Shop Local: Cash Economy

Using credit cards has become too easy.  So has amassing debt.  Both occur insidiously, like dementia.  A couple of decades ago, I applied for a two credit cards for the purpose of establishing a credit history.  Out of college, paid for by thrifty parents and a job on campus, and renting a room from someone in an apartment in NYC, with a used car and no loan, I had no immediate need for credit. But, I could foresee wanting to apply for a home loan at some time.  I used these two credit cards sparingly for larger purchases.  I have missed two payments in 25 years: once when someone tossed a match into the streetside mailbox in which I had deposited my payment, and once when I wrote the check before going on vacation but neglected to put the stamped envelop into the mail.  Now, when I am in the airport buying $4 worth of coffee for Linda & me, I wait in line behind people pulling out their credit cards for similar purchases.

As I said, credit card use insidiously takes over our spending habits.  Convenience overrides prudence.  All those cups of coffee and bagels add up.  A few years back I found that I was putting most routine purchases, such as groceries, household and hardware store items, gasoline, and birthday cards into the plastic world of finance.  While we are not extravagant, I was surprised to find that with few individual expenses over $100, I managed to run up $1,000 to $3,000 in credit card bills in a month.  We could cover that bill, but spending seemed much too easy.

Around the same time, I came across some articles on how banks insert fees either for customers or merchants.  Yes, there are the obvious “annual fees”, and “cash advance fees”, and inflating credit rates should you miss a payment date, and all sorts of “special protection fees”.  I was more concerned about the percentage that credit cards charged merchants for the credit process of their card holders.   While the average fee may be around 4% of the purchase (e.g. 16 cents on that $4 coffee purchase, or $4 on that $100 grocery cart of provisions), those rates are negotiated with a range from fractions of a percent to upward of 10% to 15% for individual store owners.  Obviously, the national/international chains can negotiate low rates because they will bring in hundreds of millions of dollars in sales, while a one-store shop gets extortion rates because they have little leverage.

Moving from the suburbs to the country, we came across many more small shop owners and want to support them and the culture that they bring to our life.  Earlier this year, we began to leave the credit cards in our wallets and pull out the cash.  For ease of decision-making, we set the criteria as “most” purchases at local stores under $100 would be cash.  Yes, this means more frequent trips to the ATM or bank lobby (hey, in a small town that is a place where all the local news is anyway), and remembering on marketing day to double check the cash supply.  Certainly, there is also a risk of theft, but the petty thieves are after your credit cards and organized crime is into identity theft to get your investments accounts.  With this strategy, we have some sense that we have provided our local merchants with an extra $4 to $15 for every $100 that we exchange for their products and services.  And, as a bonus, when you return to a cash economy, you make a decision, “Oh, I don’t have $20 in my wallet, do I really need…?”

The other day, I stopped by the Rocking R Hardware for two tubes of caulking and four D batteries.  When I handed the cashier two $20 bills, he looked surprised.  “Cash?  Oh, I expected a credit card.”  I explained that I preferred to not generate another credit card fee for his store.  “You would not believe how those bills add up by the end of the month.”  Shop local.  Return to the Cash Economy.

When could you use cash rather than credit?

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About hermitsdoor

Up here in the mountains, we have a saying, "You can't get there from here", which really means "We wouldn't go the trouble to do that". Another concept is that "If you don't know, we ain't telling." For the rest, you'll have to read between the lines.
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6 Responses to Shop Local: Cash Economy

  1. Barneysday says:

    When I first started traveling to the far east in the mid70’s there were 3 prices for good. Low to price were cash, credit card, and highest was American Express. On bigger purchases now, I often ask if there is a cash price.

    • hermitsdoor says:

      Good advice. My illustration of the $4 coffe purchase with a credit card was about people not even thinking of how their credit card use could affect that concession stand owner.

  2. The Vicar says:

    I’m going to get a hair cut right now! Cash only.

  3. Wisewoman says:

    Going to the pump with cash makes you really know how much gasoline costs now. Eats a big chunk out of a $100 bill. However, I drive economy and don’t ;have to visit the pump that often. It helps.

    • hermitsdoor says:

      You are right! I use one credit card only for gas purchases, to give us an idea of how much we spend on fuel each month. You have also foreshadowed a blog which I have not composed yet on this week’s federal government announcement about a 55 MPG standard for future vehicles. More later. Thanks for reading and commenting.

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