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January 22, 2010

New York Times Takes Aim at Use Cash Movement

By Chaz Valenza

The New York Times seeks to "reframe "the issue as a "consumer" ethical dilemma. Any positive force, fairness in pricing, trade and payment options is ignored. The argument of credit card non-use as a protest with a financial weight behind it ignored.

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New York Times "Your Money" writer Ron Lieber took a veiled mainstream media shot at the Use Cash Movement in his January 9, 2010 column "The Damage of Card Rewards."

I call it veiled because he cited a "boycott" of credit card use without directly mentioning that any organization, like the Use Cash Movement, was attempting to challenge Big Banking's substitute payment system as a means of profit denying protest.

In the piece, Lieber poses as a guilty consumer all too aware that using credit cards that offer rewards could be "selfish." He acknowledges that his rewards are, in fact, paid for through higher prices merchants must charge all their customers.

He owns up to the fact that credit card use, rewards or no rewards, costs an average American family, paying with credit cards or not, between $427 to $600 per year. At $500 a year that's $59 billion dollars in revenues to Big Banking.

Then, his dubious argument begins: "Bringing that cost down to zero means that everyone would have to quit cards cold turkey."

Whoever said that this was an all or nothing proposition? Nobody, but it serves the rest of Lieber's justification to keep supporting Big Banking and Finance through plastic use.

If Mr. Lieber knows anything about business he might know that if a profit center's annual revenue is $59 billion and their marketing budget is $7 billion, which it is, and it follows that overhead and variable costs are probably 50-60% of sales, it doesn't take much to destroy their profits. Rough guess: less than $10 billion.

"But let's pretend that a boycott is feasible," Lieber continues, "Then what?" According to him some merchants would keep the money they no longer have to fork over to the banks.

What's wrong Mr. Lieber, afraid the free market system doesn't work? Merchants won't use that money to attract more customers?

It get's worse. The next paragraph of this piece of supposed non-yellow, objective journalism begins, "There is no way for consumers to win." Really?! Unless...

"...merchants started giving us all discounts for using cash instead of cards." He goes on to use the all businesses are the same rationale with the phrase, "most businesses find this problematic."

With that he goes after the second part of the Use Cash Movement's base: merchants. He deliberately lumps small businesses in with Big Business. To people like Lieber, all businesses are on the same side and small business is assumed to support all Big Business goals.

Most big businesses, most corporate business, is what he means. If he would use that qualifier he would be right. Chains retailers and restaurants love credit cards. They have their own. They prevent theft. They're easier to handle than lots of cash.

Small businesses, independent businesses, mom and pop businesses, hate credit cards. Plastic payment use costs these businesses thousands of dollars a year. Their merchant fees tend to be higher than the big boys, forcing them pass along even more banking fees in the form of higher prices.

Would small businesses rather give their customers a 5% Discount for Cash or pay 3.5% to Big Banking? No question, I'd rather give that money to my customers, be more competitive with the chain stores, and have my payment immediately. If I'm a small business owner, which I am.

Then he makes offering the discount sound daunting, claiming that merchants might have to put two prices on every item, which is not required in most states.

Anyway, most of the roadblocks to offering a cash discount have been created by Big Banking. For example, you're not allowed to put a surcharge on credit and debit card sales. Why? Because it's a law the credit card companies and banks lobbied for even though it's a prima fascia case of restraint of trade.

Next, Lieber rolls out the almighty expert. This time in the form of, oh so, business and supply side friendly University of Chicago philosophy graduate alumni and savvy plastic user Dave Hanson. Who also taught applied ethics at Gonzaga University. My, what impressive credentials as a news source!

Hanson says he's not cutting up his credit cards. No moral hazard here, an "ethics" teacher says it's okay to use credit cards, so it must be okay.

Again, the argument of credit cards non-use as a means of protest with a financial weight behind it is ignored by Lieber.

Lieber seeks to reframe the issue as a "consumer" ethical dilemma.

Hanson states, "The marginal effect of my individual use of plastic simply won't impact the larger outcome."

And there you have it. No individual moral imperative, though that's not the question, because the system blows. The poor get poorer. You're off the hook.

Subtext to Use Cash participants: You can't fight Big Banking. You can't deny them their 3.5% of everything you spend. You can't send a message by telling the credit card companies that their $7 Billion to get you to use an expensive payment system won't work.

Don't organize "Mr. and Ms. Consumer." You can't boycott, you're too small; you don't matter. You can't protest because those few dollars you deny Big Banking everyday are peanuts and nobody will join you.

Small businesses shouldn't bother to offer the money they would otherwise send to Big Banking, which will not loan them a dime, to the people who really matter to them: their customers.

No. Use Cash as a means to an end is hopeless, you stupid little "consumer."



Submitters Bio:

Chaz Valenza is writer and small business owner in New Jersey. He earned his MBA from New York University's Stern School of Business. His current feature film project is "Single Point Failure" an insider's account of how the Reagan Administration caused the greatest tragedy of the space age based on Richard C. Cook's book "Challenger Revealed." He is a former Director of Public Information for Planned Parenthood of NYC. His website is: www.WordsWillNever.com

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