Consider going cash-free, with caution

There’s a growing trend toward cashless businesses. From clothing stores to coffee shops to salons, some businesses are implementing cash-free policies. Only credit and debit cards allowed.

What’s behind the trend? Cash-free businesses (and credit advocates) say there are a number of benefits:

  • Speed up the checkout process: It’s quicker to swipe or tap a credit card than to count cash and make change. If your business has long lines at peak service times, going cash-free can speed up the checkout process.
  • Reduce the possibility of theft: Keeping a register full of cash could attract thieves. Cash transactions also represent an opportunity for employees to pocket money and skim your revenue.
  • Improve efficiency: It takes time to close out cash drawers and make trips to the bank. Going cashless eliminates the time you spend on cash management.
  • Streamline bookkeeping: Going cashless simplifies accounting work. Every transaction is digitized and trackable for fast, accurate accounting.

However, there are some distinct disadvantages to going cashless. You pay more in credit card fees, of course, and there’s no way to accept payment if your credit card system goes down. And you may lose customers who prefer to pay by cash, as well as those who don’t have a credit card at all.

Critics cite justice, civil rights concerns
It’s the latter customers who have some legislators concerned. They see cashless businesses as discriminatory and elitist, designed to keep low-income people and undocumented immigrants away.

Estimates from an FDIC survey suggest that 6.5 percent of U.S. households are “unbanked,” meaning they don’t have checking or savings accounts or any kind of traditional banking relationship. But in certain urban areas, the number of unbanked households is much higher.

According to the Pew Research Center, approximately 29 percent of American adults say they don’t make a cash purchase in a typical week. People with household incomes of $75,000 and above are more likely to say they didn’t use cash, while African Americans and older people were more commonly cash users.

Bans on cash-bans
Philadelphia and San Francisco both enacted bans on cashless stores this year. New Jersey passed a similar law in May, making it the second state in the U.S. to prohibit cashless stores since Massachusetts first prohibited them in 1978. Legislators in New York are working on a similar ban.

Certain transactions are exempt from such bans. In Philadelphia, for example, parking garages can still operate cash-free. So can businesses that sell through a membership, businesses with online or phone-only business models, and operations that sell goods exclusively to employees.

Amazon Go, which not only operates cash-free but also cashier-free, has adapted to the ban by providing cash payment options at select stores.

If you’re considering going cashless but are worried about possible downsides, look for ways to encourage customers to pay with a card. You can install cashless ordering kiosks that speed up the ordering process or keep one cash-accepted register.

If you prefer a cash-based model and are considering credit card surcharges or cash-payment discounts, consult an attorney. Surcharge and cash discount rules vary from state to state, and business owners must word these promotions carefully to adhere to regulations.

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