Plastic Surgery
One Sunday, a family came in and said they had decided that during these really hard times for restaurants they would only support owner-operated places, figuring that the chains can always find a way to survive. They did an Internet search and came up with a list that, thankfully, included Ina's.
They also said they would not use a credit card at these places because they knew that the fees charged by the Big Three were enormous for a small operation.
It started me thinking that most people have no idea how credit cards really work and just how much they cost all of us.
From the CardReport Web site:
Visa and MasterCard are joint ventures -- or, as they call themselves, "associations" -- created, owned, governed and operated by and in the interests of their member banks. The Visa and MasterCard associations do not issue credit or debit cards directly. They are each collectively comprised of thousands of banks worldwide. These banks pay membership fees to the associations, and are thus permitted to issue cards.American Express, Diners Club and Discover are not associations; each of these companies issues its cards directly, and maintains its own clearance network.
Because their memberships are virtually identical, the associations communicate frequently, exchange data and coordinate much of their activity through joint programs and consciously parallel activities.
Major banks and the Visa and MasterCard associations charge excessive "interchange fees" to retailers when customers pay for goods using a Visa or MasterCard.
Retailers have to pay the interchange fees in order to receive payments from transactions made using those cards, and these fees are disproportionately high compared to the money we receive from the transaction.
Did you know that retailers pay different interchange rates depending on the card you use-- personal, business, awards, your alma mater, debit, etc.? The statement we get once a month requires a degree in rocket science to decipher.
Did you know that debit cards "hold" money aside after a transaction for up to 48 hours? For example, you eat dinner at Ina's and the bill is $27.00. You go home, check your account and it clearly says your dinner at Ina's was $33.75. You know you left a cash tip, and so where did that $6.75 come from?
You call me and I explain that your card company sets aside up to 25 percent of the amount charged as a "just in case." Since we don't send the credit card transactions in to be cleared until the end of the day, perhaps, they think, you put a tip on the bill. But you didn't and it takes them 48 hours(!) to adjust your account back to the $27.00 you actually charged. Yes, they get to keep your $6.75 for two days.
So, let's see how this works for them. You pay interest, late fees, exceeding credit limit fees and sometimes an annual fee. (NOTE: The amount of money generated by penalty fees like late charges and exceeding credit limits had increased by about $1 billion annually in recent years, and should top $20 billion this year.)
I pay a lot of fees ($30,000+ per year) to accept the cards and have to wait 48 business hours to get MasterCard and Visa and 72 business hours to get American Express into my bank -- which can mean you charge a meal on Friday, and I don't see that money until the following THURSDAY! -- and more than 40,000 banks pay Visa and MasterCard a membership fee to "join" the associations.
Not my idea of a fair and balanced business exchange.
I propose a new way of thinking about transactions that is based on paying cash as a bridge to connect human beings in relationships of service.
When a 20-something comes in and wants to buy a cup of coffee with a debit card because there isn't a dollar in his or her pocket, it is clear that any insight into economic life has lost the intangible deeper social value, that buying and paying is an exchange of energy (i.e. I worked hard for this money and I pay you because you worked hard for the goods or services I am buying).
It is transparent, healthy and humane.
Paper money creates a direct and open dialogue and has different meanings and qualities when used for a gift, a loan or a purchase.
It was easy to see this crisis of spirit coming when the healthy balance of fear and greed on Wall Street disintegrated with deregulation taking away the fear and leaving only greed; when people decided that a corporate executive was worth 400 times more than the lowest-paid employee; when a company would not provide health care and retirement to the loyal workers but a million dollar renovation of a boardroom was seen as essential and appropriate.
That was not progress.
We all have wants and needs that come from feelings and desires. Deeds and actions must come from our will.
We must change our expectations and habits and decide how and where we spend our money ... our paper money.
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Chicago taxis are now required to accept credit cards. A lot of the drivers try to pretend they can't, but I always refer them to the Riders' Bill of Rights, affixed to their own backseats. And I hate to break it to you, sbm, but it's going to take a lot of emergency twenties to pay for a meal in the kind of restaurants we're talking about.
Hey Ted, I'm one of those antideluvian people you're talking about (over 50). Back in the day, I used to work for MasterCard. Credit cards have very little to do with convenience, and very much to do with profit (for the card issuers). Not only do the card issuers charge different percentages for different types of cards, but they also charge different percentages for small business owners (huge, for folks like Ina) and mass-market retailers (relatively insignificant for big box stores like Home Depot). So the smaller your business is, the larger--relatively speaking--your fees to Visa, MasterCard, Amex, and Discover. If you don't recognize that format, it's called "regressive". Back in the day, when tourists wanted to buy something valuable in Europe (like jewelry in Firenze), the merchants offered them a deal: pay with cash, get a 10 or 15% discount. That helps the merchant, and gives the customer options. I think that lovely tradition should be revisited. Then we'll see if you'd rather get a "deal", or if you would be willing to pay a penaly for convenienc
I'd be happy to see a 10%-15% discount for cash transactions in restaurants, but do you really think cheapskate operators are going to go for that? Moreover, I don't see why it's my problem or concern that the credit card companies are making the restaurateurs pay for products and services. Should we vilify the plastic-cutlery manufacturers for making Ina pay for her to-go forks? And yes, credit cards have been in use for a relatively short period of time, but before that, people could pay with other cashless forms (e.g., checks, the "IOU" option of receiving a bill in the mail). There probably hasn't been a time in the post-Industrial era where there wasn't an option not to have to carry around tons of cash or barrels of beans in order to transact.
Boy Ted, you really sound pretty angry...
Thanks Ina, for opening my eyes a little wider...as everybody is more concerned about "staying local" and the sustainability of small businesses, it makes sense to use cash, especially in this economy...
And by the way, my mom always taught me to keep at least $20 handy in case I needed to take a taxi or (god forbid) to have some cash handy to hand over to a mugger in the hopes of avoiding physical harm...and I carry a credit card in case of an emergency as well....(b
Blogger: Paper money creates a direct and open dialogue..
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No. It doesn't. Really.
Ina , you've shown us yet again that your talent isn't just confined to making your guests feel extra special . Thank you for setting out succintly, in a clearly articulated manner a situation to which most of us have given little thought . It is beyond dismaying that this inequitable "cash grab" has gone unchallenged for so long.With my new awareness I ,like Greg, will spread the word. I must add that Teds' ability to feel OK with only $1or $2 cash in his pocket struck me as quaint,,,, almost anti-deluvian ,,,,
So I should be inconvenienced, as a consumer, so a merchant can make even more money?
Very informative. Though I already knew that credit cards wracked up fees for businesses and so I avoided them when I could, I had no idea that DEBIT cards followed the same rules and also hit businesses with fees. Now that I know I will definitely switch to cash transactions when possible.
Thirty-five years ago when my college professor asked my class to imagine how things might be different after we achieved a cashless society, all of our young visions ahead were centered on the conveniences we thought would emerge. And without any consideration for the economies involved, we thought the transition from cash to plastic cards would be entirely worthwhile. But over the years since then I've learned the way cash, and the exchange of cash for goods and services when possible has an appreciative value more tangible and more substantial than is available from plastic. I mean our present modern value of money is rooted in the exchange of cash. So maybe it stands to reason the way cashless transactions and the use of plastic, as Ina clearly describes, just doesn't always render transactions fair and balanced.
Until now, I was not so fully aware of the financial details resulting from my decision to pay my restaurant check with plastic or with cash. Plus after reading this I now see the greater value of just spending cash money. Yes, years ago our youthful visions of plastic convenience simply neglected today's small business realities. We could not see the future. But now we can understand the importance of paper money.
I have a feeling before being seated in restaurants I'll have enough cash on hand from now on.
And while we're doing all this "plastic surgery," why don't we make tips to the servers ten percent and take the other five or ten to offset credit card fees? Oh, right, I forgot. It's my fault, as a consumer, that waiters need to be tipped and restaurateurs can't sacrifice any of their profits to pay the fees associated with their own costs of doing business.
I remember going to an old restaurant in Little Italy, a joint where you'd easily spend $20 a person. When I presented my card at the end, the waiter told me they were cash only--and went on to pedantically why: they'd been open for 50 years, and didn't accept cards in the beginning, so why now? In keeping with that illogic, I think restaurants should be held to ALL the standards of antediluvian eras. Any new additions to health code practices should be ignored, in favor of what was acceptable before, say, dishwashers existed. I'm tired of hearing restaurateurs complain about credit card fees. Why should you be exempt from having to pay what every other business owner--small or large--has to pay, in order to do business? I don't care whether an establishment has to pay a small percentage of the large percentage markup they take in on my dinner in order to make my payment a little more in keeping with modern trends, but seriously, who carries more than a dollar or two in cash? When I find a restaurant that doesn't accept plastic, I typically leave and go find another place that isn't trying to make life difficult for its customers. Small pretentious dining establishments and Streetwise beggars take note: if you made it easier for us to spend money, we more than certainly would. And as long as you hold out, so will (I hope) we.
Thank you, Ina. That was a most enlightening piece and I wish more people could be aware of this. For my part, I intend to reduce my use of plastic. Start spreading the word.
When I cash today's paycheck, I'm making sure to get some cash back to get me through the week. Thanks for the insight, Ina!
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