Restaurants Prove Cash Is King ... But is It?
STORY BY Artie Vincent
Published: June 5, 2013
It all started three years ago.
With the nation in the midst of its low point of the recession, numerous struggling restaurants decided to rip down its MasterCard and Visa window stickers and replaced them with "Cash Only" signs.
The results were highly sour.
In New York City, a restaurant mecca, first proved shocking and ugly. In November 2010, months after a bulk of restaurants went plastic-less, a brawl broke out in glitzy West Village jazz bar with foreign diplomats and NYPD officers.
According to an article in the New York Post, three Dutch embassy workers and their friend were incensed when they couldn't pay their $300-plus bar tab at the cash-only Arthur's Tavern with their credit card. They refused to pay the bill, attempted to walk out and eventually led to a brawl with the cops. The diplomats were released on bail and was settled out of court.
Not all reactions were as extreme as this one. But most were negative, and continue today. The fact is that the "cash-only" movement may be enticing for an average business owner but they lose out in numerous financial advantages as well as alienating its clientele.
Michael Schmidt, a business development manager for SwipeWorks, Inc., told OnMilwaukee.com recently that he feels "businesses have good intentions" because they trying to keep their store prices low. The credit card specialist also acknowledges that fees could be a toll. However, Schmidt points out that sales drop drastically when businesses pull their credit card machine.
"Studies have shown that the average ticket is higher for a credit card sale than a cash sale," Schmidt told OnMilwaukee.com in the article. "Even for quick-service type restaurants, customers paying with plastic are most likely to purchase the add-ons such as sides and speciality beverages".
Yes, the cash-only establishments do provide a conveniently located ATM machine. But a customer dishes out $4 fees per transaction. Most ATM machines have a $200 withdrawal limit. And when you're paying a $400 tab, things could get testy.
On the other hand, cash-only does work ... in corrupt China.
A Chinese businessman paid for his new BMW 5 Series Turismo entirely in cash. In the recent New York Times article, Lin Lu drove up in a beat up Honda. His friend brought a "big white bag filled with $60,000" and the buyer had the $70,000 renminbi (China's currency) in his black backpack.
Most consumers in the country typically pay with cash. They are reports of people arriving with truck loads of cash to pay for their houses. The reason for the large cash-flow is because nation-wide corruption.
According to the New York Times article, the rich "typically hide" their money to avoid governmental scrutiny. In China, the costal cities flourish in prosperity while the interior remains "poor and disconnected from the more modern aspects of the financial grid".
Hence no middle class and no capitalism.
So three years after the cash-only boom, they are more businesses going back to plastic. Even businesses in Williamsburg, Brooklyn -- where 90 percent of them were cash-only in 2010 -- have embraced some sort of credit card system.
You'll still be expected to breakout the cash in many iconic locations in NYC, like at Carnegie Deli because they've never had a credit card machine in their 100-plus years of existence.
Have a topic you want covered? Let us know.