As cash fades, America becomes a plastic nation:
For the first time, Americans used cards — credit, debit and others — to buy retail goods and services more often than they used cash or check in 2003.
State troopers are accepting credit cards, on the spot, for fines.
Vending machines, subway systems and charities now accept cards. The government is handing out cards in lieu of food stamps and child-support disbursements. Hip-hop mogul Russell Simmons is marketing a service that lets people put their paychecks directly onto a Visa card, giving consumers without bank accounts access to plastic.
The Navy has switched to cards:
The aircraft carrier USS Harry S. Truman went completely cashless earlier this year. The Navy issued MasterCards to all 5,000 sailors aboard. On payday, seamen insert cards into a machine that electronically loads money stored onto each card. They then use the cards for all onboard purchases.
(What kind of cards are they using that they have to insert the cards into a machine on payday?)
Cards have obvious logistical advantages:
The Navy estimates sailors on the Truman buy 250,000 soft drinks monthly. When it was a cash ship, somebody had to collect half a ton of quarters each month from all the Truman’s vending machines. Those coins then had to be redistributed. Now it’s all settled electronically.
U-Haul’s doing something similar:
U-Haul International Inc., the truck-rental company, has begun issuing “payroll cards” to about 3,000 of its employees, or about 17% of its work force. They are mostly hourly workers who lack bank accounts. Workers can withdraw cash once a week from any automated teller machine without paying a fee, and they can use the cards wherever Visa is accepted. They can even get cash back after a purchase from the supermarket without any charge. The company, meanwhile, says it is saving about $500,000 a year in costs associated with issuing checks.
Naturally, people use credit cards for credit — and “normal” credit-card users subsidize those of us who don’t carry a balance:
Roughly 60% of credit-card holders roll balances over each month, paying interest of as much as 22%. Because these cardholders are the most lucrative customers of the banks, critics say they effectively subsidize the remaining 40% of cardholders.
Incidentally, although credit-card companies make money off interest, they make more off of transaction fees:
Over the longer term, big earnings for the card industry could come from the commission merchants pay with each swipe, anywhere from 1% to 5% of each transaction. It amounts to a tax, of sorts, on the new currency of choice.