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Memories of the 28th Century

Money and Debt

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I was thinking of writing a post on the stubbornness of pseudo-facts, but then I went to a store to buy some orange juice. I lightened the collection of coins that were weighing down my pocket, and the cashier commented on my use of coins. We discussed that fact that younger people often use plastic for anything and everything, ignoring the fact that there are processing fees for both credit and debit cards. While it is foolish for people to collect change and use plastic for small retail purchases, the merchants are throwing away a significant amount of money by not charging the users of plastic the processing fees.
The processing fee for debit is only about 2%, but the fee for credit cards can be as much as 5%, and it goes up with interest rates. If a store turns over a million in credit card sales every year, and that's not a lot for a supermarket or a busy drug or convenience store, the processing fee on those sales is $50,000. If you own the bank, then that's wonderful, but the retail store owner pays it. There are a few places that give a discount for cash, and this is good, but people who use cash deserve the price break that they are not getting in most place.
But the price itself is not the only problem with people using credit and debit cards for all purchases. Using plastic tends to cause inflation. The percent of the fee tends to increase the final price, and it influences suppliers to push the price, and it encourages banks to keep at it. The U.S. economy is built on debt. The currency is backed by debt, and the Treasury has been playing with debt and bond issuance to cause more inflation, and that makes it easier for consumers to use debt, and card processing fees add to the 2.2 % inflation that Treasury works with. By inflating the currency about 2.2% per annum the Treasury pays off bonds with money that is worth about half of what the money that initially bought the bond was worth. Piling processing fees on top of the basic inflation simply increases the total inflation rate, so by paying with plastic hurts the one pays that way.

Then there is another characteristic of using plastic that can hurt the payer without being noticed, and this is long before insolvency. Paying with plastic creates a paper trail that might be a problem. Having evidence of a purchase can be very useful, but that's for things that cost a lot, but if one is buying little things, it doesn't help, and it can hurt. I have sometimes noticed people in bars handing a card to the bartender and running a tab. By itself, that can get out of hand. I have always considered it safer to pay with cash, because I have to be aware of how much I spent. If I were infinitely wealthy, that wouldn't be an issue, but that is not my degree of wealth. Then there was the bartender who mentioned that the parents of one of his college age customers saw every statement, and they were not pleased. That was the student's problem, but if he had gotten some cash from an ATM and paid cash for his drinking, his parents wouldn’t have been displeased, because they wouldn't know. Cash also makes it easier to limit one’s drinking, if one is planning to spend an evening drinking. Simply carrying only as much cash as one is willing to drink up puts an upper limit on the expense.

So, we now know that there are several reasons for people to avoid using plastic for small retail purchases, and merchants know that they should be giving a discount for cash sales. There also are similar reasons why the government should go on a diet and stop using debt for anything. This is the same issue bit on a much larger scale.
Debt is fine, if you are the creditor, not te other way around.