It was a bit buried, but calls out an interesting fact I wish more people knew about business: cash has processing fees too.
If you deal with commercially relevant quantities of cash, in addition to your own labor costs associated with it, your bank will assess a fee for depositing it. Larger retailers will negotiate their own bespoke rates, but the right ballpark for small businesses above a nominal amount is 3 bps, or $3 per $10,000 transacted.
it's not like you can drop off a bag full of cash with a note that says "we swears it is $10,000" without some human employee counting it. even with counting machines, they still have to sort it (unless I'm so out of the cash counting game that the counters can sort for you).
besides, you just wouldn't respect them in the morning if they did NOT take some money from you, would you?
There are lots of extra security effort/measures that are required when a bank has LOTs of cash on hand. Yes, there is added cost in counting, but it's the security that really costs the bank.
Thats purely the banking fee. Cash handling costs (everything from security to transport to audit) adds up to. Depending on the size of the business and their transaction mix it is extremely common for retailers to prefer credit cards to cash as they require less costs.
100x less than Amex, others should be much cheaper (don't know about the US but flat monthly fees are common in Europe). Also the fee does not include the time and risk of bringing cash to the bank.
Physicists like to call this kind of sum “finite”, to make it sound closer to infinity, which sounds better than “nonzero”, which makes it sound too close to zero.
I wish that was towards the top of the article. It makes the whole "mystical paper" terminology make more sense. Cash becomes a burden to anyone moving lots of volume of money. That's what the article means by "useful money" not being paper money.
> Although many readers may not remember this, bank ATMs used to be free as a matter of policy, through approximately the 1990s.
This isn't clear to me. Is it for interbank transactions or is this includes intrabank transactions? It's confusing for me since that nearly all banks here have free intra- and interbank withdrawal*. Are US banks really that greedy?
* It may be indirectly charged by lower interest rates, I'm not sure, but there's no direct fees collected.
Edit: wow, US banks are greedy. This is the first time that I've heard about domestic own-bank fees (separate from ATM operators' fees) for inquiring (not even withdrawing) your account. Silver lining is that intrabank transactions are still free, which is okay I guess but but definitely weird for me.
In Japan same-bank transactions routinely have ATM fees outside of banking hours, though this is finally starting to change. Banks will also routinely charge you for same-bank bank transfers, often at a discount to interbank account transfers, including when they’re made at the same bank’s ATMs during banking hours. (For added fun, sometimes the price is different if it is same-bank same-branch versus same-bank different-branch, largely to lessen impact of fees on interfamily transfers and entrepreneurs moving money into and out of closely held companies.)
In the U.S. withdrawing at another bank will frequently incur a few twice, once from your institution and once from the disbursing one, unless you are on a product which specifically makes a selling point out of reimbursing you for ATM fees.
This is not simply a matter of “greed”; it is also a policy choice made by society as to who pays for bank services and where. Different equilibria prevail in different places, partly anchored on historical practice and partly in response to the usual factors which shape public policy.
> This is not simply a matter of “greed”; it is also a policy choice made by society as to who pays for bank services and where. Different equilibria prevail in different places, partly anchored on historical practice and partly in response to the usual factors which shape public policy.
Fair enough, but I was still shocked by it. I know Japan's "checkerboard" ATM schedule, but (except for normal fees charged for withdrawing money from your savings account) I didn't really expect banks to double-charge you for domestic transactions.
In Spain (IDK about other European countries), same bank transactions are always free (wether is a SEPA transfer, or a withdrawal on the bank's ATM). These days, transfers to different banks than yours are usually free (and many banks also offer free transfers to other Euro banks, I think it's got to do with SEPA stuff).
However ATM withdrawals on a bank different than yours usually has some kind of fee (depending on the bank, I usually pay between €0,60 to €1,50, for debit withdrawals, credit has bank fees for ATM use and a fee for using credit). Usually if you withdraw €200 or more it's free, but that's entirely dependent on your bank.
In my network, the first 3 withdrawal a month at an out-of-network ATMS are free, then it's like 1€ (i'm not sure anymore, i never had to pay this fee in my life)
FWIW, I've never had a fee to use the ATM physically at one of my (US) credit union branches. That's three separate credit unions in two states, starting around 20 years ago. Also, there are typically no fees at branches of other credit unions either (with some exceptions: A+ and UFCU in Austin always charge fees to me as a non-member, no idea if they charge their members too). Transactions at standalone ATMs (7-11s, etc.) typically cost, as do transactions at regular banks (not credit unions).
Where I am, we don't pay anything for balance enquiry/withdrawals from own-bank ATMs and also from ATMs within their network (subject to some conditions like max no. of transactions etc). We also don't pay for transfer across own-bank accounts AND local interbank (unless it is a very big amount in which case it can go through other means which depending on their nature may or may not incur fees).
Interbank withdrawals incur fees in Germany as well. Of course, a) there are groups that count each other as intrabank, and b) Some banks have limited withdrawals (My N26 account has 5 per month, new accounts only get 3) where they pay all fees for you.
Interesting that they say the number of tellers is up because the amount of branches is up, because where I live (New Zealand) it's practically impossible to find a bank branch now days, they've all been shut and replaced with internet banking and ATMs. I can't remember the last time I used a cheque, for instance, probably 20 years, so the requirement to physically go into banks is low, but when you do need one they're not around.
A friend (in France) recently had to walk into a branch to declare a stolen check book (couldn't do it online). While the branch was open, it was physically closed and you could only get in with an appointment. He had to negotiate and explain his situation before they let him in and processed his case.
Here in Germany, most traditional banks still have branches (assuming you are in a city). Not many, but still quite some (and it depends on the bank, some have more than others). FinTech banks like N26 never had any.
Same here in Australian country towns. Here the post office (which is often now actually an agency within a general store or the like) are setup to do the normal cheque, passbook and cash transactions that people previously expected a bank branch to fulfil.
We've even lost our post offices, I couldn't tell you where a post office is in the city I live in, they've been slowly disappearing for the last ten years or so. But small businesses like service stations and convenience stores often are post agents.
Here in England, it seems, after coronavirus many shops on high street closed and were replaced by bank branches. But there's a tight competition with gambling parlours and Poundlands.
Here in France I'm still using cheques to pay for my electricity bills (which not the usual way, I'd wager most people just pay by internet), but I never have to go to the bank for the checkbook, I order it online and receive it by mail within a fortnight.
I was under the impression that selecting debit when paying at the cashier means a direct debit of your account happens (as this article seems to imply). Which isn't subject to laws protecting consumers which apply to credit cards.
However selecting credit by the cashier - while using eg a MasterCard branded debit card still gives you the consumer protections (eg when disputing charges the onus is on the bank etc)
Am I completely wrong about this? Is the only difference the payment rail that gets used - and that has no affect on whick consumer protection laws you fall under?
Reg E is Reg E regardless of whether you’re on credit or debit rails, and most other regulations/laws are similar, but feel free to ask an extremely specialized lawyer for the specifics in your state.
The thing that is materially different are brand rules, because Visa/Mastercard/etc are effectively their own legal systems. They can, and do, require issuers to do certainly things vis customers and dispute resolution that go above what the law strictly requires. Those requirements may be more customer-friendly than what the debit network saddled the bank with, as debit networks have less of a brand to protect and less power over issuers.
(Speaking strictly for myself and on the basis of things I have believed for a long time: unless you need cash back, customers should choose credit ~every time.)
The slightly tricky part is that the brand rules may still apply even if it transaction on debit rails, since the brand is printed on the card and Visa/MC doesn't want to deal with consumer complaints because the merchant routed it to debit rails despite Visa's "zero fraud guarantee" (the primary exception for this is pin debit transactions are excluded since those primarily go through debit networks). The challenge then becomes the issuer needs to take a loss as some of the debit networks don't have the chargeback infrastructure that the larger networks have, but you are often still protected by Visa rules just because the card has Visa printed on it.
Thank you for explaining how brand rules might affect the decision which payment rails to choose. But does this also apply to payment cards that were issued by banks outside the US?
When you transact with a foreign credit/debit card at a POS or ATM in the US, you are also routinely asked if you want to proceed as a credit or debit transaction. I never know what to choose and if it actually makes a difference.
Yes, the rails used should not affect the consumer protections you do or do not receive. If it's a debit card, it's a debit card regardless of if it's processed over a credit network.
Exactly how long the transaction takes to _clear_ your account may vary depending on the semantics of the network and integration used, but processing a debit card over a credit network doesn't mean you get to hold onto your money for any longer than you would otherwise. The auth will put a hold on the funds in your account instantly and you will effectively have that much less money in your account.
The terminology makes this so much harder to distinguish. My bank does have different consumer protections for different cards issued through them (debit cards require you to report fraud within 7 days, credit cards require you to report within 30). I didn't realize that the payment network used was not coupled to these mechanisms.
I wonder if financial marketing understands this? Associating credit with less risk, less requirements, in naming of the networks themselves? Even though settlement can occur on each network
False. Charging back a debit transaction can be massively more difficult - the network rules are very different between Amex etc and debit. The minimums are the same but as Zelle folks are finding out - payment rails matter in terms of protection
Depends...
... on your geo: in the US credit/debit terms used like that often refer to the network it'll travel over. As others have noted the rails don't impact the consumer protection you receive. Outside the US things credit/debit don't have this overloaded meaning.
... on who's asking: sometimes the retailer wants or has to offer you a choice of networks. Sometimes your multi-app chip card is asking you to choose which app to use.
Being asked whether you want to pay with credit or debit when you are trying to pay with a debit card is one of those culture shock moments every time I visit the USA and I ask myself "how could it not know?"
> If you’ve ever used a debit card to purchase something in the U.S. you may have been asked “Debit or credit?” and wondered “Hmm, can’t they tell from looking at it that it is a debit card? Or isn’t it, I don’t know, in the card number or the magnetic stripe or somewhere?”
I don't know if it's a cultural difference, but at least here in Brazil, it's common to have the same physical card work as debit, credit, and as an ATM card. AFAIK, they are different applications running in the same chip on the card, selected by a command from the terminal. So they really have to ask "debit or credit", since the same card can be used for both.
I'm from Europe and I have separate cards for credit and debit, but the ATMs in the US still ask me. I've always wanted to try pressing debit on the credit card but then never could be bothered. Would it just do credit because that's the only thing the card can do, or reject it altogether?
Brazil has a unique thing "combo cards" in which a single card number can be tied to different accounts. So selecting credit draws from a line of credit while selecting debit draws from a bank account (checking or savings) holding cash.
In the US, though, both options draw from the same bank/checking account.
For an interesting look at one of the early ATM networks, see Gifford and Spector’s article, “Case Study: The CIRRUS Banking Network,” Communications of the ACM, August 1985. It’s posted here as an exhibit in a patent case:
Fair warning: The "infrastructure" here is a metaphor, and this is all about how the business of operating ATMs works. There is no talk at all about the physical infrastructure of the machines themselves, how they are installed securely, the network they use, how cash is physically stocked in the machines, etc.
Because unlike in an ATM withdrawal where you take money out from your bank, you just paid the merchant a bunch of money, and the merchant is giving some of that payment back to you as cash.
Readit News
If you deal with commercially relevant quantities of cash, in addition to your own labor costs associated with it, your bank will assess a fee for depositing it. Larger retailers will negotiate their own bespoke rates, but the right ballpark for small businesses above a nominal amount is 3 bps, or $3 per $10,000 transacted.
Don't you think it's fair for the employee to get paid as well?
besides, you just wouldn't respect them in the morning if they did NOT take some money from you, would you?
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This isn't clear to me. Is it for interbank transactions or is this includes intrabank transactions? It's confusing for me since that nearly all banks here have free intra- and interbank withdrawal*. Are US banks really that greedy?
* It may be indirectly charged by lower interest rates, I'm not sure, but there's no direct fees collected.
Edit: wow, US banks are greedy. This is the first time that I've heard about domestic own-bank fees (separate from ATM operators' fees) for inquiring (not even withdrawing) your account. Silver lining is that intrabank transactions are still free, which is okay I guess but but definitely weird for me.
In the U.S. withdrawing at another bank will frequently incur a few twice, once from your institution and once from the disbursing one, unless you are on a product which specifically makes a selling point out of reimbursing you for ATM fees.
This is not simply a matter of “greed”; it is also a policy choice made by society as to who pays for bank services and where. Different equilibria prevail in different places, partly anchored on historical practice and partly in response to the usual factors which shape public policy.
Fair enough, but I was still shocked by it. I know Japan's "checkerboard" ATM schedule, but (except for normal fees charged for withdrawing money from your savings account) I didn't really expect banks to double-charge you for domestic transactions.
However ATM withdrawals on a bank different than yours usually has some kind of fee (depending on the bank, I usually pay between €0,60 to €1,50, for debit withdrawals, credit has bank fees for ATM use and a fee for using credit). Usually if you withdraw €200 or more it's free, but that's entirely dependent on your bank.
That network just so happens to encompass every bank operating in the country.
It has an integrated ATM and 1-2 bank employees. Each half day it is at another village/small town.
Here in France I'm still using cheques to pay for my electricity bills (which not the usual way, I'd wager most people just pay by internet), but I never have to go to the bank for the checkbook, I order it online and receive it by mail within a fortnight.
However selecting credit by the cashier - while using eg a MasterCard branded debit card still gives you the consumer protections (eg when disputing charges the onus is on the bank etc)
Am I completely wrong about this? Is the only difference the payment rail that gets used - and that has no affect on whick consumer protection laws you fall under?
The thing that is materially different are brand rules, because Visa/Mastercard/etc are effectively their own legal systems. They can, and do, require issuers to do certainly things vis customers and dispute resolution that go above what the law strictly requires. Those requirements may be more customer-friendly than what the debit network saddled the bank with, as debit networks have less of a brand to protect and less power over issuers.
(Speaking strictly for myself and on the basis of things I have believed for a long time: unless you need cash back, customers should choose credit ~every time.)
When you transact with a foreign credit/debit card at a POS or ATM in the US, you are also routinely asked if you want to proceed as a credit or debit transaction. I never know what to choose and if it actually makes a difference.
Exactly how long the transaction takes to _clear_ your account may vary depending on the semantics of the network and integration used, but processing a debit card over a credit network doesn't mean you get to hold onto your money for any longer than you would otherwise. The auth will put a hold on the funds in your account instantly and you will effectively have that much less money in your account.
I wonder if financial marketing understands this? Associating credit with less risk, less requirements, in naming of the networks themselves? Even though settlement can occur on each network
IANAL etc.
I don't know if it's a cultural difference, but at least here in Brazil, it's common to have the same physical card work as debit, credit, and as an ATM card. AFAIK, they are different applications running in the same chip on the card, selected by a command from the terminal. So they really have to ask "debit or credit", since the same card can be used for both.
In the US, though, both options draw from the same bank/checking account.
Same in Italy, at least recently, a few years.
https://ptabdata.blob.core.windows.net/files/2017/CBM2017-00...
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This was many years back, I wonder if it's still possible.
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