Living with credit, Shopping

How using credit instead of cash hurts local businesses, charities

Kelly Dilworth

If you prefer to go cashless, you shouldn’t have much trouble finding ways to pay – no matter what you’re trying to buy. As credit and debit cards become more ubiquitous, it’s become easier than ever to use plastic to pay for everything from school lunches to vending machine snacks to library fines.

But before you pull out your card just for the sake of convenience, think twice about whether you really want to stick the group you’re transferring money to with a hefty fee. If you’re purchasing a service or product from a business or organization you want to support – or if you’re donating money – you’ll do more good if you pay with cash or check, or find a way to cover the cost of the card transaction fee yourself.

The high price of convenience
Many groups that used to only take cash or check now accept credit and debit cards for payment, including public schools, libraries, public utility companies, donation drives and – thanks to mobile card readers such as Square – even the kids that work at neighborhood garage sales and lemonade stands.

That’s made it easier for cardholders who prefer to use credit – or don’t keep much cash on hand – to make payments with ease. But it’s also cost civic organizations and other groups who may be chronically short on funds a substantial amount of money.

When you use a credit or debit card to make a payment or donation, the organization that accepts your payment must pay your card company a substantial interchange fee. The fancier the card the heftier the fee. For example, the National Retail Federation estimates that card companies may charge as much as 3 percent or more to process a charge from a premium rewards card, while regular credit cards typically garner around 1.5 percent in fees.

Some organizations, such as public utility companies, will charge cardholders a little extra to use a credit card in order to help recoup the cost of accepting it. Similarly, retailers will often raise prices in order to make up for credit and debit card swipe fees. But other organizations will simply absorb the interchange fees and try to factor the costs into their budgets – which can significantly strain their finances.

I was reminded of this issue recently when I read a column about interchange fees in a regional Minnesota newspaper. The column pointed out that the Rochester Public School District spent more than $100,000 on credit card processing fees last year thanks to parents using credit to pay for their kids’ school lunches. To help pay for the fees this year, the school district had to ask the school board for special approval since the costs were so enormous.

“It’s a chunk of change,” said school board chairwoman Julie Workman in an interview with the Post-Bulletin. “Perhaps if parents were more informed they’d be more likely to write a check instead of pulling out the plastic.”

Reading that column, I felt a twinge of guilt. My kid is not in public school yet, but when his old day care allowed me to use credit to pay for his tuition, I immediately jumped on the opportunity to rack up more rewards points. I wasn’t charged extra to use my card and didn’t think about the fact that I was costing the day care more to conveniently use credit.

I also guiltily used my card this past week to buy popcorn from a Boy Scout troop, despite knowing that I had enough cash on hand to pay for the full purchase. As a Boy Scout mother took a quick photo of my card using her mobile phone’s card reading app, I wondered what kind of fee they were being charged to process my payment.

Square’s portable reader, for example, charges between 2.75 and 3.5 percent, depending on how a card is processed. But I was so eager to catch up with my husband and son in the grocery store that I didn’t take the time to fish for cash in my purse.

I’m more aware of the high cost of swipe fees when I visit a local business. As a result, I always try to use cash when I visit a small mom-and-pop restaurant or retailer. But even then, I often still wind up using credit anyway because I didn’t pack enough cash.

Going forward, I’ve resolved to start using cash more often – at least when I’m paying a group I want to help. The extra convenience of using a card isn’t worth it to me if it means that I’ll be hurting a business or organization that could really use my full support.

See related: Convenience fees: When is it OK to charge extra to use a credit card?, Q&A: Can private schools charge credit card convenience fees?

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