While some businesses find it cost-effective to accept only cash to sidestep credit card fees, others find handling cash transactions troublesome and are moving away from it altogether. New kiosks are being introduced that convert cash into rechargeable cards. These reverse ATMs allow customers to deposit cash and receive a debit card, deducting a fee of 1.5% to 2.5% from the deposited amount.
Previously, using cash for purchases could result in in-store discounts, helping consumers avoid credit card processing fees. However, customers using cash are now facing additional charges. Today, paying in cash might incur fees ranging from $1 to $6, similar to those traditionally associated with credit card swipes or using an out-of-network ATM.
The rising costs of transactions in the U.S., including the new fees on cash payments, are becoming a significant issue for consumers.
Key Takeaways
- Rising Cash Transaction Fees: Customers paying with cash increasingly face additional fees ranging from $1 to $6, similar to those for credit card transactions, as businesses adjust their payment processing strategies.
- Growth of Reverse ATMs: Reverse ATMs, which convert cash into prepaid debit cards at a cost, are becoming more common in venues like stadiums and shopping centers. These machines charge fees of 1.5% to 2.5% of the deposited amount, adding costs for cash users.
- Impact on Cash Users: The shift towards cashless transactions and the associated fees for cash payments present challenges and additional expenses for those who prefer or rely on cash transactions despite cash still being a widely used payment method.
- Operational Costs for Businesses: Handling cash incurs significant operational, treasury, and loss prevention costs for businesses, driving some to adopt cashless models to reduce expenses and streamline payment processes.
The Growing Trend of Cashless Transactions and the Impact of Reverse ATMs
The trend toward cashless transactions is growing. This shift is driven by the convenience and efficiency of digital payments, which are becoming more popular among businesses and consumers. However, this trend can introduce unforeseen challenges and expenses for those who prefer or depend on cash. One such challenge involves using reverse ATMs, which convert cash into prepaid debit cards, typically at a cost to the user.
Reverse ATMs, also known as cash-to-card kiosks, are machines that allow users to deposit cash in exchange for a prepaid debit card. These cards can then be used for in-store and online digital transactions. The process is straightforward: users insert cash into the machine, which then loads an equivalent amount onto a card. This technology is increasingly found in places like shopping centers, sports stadiums, airports, and event venues.
While reverse ATMs provide a useful service for converting cash to digital currency, they often include additional fees. For example, recently, at Yankee Stadium, investor and philanthropist Noa Khamallah encountered such a “trend” when trying to make purchases at cashless concession stands. He was guided to a kiosk for “plastic money.” Khamallah inserted $200 into a reverse ATM, which charged a $3.50 fee, and issued a debit card with a balance of $196.50. Although this fee might seem minor, it can accumulate over time, particularly for those who use the service frequently.
Reverse ATMs have become widespread in cashless establishments and restaurants nationwide to accommodate those who still prefer cash. However, individuals looking to pay for items like taxes, parking tickets, tolls, and phone bills often find that these services have been outsourced to companies that typically impose a fee.
For instance, Companies like RedyRef have significantly increased the deployment of these machines to places, including restaurants, carnivals, and stadiums. This shift is influenced by a general move away from cash and by-laws in some states that prohibit cashless businesses. Fees for using reverse ATMs may apply and vary by state and venue.
This situation effectively penalizes those who opt to use cash. Although using cards and mobile devices to make purchases is increasingly common, cash still represented 16% of all payments in 2023, making it the third most preferred payment method.
Jonathan Alexander, executive director of the Consumer Choice in Payment Coalition, expressed concern over the necessity to remind retailers about the legitimacy of cash, stating that it is shocking to have to assert that U.S. currency should be accepted everywhere.
Government entities and companies handling utilities, cable, and wireless services have also started outsourcing cash payment processing. For those who prefer to use cash for payments such as bills, rent, or fines, services like PayNearMe facilitate these transactions at retail locations like 7-Eleven, Walmart, and Walgreens. Customers simply show a cashier a personalized barcode to process their cash payment. Last year, PayNearMe handled over $4 billion in such transactions.
Currently, there are no federal laws mandating that businesses accept cash. However, some states like Rhode Island and Colorado, as well as cities such as New York, have outlawed cashless stores after many shifted to card-only transactions to limit the spread of COVID-19, accelerate service, and reduce theft. In 2023, legislation was proposed in both the House and Senate that would require businesses to accept cash for all in-person transactions below $500, provided they do not charge fees for using payment devices like reverse ATMs. These bills have yet to be approved.
The push for cashless transactions also stems from multiple benefits. Businesses find that digital payments can simplify their processes, lower the risk of theft, and decrease the need to handle cash. Consumers enjoy the quickness and ease of contactless payments, eliminating the need to carry cash or concern over losing credit and debit cards. Yet, this transition also prompts concerns about accessibility and fairness.
Many businesses also avoid cashless transactions due to charges that come along while handling cash transactions.
Understanding the Charges of Handling Cash Transactions
Handling cash presents multiple costs for businesses in the US, spanning from operational activities to loss prevention measures. Let’s explore these costs in detail:
- Operational costs:
Operational costs are a significant burden when handling cash. Preparing cash envelopes can consume up to 40 minutes per day if a cashier is responsible for 80 to 100 envelopes, with each taking about 30 seconds. Additionally, both cashiers and managers need 5-10 minutes to balance cash at the end of a shift.
Store managers also spend around 45 minutes preparing bank deposits, the duration of which depends on the cash amount and the number of transactions. Other operational costs include secure transportation of cash or handling deposits through employee accounts.
- Finance and Treasury Costs:
Treasury and finance also contribute to the financial strain. Maintaining a bank account typically costs about $35 per month. There are also fixed and variable fees for deposits, including costs per deposit ticket and fees that vary based on the deposit amount.
Sweep fees for transferring funds between accounts average $.30 each, and non-sufficient funds (NSF) fees, typically $35, are incurred if transfers are made without adequate funds. The labor involved in reconciling daily sales and bank sweeps significantly affects the need for full-time employees and their costs.
- Loss Prevention Costs:
Loss prevention costs arise from discrepancies between the cash registered from sales and the actual deposits, which usually amount to about 0.1% of total sales. Stores face risks of robberies, which may also target managers en route to banks and incur costs related to adjustments for counterfeit cash made by banks. Additional expenses come from investigating internal cash handling discrepancies, often involving interviews and requiring travel.
- Additional Costs:
Additional costs include internal losses that may lead to the dismissal of staff involved, with subsequent hiring and training of replacements. Following robberies, some employees might resign or require counseling, adding further to the costs.
Conclusion
The rise in cash transaction fees and the shift toward cashless systems are reshaping how consumers and businesses handle payments. While digital payments offer convenience, those who prefer cash face new financial burdens, including fees from reverse ATMs. The operational, financial, and security costs of handling cash are prompting many businesses to adopt cashless models despite cash still being a significant payment method.
This shift highlights the need for balancing convenience with accessibility, ensuring that all consumers, including those who rely on cash, are not unfairly penalized. As the landscape of payment methods evolves, ongoing discussions about regulation and fair access to payment options will be crucial.
