When making a cashless payment, there’s always at least one party that stands to benefit financially from it. “While there is almost never a direct cost to the sender for digital transactions, they do often impose costs on the receiver,” Prabhakar said. Those costs include credit card interchange fees and the fees businesses pay digital payment companies such as PayPal and Square3 for the privilege of receiving funds electronically.
“The 2-3% in fees that small businesses in industries with very low margins and low transaction volumes — think the corner store or main street independent retailer — can pay for merchant card services could be the difference between making the monthly rent or not,” Prabhakar said. But it’s not just business owners who shoulder those fees. Ultimately, the higher cost of conducting business is passed on to customers.
There’s also the potential personal cost. Studies show that paying with plastic causes consumers to spend more. “Cash can prevent you from spending more money than you intended, whereas credit cards can often encourage you to overspend,” Rebell said. Cash can serve as an important guardrail to help keep yourself out of debt.