In a society that appears to be rapidly moving away from cash, every now and then a small voice emerges making the case for cash. Being a cash whisperer, I tend to take heed to such arguments, with an open mind, of course. From the practical “you never know when you may happen upon a truck stop that only accepts cash” to the hysterical “the grid could collapse causing panic and pandemonium,” and every argument in between, there are plenty of reasons for physical currency to remain in circulation.
Spend a few moments observing the checkout at any retail outlet or the traffic in and out of a financial institution’s physical branch and it will be clear, however, that the amount of paper cash being exchanged has been reduced. Heck, have an impromptu lunch with a group of friends or coworkers and notice how few carry cash. Restaurants and retailers are responding to the trend by offering online preordering options and making it easier for consumers to swipe a debit or credit card at the register.
Financial institutions and credit card companies will not be happy with the case for cash that I’m about to divulge.
The flurry of activity around charge cards is a boon for the credit card industry and for FIs. Unfortunately, it is also a boon for thieves, a fact about which FIs are well aware and equipped to handle. Consumers are becoming more and more accustomed to the process, too. Rare is the occasion when a clerk requests identification from a cardholder, and frequent are the occasions when cardholders’ accounts are compromised.
Fraud prevention is set up to recognize, report or question, and then halt unusual activity. In most cases, the cardholder is not held responsible for fraudulent purchases. In cases where the charges can be stopped, the retailer takes the hit for the fraud. In other cases, the FI or card issuer eats the loss. Or do they?
Actually, all consumers take the fall for fraudulent credit card activity.
Let’s unravel the scenario. Credit card companies charge retailers for the ability to take credit. As the card companies’ cost to do business increases, so too do their fees. Most retailers pay the fees or risk losing customers. As retailers’ cost of doing business increases, so too do their prices.
Online retail aside, the solution is yet another case for cash. By increasing the use of cash at checkout, we drive down the opportunity for credit card fraud. Yes, what is old is new again. The solution is not favored by credit card companies for obvious reasons, and it is unpopular among some consumers and retailers.
Some argue that it is not safe to carry cash because it can be lost or stolen, but credit cards can be lost or stolen, too, and they are. Often! The loss of either is a headache for the consumer but credit card loss can result in a much longer-lasting headache in terms of possible identity theft.
Others will argue that cash is not convenient. Sure, there’s an extra step involved to withdrawing cash from an ATM or a branch but consider the budgeting benefit. It is much easier to monitor spending and avoid debt when spending is limited to the available money in hand.
Consider this true story about a young lady whose credit card was stolen a few days before Christmas. She was not aware the card was missing until the fraud department of her FI called on Christmas Eve to inquire about unusual activity. In just a few hours, the thief went to a gas station and two supermarkets. He made a small purchase at the gas station, an $800 purchase at the first supermarket, and then the card was declined at the second supermarket. It’s likely the culprit purchased a lot of gift cards before the account’s credit limit was reached. How many similar incidents occur on a regular basis, let alone the holiday season when large gift card purchases are common?
The United States Postal Service sells gift cards but will only accept cash or money order to avoid such schemes. How soon until all retailers do the same, thus keeping cash in business? Now that is something to think about.