At a recent American Antitrust Institute (AAI) symposium in Washington, D.C., I asked the presenters about the ability of cash and checks to compete with the credit card industry and its strict controls on merchants. This obvious point becomes less obvious when one takes into account the expanding exclusion of cash/check payments due to the overwhelming expansion of goods and services that you cannot buy unless you have a credit card or a friend with one whom you can reimburse.
When sending some types of express mail, renting a car, or paying for the services of airlines/trains or hotels, you either cannot pay with cash/check or it is a real hassle of inquiries and conditions. The overall trend is to limit more and more what legal tender can actually buy in America because of exclusionary fine print contracts (see faircontracts.org).
For many people, the convenience of a credit card and potential for rewards justify their preference to forgo cash. Moreover, lower income consumers want a brief extension of credit, however expensive. Credit card carriers are given “points” such as frequent flyer miles, but often the consumer pays in other hidden ways for these “freebies.”
Notwithstanding the above obstacles, I still do not have a credit card or a signature-based debit card. There are ten relevant reasons for my preferring cash or checks over plastic.
1. Plastic lays the groundwork for massive, daily invasions of privacy. Personal purchasing data now floats around the world without controls. The data mining industry is everywhere and both government and hackers can get into peoples’ files. As Facebook and Google demonstrate, it is almost impossible to keep up with the sharing of your personal information.
2. Once you enter the credit economy you fall under the controls of arbitrary credit rating and credit scoring merchants. So if you complain strenuously to an auto dealer or insurance company, if you are a victim of false information in your credit file, or even if you have too many credit cards, your credit can suffer so that you pay more or are denied loans.
3. The credit card economy, with its anti-competitive no-surcharge rules, etc. is inflationary and affects negatively consumer purchasing power as well as lower savings rates.
4. Credit cards encourage impulse buying. The industry knows this very well. Swiping a plastic card rather than opening a wallet and directly taking cash out creates a disconnect between the purchase and the loss of money to the consumer.
5. Credit card terms—what Senator Elizabeth Warren calls “mice print”—are mostly inscrutable and non-negotiable. You sign on the dotted line, shut up and shop. Companies rarely compete over fine print terms that favor the consumer. Compare, with a suitable microscope, the standard form contracts of Visa, Mastercard or Discover or GM, Ford and Toyota, or Bank of America, Citigroup or Wells Fargo. Consumers have been driven into a choiceless contract of peonage or contract servitude.
6. Using cash/check encourages consumers to live within their meansand not get caught in an ever deeper cycle of debt. For instance if you are out shopping with cash and set a budget for yourself, it is impossible to overspend if you simply do not bring more than has been allocated for your purchases.
7. Paying by cash/check avoids the gouging of fees, penalties, termination charges, and of course, sky-high interest rates for consumers. Corporations on the other hand enjoy low-interest rates across the board. (Remember, however, checks have a fee if they bounce.)
8. Paying by cash/check—say in a restaurant—saves time and follow-up monitoring for errors. Furthermore, it prevents the addition of any fraudulent charges to the bill.
9. Paying by cash/check avoids having to give away your personal property to the likes of internet companies that turn around and very profitably sell this free information to advertisers with such specificity that the latter knows what ailment or craving you have.
10. Credit card issuers often approve consumers for credit cards with maximum spending limits that are too high considering their salary or lack thereof.
Apple is now out with a payment system that does not require signing or clicking. You can regularly fall into the credit penitentiary with a mere swipe. What’s next, the evocation of brain waves?
There is a strong case for giving cash discounts to consumers, as is done by many gas stations. This would pass along the savings that the vendor would make by bypassing the credit card companies to benefit the consumers, a win-win situation. In addition, there should be no discrimination against consumers based on their choice of legal tender; vendors should have to accept all methods of payment.