“Inspiring Technology: 34 Breakthroughs”: Download IEEE’s 140th anniversary book for FREE.

Close bar

The High Cost of Taking Your Money

Transaction costs to merchants vary wildly, depending on how you pay

1 min read
The High Cost of Taking Your Money

Whether you pay for a bag of groceries by cash, check, credit card, or debit card may seem to be just a matter of convenience. But the cost to you is nothing like the cost to the seller, says Allan Shampine, senior vice president of the Chicago financial consulting firm Compass Lexecon. “If it’s a mom-and-pop store and you get out your credit card, the merchant is probably groaning inside: ‘He comes here all the time. I really wish he’d pay with cash!’ ”

In January, Shampine published a survey of 11 studies from the past 21 years of the actual costs of various payment methods. Shampine was surprised to discover that estimated costs of cash versus credit cards versus debit cards or checks vary so widely that only a fuzzy picture emerges.

Below are some sample findings—along with Shampine’s commentary on parts of the story that the data might not be telling.

graphs for high cost of money

Sources: Bank of Canada; Brinks; Coopers & Lybrand; Food Marketing Institute; Lydian Payments Journal (using Nilson Report data), January 2010; “An Evaluation of the Social Costs of Payment Methods Literature,” Allan Shampine, 12 January 2012, posted on the Social Science Research Network on 14 January 2012
Click on the image to enlarge.

This article originally appeared in print as "The High Cost of Money."

This article is for IEEE members only. Join IEEE to access our full archive.

Join the world’s largest professional organization devoted to engineering and applied sciences and get access to all of Spectrum’s articles, podcasts, and special reports. Learn more →

If you're already an IEEE member, please sign in to continue reading.

Membership includes:

  • Get unlimited access to IEEE Spectrum content
  • Follow your favorite topics to create a personalized feed of IEEE Spectrum content
  • Save Spectrum articles to read later
  • Network with other technology professionals
  • Establish a professional profile
  • Create a group to share and collaborate on projects
  • Discover IEEE events and activities
  • Join and participate in discussions