Cash or credit: The choice affects businesses

The smell of roasted coffee and sizzling bacon greets customers at Cushman Market & Cafe in Amherst.

In the hustle and bustle of the early morning rush, customers open their wallets to pay for a cup of coffee and a muffin, and more often than not, it is a credit card swipe that pays for their breakfast.

The convenience of using a credit card is widely enjoyed. At Cushman on Pine Street, owner Pete Sylvan said nearly 65 percent of all transactions are plastic, not paper.

What consumers may not be entirely aware of is those transactions typically have a 2.75 percent fee associated with them. That means for every purchase, a fraction goes to a large corporation that benefits from customers using plastic.

“It’s a bit of a mixed bag,” Sylvan said. “The fact remains that it is money spent locally that ends up going to a corporate entity, so there’s that piece. Then there’s also the convenience factor, where customers don’t have to go to the bank and there’s convenience in accepting credit cards. Their usage has grown over the years.”

Sylvan and his wife, Rebecca Schwartz, have owned the cafe in the northern part of Amherst for 12 years, and even though those transaction fees may seem small, they can make an impact on small businesses and even the local economy.

Cushman gets its produce from local farms, Sylvan said, bread from Woodstar Cafe in Northampton, sauerkraut from Real Pickles in Greenfield, and coffee beans from Esselon Coffee Roasters. The market also carries numerous beers from local breweries, including from Fort Hill, Building 8, Berkshire Brewing Co. and People’s Pint.

There is no minimum payment for credit cards at Cushman, and Sylvan does not want to put any restrictions on how customers pay for items there. He sees credit card transaction fees as “the cost of doing business.”

Although some businesses offer discounts to customers paying in cash, Rebecca Robbins, owner of Woodstar Cafe, said that would cost the restaurant, too.

“An incentive to use cash would still cost money,” Robbins said. “We are grateful for all customers no matter how they choose to pay … we are mostly trying to encourage customers to spend cash for items under $10.”

According to the National Retail Federation, many retailers have cited swipe fees as their second or third highest cost behind wages and employee health benefits. The federation also claims that the average retail profit range is around 2 percent, and that swipe fees are typically passed on to customers.

The federation estimates that the total amount of yearly transaction fees reaches approximately $80 billion nationally.

The fundamental problem, University of Massachusetts economics professor Gerald Epstein said, is that there is not enough competition in the credit card industry and not enough regulation to try to prevent price gouging.

“That’s how we ended up with this problem,” Epstein said. “Large banks, such as Bank of America or Citibank, are owned by stockholders who don’t live in areas like Northampton. They get higher profits off the profits of small businesses and consumers from all over the country. That is a transfer of income and wealth from small businesses and customers to large institutions, and whoever owns them, and they mostly do not live in this area.”

While other communities might not have people willing to forgo the convenience of relying on credit cards, Epstein said, “so many people in our community, if they are aware of these social issues, would be more likely to do something … to help out local businesses and the local community more broadly.”

A co-owner of Small Oven in Easthampton, Julie Copoulos, said that even when people are using credit cards at local businesses, they are still supporting the community.

“Cash is important but it’s worth noting that people who are making that decision to shop with credit cards are already taking that step and we have to be gracious with each other and grateful,” Copoulos said.

About 60 percent of sales at Small Oven are made with credit cards, which are hit with a nearly 3 percent swipe fee. They average $11 on purchases at the bakery on Union Street, according to Copoulos.

She said she and co-owner Amanda Milazzo have a lot of friendly relationships with local farms in the area and they often barter or buy products with cash.

“You can help sustain the local economy, and it’s not only fun to feed friends, but you can take money out of the system and it’s rewarding to see that exchange,” Copoulos said.

Small Oven gets its vegetables from Mountain View Farm in Easthampton, dairy from Mapleline Farm in Hadley, and greens from Queen’s Greens in Amherst, she said.

“I am kind of struggling with the idea of a new solution to keep up with technology,” Copoulos said. “It doesn’t seem fair that merchants are suffering because technology is changing and I don’t know if going back to full cash is the solution. Things like trading and bartering are good answers to creating community and solve the problem of big business getting in the way of small business.”

Technology is moving forward so quickly that Woodstar Cafe patron Aaron Fine, 39, of Northampton, finds it more convenient to use Apple Pay, a phone application that allows users to pay with their device. He used his credit card, however, to purchase a drink at the cafe.

On a recent August afternoon, Fine sat outside the cafe enjoying a GuS Soda.

“I find it a step much more convenient than credit cards,” he said, referring to Apple Pay, “because you don’t have to take it out of your wallet. You can use your thumb print. It’s even more simplified.”

Fine works for a nonprofit that deals with transaction fees all the time, he said.

“In theory, I recognize that (swipe fees) are not ideal, but it also doesn’t seem realistic to have just a cash economy,” Fine said. “I definitively respect businesses that choose to be all cash. People get used to that, but I also think that it’s difficult to imagine an entire town going to all cash.”

Luis Fieldman can be reached at lfieldman@gazettenet.com