pay alot for the convenience of paying with plastic and we don't get it back with free air miles or Chipotle gift cards.

I know people that brag about all the airline tickets they get with CC miles. I have talked to financial advisors (take it for what its worth) that say the "best" CC is one with a cash back because the "value" exceeds hotel or airline credits.

I only use 2 CCs and I would not own one that didn't have at least a 2% cash back.