AS I PULL INTO A SUNOCO STATION on a recent Friday night, I feel as if I’ve driven right into my childhood. Despite the sign by the pump promising (and delivering) the “Lowest Gas Prices in Town,” it is a full-service station. After the friendly proprietor fills my tank, I hand him two twenties. He reaches into his chest pocket and pulls out a Tony Soprano–style wad of bills, peeling off several singles to hand me my change. No swipes, no chips, no PINs. If he had checked my oil and squeegeed my windshield (and if my two twenties had instead been a ten), I would have sworn I was a preschooler in 1973, sitting behind my dad in his Ford Falcon.
The proprietor is Ed Negoshian, and the Sunoco station at the intersection of Route 9 and Elliot Street in Newton has been in his family since the 1950s. He began working there when he was 10, showing up after school every day to help his father. Ed’s 63 now, his black beard threaded with gray.
About four years ago, he decided to lower his gas prices by 10 cents a gallon for customers paying in cash, passing on to them his savings from avoiding credit card fees. “We’ve always been busy here,” he says. “But it really took off after we did that.” For emphasis, he widens his blue eyes, which somehow manage to be both pale and piercing.
These days, as he hustles to keep the stacks of idling Toyotas and Audis from backing up into the street, his customers are split about evenly between cash and credit. “People don’t carry around much cash anymore, but to save a dime a gallon, they find it.”
I ask if he has any advice about the cash life for merchants opening Massachusetts’s new marijuana stores. Unless the banks change their minds, anyone wanting to buy recreational weed here will need to pay cash.
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Negoshian, who says he makes multiple trips to the bank each day for deposits, points to the vacant Chinese restaurant next door. “They want to put a weed place there,” he says. “The neighbors are upset. They don’t want it there.”
The resistance that has weed merchants even more concerned is coming from the big financial institutions. Even though marijuana is now legal in Massachusetts, federal law is another matter. Credit card networks don't allow weed-related sales. So far, the banks are playing it safe and not letting marijuana stores and dispensaries open accounts to receive funds from debit card processors. Effectively, that means people can't use plastic to buy their pot. And that has left marijuana merchants to worry about the security risks and logistical hassles of having to keep large quantities of cash on hand, and using it to pay their bills and their employees.
I take the opposite view. Rather than begging the big banks to get their tentacles into yet another slice of business, let’s use this as an opportunity for redirection. It makes no difference if you’d never be caught dead firing up a joint or if you can’t conceive of a morning without a little wake and bake.
We should all take this moment to remind ourselves of the massive amount of control we have ceded to the big financial institutions — not to mention nefarious hackers — in exchange for minor convenience on our march to credit card servitude.
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I’m not delusional. In an age when e-commerce is dominant, when emerging payment platforms like Apple Pay and Venmo (which rely heavily on credit and debit card processing) are taking hold with young consumers, and when people are paying even their baby sitters electronically, it’s clear that buying with credit is here to stay. I’ve been a card carrier for years, although I’m what the credit industry refers to as a “deadbeat” because I pay off my full balance each month, denying them their pound of finance-charge flesh. I have no plans to cut up my card, move my measly bank savings into my mattress, and live a cash-only life.
What I have been doing lately, though, is being a lot more deliberate about my payment choices. I’m using my credit card much less and paying with cash much more. You might want to give it a try.
If the thousand-mile journey to greater independence from charging begins with a single step, consider starting with this baby one: For just a day, leave your Visa, Mastercard, or AmEx at home, log out of PayPal, Apple Pay, and Venmo, and pack your wallet with as many dead presidents as you can find on your dresser. I think you’ll be surprised to see how much sense — economic, practical, even moral — it makes to come back to cash.
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ON FEBRUARY 8, 1950, THREE BUSINESSMEN sat down for lunch at Major’s Cabin Grill next to the Empire State Building. They were trying to get a new business called Diners Club off the ground. While there had long been charge accounts at department stores and gas stations, Diners Club was conceived as the first charge card to be accepted at various establishments. It was geared toward businessmen. Instead of having to worry about paying for each meal, they would simply sign a receipt in triplicate after the last refill of coffee, and then settle up with a single bill at the end of the month. In exchange for expanding their customer base, restaurants would give Diners Club a 7 percent cut of each tab.
Partners Frank McNamara and Ralph Schneider had brought on the third man, Matty Simmons, because he was a press agent whose client list included many top New York restaurants and nightclubs. And as brilliant an innovation as this Diners Club seemed to be, the partners were having almost no luck in getting restaurants to sign on.
This meal in Manhattan was the first transaction in Diners Club history. Before long, Simmons persuaded many of his restaurant clients to accept the card. He also concocted a winning origin story for Diners Club, telling people that McNamara had come up with the idea when he was taking a client out to dinner and realized with embarrassment that he had left his wallet at home. (Simmons insists the forgotten wallet story is apocryphal, even though it continues to be presented as fact on the company website.)
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Diners Club caught on. By the late ’50s, it had competition from American Express and Bank of America (whose card eventually became Visa). Business was so brisk that a mobster who owned a New York nightclub pulled Simmons aside and told him, “You guys are killing me with these credit cards. There’s no cash to take out of the register anymore!”
The mobster was exaggerating. Despite their success, for many years Diners Club and its competitors had very little effect on the lives of most Americans. Like first-class air travel and the Hamptons, credit cards were largely the province of the well-to-do.
Most middle-class families got by the way my parents did. They had a Sears charge card for emergencies, like replacing blown-out car tires or a broken-down refrigerator. For everything else, they used cash.
That’s how I grew up in the ’70s and early ’80s. When the ushers passed the collection baskets every Sunday at St. Louis de France Church, one of them walked around like a bus station attendant, using a coin contraption to make change for any of the congregants who were either too strapped or too cheap to part with a whole dollar.
Once a month, a kindly middle-aged man named Armand Amaral, who always wore a suit and trench coat and carried the scent of Newport Lights, would ring our doorbell to collect the premium for my dad’s life insurance policy. I marvel at how many doors he must have knocked on each day to collect payments of two dollars and change. Still, that must have been real money back then, because each month my mother kept those two singles and assorted coins tucked away in the hard-to-open kitchen drawer beside the stove, so we wouldn’t raid it and Armand would never leave empty-handed.
In 1984, at age 15, I got my first real job, picking apples at a local orchard. At the end of each week, the orchard owner would hand me a tiny manila pouch containing the appropriate number of coins and neatly folded bills to cover my $3.75 hourly rate, which was 40 cents above minimum wage. Opening that pouch was pure satisfaction. I didn’t really understand what “under the table” meant. All I knew was I was getting paid a decent wage to work outdoors on beautiful fall afternoons. All these years later, I don’t think I’ve ever found a job to top that one for enjoyable, absolutely worry-free work.
The landscape began to change in the late 1970s, as financial institutions greatly increased access to credit cards for middle-class and even working-class Americans. Gunnar Trumbull, a professor at Harvard Business School who has studied the industry, says the upside was that many people who had been unfairly shut out from credit, particularly women and minorities, finally gained access. But there were enormous unintended consequences.
He cites a crucial decision near the end of the Carter administration to allow credit card companies to change the interest rates of their loan contracts. “Carter did this because he thought if lenders raised rates in the late 1970s to reflect high inflation that borrowers would stop borrowing at those higher rates,” Trumbull says. The president was wrong. Instead, the decision eventually helped sink lots of customers into debt, since credit card companies could raise interest rates on those who missed payments. Perversely, people on the edge of nonpayment became a profit center for the industry. The trend accelerated during the 1980s.
Take a look at a chart tracking American household credit card debt through the decades. This kind of “revolving” debt basically didn’t exist before 1970. Today, Americans have racked up more than $1 trillion in credit card debt. For households carrying revolving debt, the average balance is north of $15,000. A survey last year found that 77 percent of Americans prefer to use their debit or credit card for purchases, compared with only 12 percent who favor cash.
This growth in credit card access also conditioned Americans to carrying sizable debt, which softened them up nicely to accept the insane amounts of college debt that have become standard in this century.
For some people, credit card debt is the only option to cover medical and other emergency expenses. Still, the most insidious byproduct of expanded access was training people to buy things they don’t need and wouldn’t have purchased if their only payment option had been the cash in their wallet. A 2000 study by MIT economists found that people were willing to spend up to 100 percent more on a product — in this case, Celtics playoff tickets — if they were using their credit card rather than cash. The MIT professor behind that study, Drazen Prelec, whose research focuses on the psychology and neuroscience of decision making, tells me, “It’s very likely that debt would be lower if credit cards did not exist.” In a study last year by the personal finance website NerdWallet, respondents by a wide margin said the primary reason for their credit card debt is “spending more money than I can afford on unnecessary purchases.”
Debit cards, tied to your bank account balance, prevent you from spending what you don’t have. Yet the fraud protections for debit cards tend not to be as robust as those for credit cards. And when it comes to privacy concerns, merchant fees, and the psychological deterrent against unnecessary purchases, debit is closer to credit than to cash.
As for Matty Simmons, he left Diners Club in the late 1960s. Across a wildly eclectic career, he would become founding publisher of the National Lampoon, part owner of the Warriors (moving the NBA franchise from Philadelphia to the Bay Area), and producer of Animal House and the first five National Lampoon’s Vacation movies.
By the 1990s, he found himself deeply troubled by the damage being done by the credit card industry that he had helped launch. So he wrote a book called The Credit Card Catastrophe.
He’s 91 now, and during a recent interview, he tells me, “Things have gotten so much worse. At a time when interest rates are so low, bank rates on credit cards are so high.”
Still, he doesn’t think this genie can ever be put back into the bottle.
“Two days ago, my 27-year-old daughter called me and said, ‘I left my credit card at home and I ran out of gas.’”
When he asked his daughter if she had any cash on her, he could feel the incredulousness oozing through the phone. “No,” she said. “I don’t carry cash.”
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OK, BUT WHAT IF YOU’RE A FISCALLY disciplined “deadbeat” who pays your Visa bill in full each month, relies more on your debit card than credit, and resists buying stuff you can’t afford? Why should you try to use cash more?
Do it to support the little guy. Many mom-and-pop businesses — the kind of places that tend to sponsor your kids’ soccer and marching band raffles — are having a harder and harder time making the numbers add up in the face of punishing competition from the likes of Amazon and Walmart. And when it comes to payment options, these small outfits face a Hobson’s choice of either alienating customers by insisting on cash when fewer people are carrying it, or seeing their already narrow profit margins get even thinner by signing over 3 to 4 percent of their total sales to the credit card behemoths.
That explains the campaigns that have begun bubbling up around the country to get people to use cash at local stores, appealing in particular to idealistic young souls who might not normally associate cash with progressive values. The Ben Franklin general store, a Cape Cod institution on Main Street in Chatham, now posts a sign informing shoppers they will incur a 4 percent surcharge if they use credit. “Due to the high volume in credit card sales,” it reads, “we are asking your cooperation and understanding, as the fees have become exorbitantly expensive for us.”
At Common Ground Food Co-operative in central Illinois, founded in the 1970s by a group of community-minded students at the University of Illinois, general manager Tim Sullivan recently wrote an appeal for customers to switch to cash. He disclosed that the small co-op would spend more than $133,000 in credit and debit card fees in 2017, with plastic accounting for 86 percent of the sales. Sullivan also tried to disabuse people of common misconceptions about debit cards. Yes, merchants typically pay a smaller processing fee — around 2 percent — when customers use debit rather than credit. However, these businesses also must pay a flat “swipe” fee for every debit transaction.
For small-dollar sales, the combination of the two fees can swallow much of a merchant’s profits, especially those that operate on small margins.
It’s funny how different credit cards look from the other side of the store counter. Take, for instance, all those “cash back” reward credit cards that consumers love. If Visa or Mastercard is giving you back 2 percent of your total purchases, guess who is underwriting a big portion of that largesse? Yup, the merchants, who typically must pay an even higher transaction fee when customers buy something from them using a rewards credit card.
But what if you’re a disciplined, hard-minded deadbeat who is unmoved by appeals about mom-and-pops’ razor-thin profit margins? Why should you use cash more? I can think of several reasons.
Do it for your own pocketbook. If you’re hard-minded, you must realize that at least a portion of those credit card fees are built into the prices you pay. That’s why some merchants offer a discount to customers paying cash. If more people used real money, presumably the prices for everyone would be lower.
Do it for your own sense of control. Did you know that, except in Massachusetts and a couple of other states, when you use your credit card to tip your server at a restaurant, the server can end up seeing that tip reduced by 3 or 4 percent to cover the credit card fees? Unless someone from Mastercard or Visa is prepared to refill my water glass all night, I don’t see why they should get their piece of my tip. (These days, even when I use my credit card to cover a restaurant tab, I try to leave the tip in cash.)
Do it for your own privacy. If those targeted online ads for sneakers haunt you like a digital stalker, all because you once Googled “Nike,” think about how much personal information you are giving away every time you insert your chip into a reader for actual purchases. And if you think convenience is always a good thing, consider how recent events have left many state and local election officials wishing they could have a do-over in their rush toward electronic voting machines and away from those old-fashioned (reliable) paper ballots. I’d happily go back to staying up into the wee hours of the morning waiting for election results, if those results came attached to certifiable ballots. Instead of being chagrined after getting caught selling our personal data to Cambridge Analytica and other slimy operators, Facebook appears to be doubling down, pushing big banks to share their customers’ credit card transactions and other detailed financial information with the social media giant. Naturally, Facebook is packaging this data grab as a convenience boost, mulling new services that let people get their banking done in between posting photos of their kids. (Google and Amazon are making similar requests of banks.) A little inconvenience in our lives isn’t such a bad thing.
And how many of you have been saddled with the hassles of a credit card breach by Target, The Home Depot, TJX, or dozens of others? More than likely, you’re like me in having been a victim of that mother of all breaches, the one involving credit bureau Equifax. How many hours did all 148 million of us lose trying to deal with our compromised personal information, all because one of the nation’s insanely powerful Big Three credit bureaus — which each make money by selling our data to others — screwed up so massively? Sure, Equifax was eventually shamed into offering us victims free credit “freezes,” for a limited time. Yet we learned that for any kind of meaningful protection, we would need to put in place freezes at the other two credit bureaus, and naturally those came with fees.
This is a game where the house always wins. So every time you use cash, you’re widening ever so slightly the narrow band of your life as a consumer that falls outside their control.
Do it for peace of mind. You’ve seen those natural disaster and postapocalyptic movies, right? And you remember what happened when Katrina hit? When one of those increasingly frequent “storms of the century” takes out your power, try getting very far with your AmEx card. And don’t even bother trying to hit the ATM. In periods of literal and figurative darkness, cash becomes king.
We’ve even seen that happen here in New England during those nasty storms that have knocked out power for days across whole swaths of the region. Get used to more of that. Our nation’s power grid is a lot more vulnerable than most of us would like to believe. Beyond those “acts of God” are “acts of Russian (and other) hackers.” Earlier this year, US intelligence officials announced they had evidence that Russian operatives were behind a series of cyberattacks on our energy grid, among other vital targets.
And why should the cyberhacking stop with the energy grid? How devastating would it be to our economy if hackers took out one or more major credit card companies or credit bureaus?
There’s growing excitement these days about blockchain, the technology behind bitcoin and other virtual currencies that is supposed to be far more impervious to hacking. However revolutionary it may be, blockchain is not unhackable. And if it does take hold, the big financial institutions will probably find a way to dominate it, something both Visa and Mastercard already appear interested in doing.
The reason cash is always king in a crisis is that cash is real. You can touch it. And it clearly belongs to the person holding it. I have a lot more faith in the cash in my hand than any figures attached to my name in some database.
Finally, do it because, well, cash is just cool. Think about the brio Tony Soprano showed when he would pull a wad of cash out of his front pocket and peel off several Ben Franklins to cover everybody’s tab for the feast of baby octopus and caponata that Artie had prepared. Now imagine Tony and four of his underlings each clumsily handing Charmaine a separate credit card at the end of the meal and asking her to split the bill five ways. One of those scenarios would almost certainly elicit an eye roll, the other admiration. Which would you rather get?
Since I brought up a mobster, it’s probably a good time to deal with most common criticism of cash: that it’s the favored currency of racketeers and drug runners, a germ-covered tool for dirty money used to evade taxes and engage in all sorts of criminality. Fair enough. Harvard economists Larry Summers and Ken Rogoff have even called for the elimination of big bills like the US $100 and 500-euro notes, to reduce crime. Rogoff wrote a book to make his case, calling it The Curse of Cash.
But as Bloomberg columnist Elaine Ou persuasively countered, “the crime-fighting case against cash is overstated.” She cited a risk assessment by the British government that found the big banks and major accounting and law firms posed a much higher risk of facilitating the movement of dirty money than did cash, something the Panama Papers tax shelter scandal made abundantly clear. “If we’re going to cite unlawful transactions as a rationale for banning cash,” she wrote, “it only makes sense to ban banks and accounting firms first.”
Besides, although I have previously warned against reflexively ignoring the advice of experts, there is good reason to question Rogoff’s pronouncements. He’s the same expert whose work was used by Republican leaders and foreign governments to justify tough austerity measures, until a grad student at University of Massachusetts Amherst exposed Rogoff’s conclusions as flat-out wrong because the Harvard economist and his coauthor had made a basic Excel spreadsheet error.
I’m more inclined to trust the Germans, whom Summers blames for putting up the most resistance to phasing out the 500-euro bill. Cash still dominates in Germany. A recent report by the European Central Bank found that Germans use cash way more than we Americans do, plunking down euros for a whopping 80 percent of their point-of-sale purchases. Not surprisingly, our average household debt is about 2.5 times what theirs is. Achtung, baby.
* * *
IF YOU WANT THE BEST STEAK in Brooklyn, bring your appetite but leave home without your AmEx — or your Visa or Mastercard. Peter Luger Steak House, an institution since 1887, has never accepted them. Same story at Giacomo’s in Boston’s North End (and South End). And if you have a hankering for a foot-long hot dog, head to Simco’s, the legendary takeout stand that opened on Blue Hill Avenue in Mattapan in 1935. It remains card-free. “I like to keep it simple,” owner Nick Fotopoulos tells me, “like old times.”
Despite the omnipresence of plastic, there are popular businesses sprinkled around the country that continue to be defiantly cash only. Instead of selling commodities, they tend to offer goods and services that are so specialized or beloved that customers will stomach a little inconvenience at the register.
The newer trend, though, is in the opposite direction: businesses that refuse to accept cash. That’s the policy at several trendy chains, from Sweetgreen to those new Amazon Go grocery stores, where you never stop at a register because all your purchases are (creepily) tracked electronically. Since the vast majority of their younger consumers have already moved away from cash, these newer businesses figure they can reduce hassles and security concerns by just getting rid of it altogether. When Sweetgreen opened in Massachusetts, it refused to take cash until a Globe story about the company pointed out a little-known 1978 state law making it illegal to require customers to pay with credit cards. For now, the chain is no-cash everywhere except Massachusetts.
Yet, given the power of the credit card industry and the advance of technology, there’s little reason to assume this protection ensuring consumer choice will persist. (Even the Globe, much to my disappointment, recently began charging subscribers a $1.50 processing fee if they pay by any means other than credit/debit card.) Drazen Prelec, the MIT economist, tells me he makes a point of sometimes paying in greenbacks as a small check on the domination of the credit card industry. “I think it is important to preserve the option to pay in cash.”
I’d wager that, before long, Bay State stoners will be swiping their cards to buy their weed. And unless more consumers insist on using cash, it’s a safe bet that more businesses will eventually go the credit-only route.
So, if only to preserve your options, try adding a little more green to your consumer diet.
For a true test of what that would feel like, head to Cape Cod, where cash remains surprisingly strong. Why? For starters, Cape businesses lean heavily on nostalgia, since visitors like to take their kids to the same ice cream parlors, seafood shacks, and mini-golf courses where their parents took them. So it’s easier to ask customers to pay in the same manner their parents did. More important, because these seasonal businesses have just two months to cover their nut, they are more reluctant to sign over 3 to 4 percent of their sales to the big credit card companies.
Visitors learn to replenish their wallet with bills because they know cash is king at the most popular ice cream shops, from Four Seas in Centerville to Sundae School in Dennis Port to Smitty’s in Falmouth and Barnstable. Same with lobster roll stands, from Seafood Shanty on the Upper Cape to Sesuit Harbor Cafe on the Mid-Cape to Arnold’s Restaurant on the Lower Cape.
Several business owners tell me that despite their longstanding policies and plentiful “cash-only” signs, on an average day, a dozen or more customers will pull out a credit card at the register.
I see that for myself one weekend night when a trio of college women line up next to me and my kids at a Mid-Cape ice cream shop called What’s the Scoop. Fortunately, one of the young women finds enough cash in her clutch to cover her friends, prompting “I’ll Venmo you” assurances from the other two.
Mike Gaffney, who owns the shop, tells me if he accepted credit cards, he’d have no choice but to raise prices. “For a family of four, I try to keep the tab under 20 bucks, because I know there are only so many twenties in the wallet.”
When a wallet can’t cough up enough cash, Gaffney sends the customer to the ATM around the corner. “I feel bad because I know they’ll get whacked with a $3 fee.”
Unlike the credit card fees, however, the ATM surcharge is entirely avoidable. If you’re going to try using cash more, do yourself a favor and open an account at a bank that will reimburse you for all ATM fees, even those imposed by other institutions. I don’t live in Wellesley, but I opened an account with Wellesley Bank because it lets me use any ATM in the world without having to pay a fee. Other banks offer similar accounts. It makes no sense to take a hit every time you sidle up to a bank machine.
If the Cape offers a crash course in the cash-only life, consider Cuba a graduate school seminar. Earlier this year, my family and I spent a week there. Because of the nearly 60-year-old embargo, American credit cards are as unwelcome in Cuba as a JFK campaign button.
I adapted pretty quickly to the demands of having to begin each day packing my wallet with enough cash to cover whatever expenses we might incur. I enjoyed how this extra layer of unpredictability gave the trip an old-school vibe, like traveling without a net. And I loved seeing my three teenage daughters essentially put away their phones for the week because Internet access was so elusive (and expensive).
Still, when the bill arrived after a meal late in the trip, I came to the red-faced realization that I had dangerously underestimated my supply of convertible pesos, as had my wife and in-laws. My mind instantly flashed to a scene with the whole family working off our debt washing dishes, Lucy and Ethel style.
We managed to scrounge up enough pesos, but the episode took some of the shine off the whole traveling-without-a-net thing. After we landed in Newark and stopped for an airport meal, I was relieved to be able to pull out my Mastercard.
Neil Swidey is a Globe Magazine staff writer. E-mail him at swidey@globe.com. Follow him on Twitter @neilswidey. Get the best of the magazine’s award-winning stories and features right in your e-mail inbox every Sunday. Sign up here.