Budget Sense

One of my fascinations since childhood has always been radios. Specifically AM and SW radio.  Having just arrived in Athens,

Collecting calling cards in my teen years helped me buy my SONY SW Radio

Greece in the mid 90s and in my early teens, I was without a radio. I needed one badly. But I was only 14 and with no job, and wasn’t about to ask my family for money to buy something as inessential as a radio. Well at least not important to them. So I took it upon myself to save money and buy one of my favorite radios: a SONY SW Receiver. But at the time, this cost close to $100, a fortune back then. I was still too young and a year away from finding my first job in Athens. So I had to come up with a new way to get the money.

At the time, and prior to the introduction of cellphones in Greece and Europe in general, calling cards were very popular, even for local calls. You would get a calling card with a certain amount of money and that enabled you to use it for a certain amount of time. Very convenient and affordable for most people. Beside their convenience, these cards had a another appeal to them: each had a theme or image of a certain city, place, team, person etc. Needless to say, there was a whole market of collectors, ready to buy and sell these phone cards (after their minutes had been used of course)

At first, I started seeing them in phone booths, left behind once people were finished using them. A few of the people who used them would end up collecting them but the majority would leave them behind. This is where I saw an opportunity I could capitalize on: collect enough of those calling cards and sell them for a profit to be able to buy a radio.

It took me a few months and at the end of it, I found more calling cards than I had imagined I would. It felt like a treasure hunt. When I went to the collector’s corner in downtown Athens, I had more than a few collectors gathering around me, trying to give me the best value for my cards, seeing that I had a lot and of different varieties. I managed to get the best deal which was more than enough to buy my radio and even had some money left to save for other things.

This is one of the best life experiences I have ever had. It taught me to rely on myself and work hard for what I want. It taught me that there is a way to do things if I try hard enough. After all, I managed to save money without having a job or getting money from anyone. All I needed was the right idea, some walking and free time, all of which I had back then.

Merchants pay up to 3% of every transaction back to the credit card company.  Not only that, but these credit card companies

Paying with cash, as opposed to credit, helps your local retailer and economy in general.

have a lot of power and influence while small business don’t have any choice.

One way to help your local small business is to use cash or debt when paying. Cash is even better because they will not have to pay virtually any transaction fees on it. These savings add up to hundreds or even thousands for your local small business. In turn, these savings can translate into more job hirings, more investments in the local community and so on.

Some people prefer to pay with credit as it may mean more convenience, loyalty points etc.  For the rest or those who don’t care one way or another, using cash will help your local economy and that is always a good thing.

Recently, credit card companies were in court defending against accusations from small business retailers that they were bullying them and charging them too much in credit card transaction fees. Unfortunately, the case couldn’t be proven and the credit card companies continue their practices of overcharging and putting too many burdens on small businesses. Though they can’t do much about that, the consumer can help these businesses by paying with cash.

“Canadians are paying more than they should be at the register because of these high fees,” retail council spokesperson David Wilkes said. “Totalling more than $6 billion annually, these fees have a negative effect on merchants and consumers alike.”

So not only are these fees harming small businesses and retailers, they are also harming consumers’ pockets, costing them in the billions. Retailers have to pass on these expenses to the consumer at the end of the day and that is a lose-lose for both and only the credit card companies benefit.

Example: Credit Card vs. Debt vs. Cash payment

Suppose you bought something from your local store for $500. If you paid for it with a credit card, at 3%, the retailer would be charged close to $15 in transaction fees! If you paid for that same item using debt, the transaction fee to the retailer would be only half of that (at $7.50). And if you paid with cash, they would incur no charges at all.

Some may argue that since retailers pass on these credit card transaction expenses  back to the consumer, it makes no difference what method of payment to use. That may be true for some but not all retailers. Furthermore, even if they are passing some of these expenses and including it in the price, paying cash or debt still makes more sense, when all things are considered.

One word of advise to small businesses who want to encourage people to pay with cash: instead of charging people a certain amount to use credit card below a certain amount (say 50 cents to use credit card for any transaction below $5) , why not change or add to that by actually giving customers a discount when paying with cash, above a certain amount (say $100)? Even if it is a 1% discount, it is still a good psychological motive for people to use cash rather than credit.