Living in New York City, I typically keep $50 to $100 dollars in cash on me because there are many places where cash is the best form of payment. Even though some of the smaller stores accept credit cards, if I’m buying something that is $5 or less, I feel like it is easier to pay with cash…. unless of course it’s $3.06 or $4.02 because then I don’t want the loose change in my pocket all day.
At some point I thought about the fact that retailers have to pay a fee in order to accept electronic payments and at some places, especially McDonald’s, I now pay only with my debit card just in spite of not liking the retailer or if I think I’m being overcharged to begin with. On the other hand, I feel bad charging $6 or $7 on my card at La Grolla Pizza because it is a smaller restaurant where I deal with the owner when I go in. I’d prefer to see him prosper and hang on to that 1% or 2% that would otherwise go to the credit processing company.
And thinking about the 1% or 2% fee that is charged made me interested in finding out more information. The fee that a merchant pays in order to accept electronic payments is called the interchange fee. The interchange fee is typically around 2% in the United States and the “issuing bank” collects the largest portion of the 2%. VISA and Mastercard, for their role in the transaction, collect 0.11% and 0.095% respectively.