No cash businesses are becoming more popular

Cashless businesses slowly catch on

Small, but growing number of merchants take plastic only

At Dave Hatfield's family-run restaurant, there's no cash register. Customers come and go for breakfast and lunch and paper currency is only rarely and reluctantly exchanged. But it's not a soup kitchen. Café 3456' in Bend, Ore., is cashless. Patrons pay with credit cards or debit cards.

The eatery is one of a small but slowly growing number of businesses across the country that accepts credit cards or debit cards only. No cash. The primary reason: Electronic payments save time and eliminate many of the headaches associated with counting, handling and securing cash, said Hatfield and others.

"When I mention my café to people, they don't remember the name of the restaurant," says Hatfield, co-owner and chef. "They say, 'Oh, you're the one that doesn't take cash.' " Hatfield says he weighed the costs and benefits of accepting only credit cards or debit cards and found it was worth it to make the switch. "For me, it has just not been a negative thing to switch to cashless."

The benefits of plastic
Experts say cashless -- or electronic -- transactions are becoming more popular with consumers and vendors. Making purchases with credit cards or debit cards has become the rule for fast, secure Internet transactions, but the trend has begun to catch on in segments of the brick-and-mortar business world. "Everybody is more prone to using plastic today than ever before," says Mary Beth Pinto, director of the Center for Credit & Consumer Research at Penn State University.

The airline industry -- which revolutionized plane ticket reservations and payments by automating them on the Web -- is now moving toward cashless transactions during flight. JetBlue Airways has announced it will join American Airlines in banishing cash from the menu of payment options for drinks, headsets and meals during airline flights. Starting Nov. 1, 2007, JetBlue's "cashless cabins" will accept major credit cards or debit cards only. The policy will free flight attendants from having to track down change for passengers.

"The hunt for stray dollars and cents is over for our customers," JetBlue product development manager Brett Muney says in a press release. "Now with a quick swipe of a credit card, in-flight purchases can be enjoyed with ease."

Cash takes time
Café 3456' opened about a year ago at the Bend Municipal Airport. The restaurant (named for the airport's elevation above sea level) caters to airport travelers and the employees who work at aviation-related businesses nearby.  Cash transactions slow down food delivery and ultimately reduce the number of people Hatfield can serve each day. In addition, cash requires time at the end of the day to count and mechanisms to safely secure the bills from loss or theft.

Hatfield decided to go cashless after hearing a news report about a New York restaurant owner who never took vacations. She was too afraid that workers would steal the cash.

He looked at his operations and realized how much time he and his staff spent counting bills each night. His four waiters and waitresses spent about 30 minutes counting cash. Hatfield then spent another 30 minutes counting the cash drawer. "That's an hour a day," he says.

After that he had to make daily trips to the bank to deposit the day's earnings. "After spending 12 hours in the restaurant, I just didn't have time to go to the bank every day."

He says the cashless system is much less time consuming. "I just hit a button and all the transactions get transferred."

Customer feedback
What do customers think of no-cash establishments? "I think it's great," says Percy Montgomery, a 27-year-old engineer who eats at the café two to three times a week. He says he prefers paying with credit cards and, in fact, doesn't carry any cash in his pocket. "When you're done with your meal, you just hand the card across."

Montgomery said the café has become the talk of his office. Many of his co-workers eat at the restaurant and many have gotten used to the no-cash policy. "They would miss it if they went back to cash," he says.

Not all of the café's customers like the idea. Some, mostly older patrons, still insist on paying with cash because they do not have credit cards or debit cards or are reluctant to use them, Hatfield says, adding they account for only one out of every 200 customers.

He says he takes time to explain the rationale behind accepting only credit cards or debit cards. "A lot of times, I find myself going out to the table to explain it. When I do, they usually understand," he says. If customers still want to pay with cash, he accepts the paper currency.

"On the days that someone pays with cash, those are the days that the process breaks down. It takes us longer," Hatfield said. He referred to the Visa credit card commercials airing on television showing customers zipping through checkout lines and paying by either swiping their credit cards or waving them over a sensor to pay for purchases. Lines move swiftly and there's little waiting. But when a customer pulls out cash, the cashier stares and a long line of people behind the currency-carrying patron must wait."It's exactly like that," Hatfield says.

Who pays the fees?
Another objection he encounters from customers involves fees. "A lot of people think they are getting charged more money when they use their credit cards," he says.

Hatfield explains that he pays the fees charged by credit card networks (i.e., Visa, MasterCard and Discover) and they range from 1 percent to 1.75 of the transaction. The café's average meal ticket is $9. So Hatfield pays an average of 9 cents to 16 cents per transaction.

Customers who do not pay off their credit card balances each month may incur additional monthly interest charges from credit card issuers. These can range from 9 percent to 24 percent of the outstanding balance for regular annual interest rates, although many issuers offer lower introductory rates for limited time periods. According a Federal Reserve study, only about 40 percent of credit card users paid their balances in full each month in 2006.

Hatfield says customers who carry monthly balances and do not want to pay interest on a meal purchase may also use debit or ATM cards, which do not charge interest but may have monthly bank fees, depending on usage.

Although Hatfield has seen success with his cash-less operation, not every business may be suited for electronic transactions, says Penn State's consumer credit researcher Pinto. Small companies with high volume business -- such as restaurants -- may have better results accepting only credit cards or debit cards.

A small antiques shop, with a relatively low number of customers, may not find that a credit cards only business model works, Pinto said. She notes that many small businesses do not accept credit cards for purchases under $10, even though that policy violates their agreements with the card issuers. "They won't even do it. I've seen those signs all over."

Cash less appealing?
Still, technological advances are making cash less appealing. "The idea that there are cashless businesses that accept only electronic payments is kind of a new phenomenon," said Peter Madigan, executive director of the Electronic Payments Coalition, a group of payment card networks, financial services companies and trade associations.

He adds: "The idea that cash is king in purchases is going more and more by the boards."

Updated: April 8,2023