Are we punishing the good and rewarding the evil-doers?

“Sorry sir. We don’t accept cash.” Wait – What!?

So I have been flying a bit lately for work, and it has come to my attention that if you wish to purchase a meal on an airplane – never mind that my grandparents used to tell me about the marvelous FREE food on commercial jets – you now MUST carry a credit card. At least if you aren’t in first class on the airline I flew.

I also tried with all my might to rent a car without producing plastic. Impossible. I had to produce my debit card and the car rental company, if they would accept debit cards at all, would only do so with an exorbitant security deposit, applied in the form of a “hold” on my account. This basically means that several hundred of my dollars, although they were in my account, were not accessible by me. For several days after I returned the rental car. Am I being punished for paying with cash instead of borrowing money when I don’t need to?

I have begun the Dave Ramsey plan of living your life with the money you already have, and I’m closing in on the 100% debt free status. This makes me happy and proud. Somehow, I’ve done something that many of my peers have not done – and apparently cannot do – and I’ve done it without cheating anyone, without crazy good luck like winning a lottery or something, and without slighting my life, my family, or my friends.

So now, back to the airline for a minute – let’s consider a hypothetical person we might meet on the airplane. Let’s imagine someone who grew up in the era of World War I. Let’s call her “Aunt Sophie”, who is 99 years old, worth millions, and who has never had a credit card. Let’s imagine that she is flying from her retirement villa in Florida to Anchorage, Alaska to see her great grandson graduate high school. Are we living in a society that will make this woman endure a cross-continent flight without a meal which she can easily pay for 100 times over, just because she does not have a credit card? This is ridiculous.

I grew up in a home without credit cards. My father never had one, and he taught me that you really shouldn’t need one. If you can afford to pay, you don’t need one, and if you can’t afford to pay, you shouldn’t have one.

Sometimes this seemed like a harsh lesson. Sometimes it seemed almost incredible, especially when I saw how other people used the cards they carried. It was so easy and quick to just hand over the card, and watch as the clerk took an impression and then gave back the carbon. Then later, as computer technology pervaded retail space, things became even easier and quicker, with a simple “swipe” of the magnetic strip.

One day I discovered that a debit card works just like a credit card, but it doesn’t use a credit balance – instead taking the funds from your checking account. This was like an epiphany – I could have all the ease and convenience of the “swipe” without the nasty interest rates, fees, etc. I quickly got one of these, and couldn’t wait to use it in front of my dad – loudly telling the clerk “Put it on my VISA!” and watching my dad’s eyes get big. I explained very shortly afterward that it was not really a credit card and told him how it worked.

Recently, in a discussion with a good friend and mentor, I expressed my concerns with credit cards and the whole system of “buy now pay later”. My friend essentially told me that even if you already have the money, and plan to pay for the product entirely, it is safer to buy with a credit card in case there are problems with the product or service. What?? What place on earth would allow it to be easier to get something fixed if the customer had not yet paid? Can this be happening? Here – in America? Can this be possible?

Another point that my friend made was that often the customer gets rewarded for buying items on a credit card. A certain percent back for gas, a certain percent for food, free airline miles, and so on. Since the merchant pays a fee, I assume that some of this “graft” comes from the merchant transaction fee, but surely not all? Where does the rest come from? Card member fees! Interest! This sets up a very strange, slanted situation where many retailers have to factor card fees into their prices (groceries and gas, especially, since they operate on slight margins already). What does all this mean? It means that gas, food, and myriad other items are more expensive (even if you pay cash) because the retailer has to prepare for the credit card company ambush.

We are adding frictional cost to almost every transaction by using credit / debit cards. A cashless society is a very expensive society to operate in. Expensive in terms of added consumer cost, expensive in terms of privacy (consider piles of purchase history data that are floating around cyberspace, just waiting to tell the story of your spending habits to anyone who will take the time to look), and expensive in terms of some of our basic rights (we are now being told how we should store our money and our property, decisions which were previously made by the sovereign individual).

Throughout all of this process, we have made it far easier for us (or for impostors) to spend our savings, we have made it far more difficult to use the power of cash to bargain with (you cannot lay the debit card in front of the car dealer and expect to get a cash discount), and we have made it almost impossible to safeguard a nest egg by putting almost everyone’s savings into investments that not only carry inherent risk (generally the risk involved in stock market investing) but we’ve also separated the owner from the physical asset, placing wealth into paper instruments (and now into so-called “cyber” instruments) which are far more susceptible to pillage than hard assets in a vault.

Have we made life easier and more productive for the man with a fist full of hard-earned money, or have we made the pick-pocket’s job easier? I ask that question both literally, and figuratively. Because there are both literal pick-pockets who hang around busy areas and work crowds, and there are also figurative pick-pockets (some of them are even legal, legit businesses!) who will talk you out of your money, making it easy for you to move it into their accounts.

Just something I’ve been chewing on since first experiencing “Sorry, sir. We don’t accept cash.”