For retailers, cash or credit?

Credit Card

Question/Comment: Maybe 10 years ago I heard that cash was the costliest payment to exchange or process by a retailer. Also credit was costlier than debit for a retailer to have processed by a bank. Lately, I’ve heard just the opposite — that plastic card transactions are costlier than cash. What has happened, or am I out of the loop?

Paul Solman: Though people sometimes affirm what you heard a decade ago, it’s hard to see how cash can consistently be costlier than a credit card. Yes, there are costs to handling cash: storage, transportation, insurance and oversight. And if you’re a really sloppy retailer, maybe credit cards would have an edge.

But credit card companies charge retailers a hefty fee on every transaction: 3 1/2 percent by American Express, for example, last I checked, and there’s also a delay between the time the customer pays and the time the retailer gets credited with the money (that lag is “the float”). That’s why so many places won’t take an AmEx card. It’s also much of the reason retailers will give you a cash discount (though tax evasion may also be a factor).

I could be the one who’s out of the loop here, but that’s my nickel’s worth.