At a recent American Antitrust Institute (AAI) symposium in Washington, D.C., I asked the presenters about the ability of cash and checks to compete with the credit card industry and its strict controls on merchants. This obvious point becomes less obvious when one takes into account the expanding exclusion of cash/check payments due to the overwhelming expansion of goods and services that you cannot buy unless you have a credit card or a friend with one whom you can reimburse.
When sending some types of express mail, renting a car, or paying for the services of airlines/trains or hotels, you either cannot pay with cash/check or it is a real hassle of inquiries and conditions. The overall trend is to limit more and more what legal tender can actually buy in America because of exclusionary fine print contracts (see faircontracts.org).
For many people, the convenience of a credit card and potential for rewards justify their preference to forgo cash. Moreover, lower income consumers want a brief extension of credit, however expensive. Credit card carriers are given “points” such as frequent flyer miles, but often the consumer pays in other hidden ways for these “freebies.”
Notwithstanding the above obstacles, I still do not have a credit card or a signature-based debit card. There are ten relevant reasons for my preferring cash or checks over plastic.
1. Plastic lays the groundwork for massive, daily invasions of privacy. Personal purchasing data now floats around the world without controls. The data mining industry is everywhere and both government and hackers can get into peoples’ files. As Facebook and Google demonstrate, it is almost impossible to keep up with the sharing of your personal information.
2. Once you enter the credit economy you fall under the controls of arbitrary credit rating and credit scoring merchants. So if you complain strenuously to an auto dealer or insurance company, if you are a victim of false information in your credit file, or even if you have too many credit cards, your credit can suffer so that you pay more or are denied loans.
3. The credit card economy, with its anti-competitive no-surcharge rules, etc. is inflationary and affects negatively consumer purchasing power as well as lower savings rates.
4. Credit cards encourage impulse buying. The industry knows this very well. Swiping a plastic card rather than opening a wallet and directly taking cash out creates a disconnect between the purchase and the loss of money to the consumer.
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