Go Cardless and Use Cash not Cards to stop Devaluing Money
Published / Last Updated on 11/07/2025
This morning, director Ashley Roberts-Clark went to the local ‘cash point’ machine to withdraw some cash for the weekend. It got him thinking about the implications of using cash rather than card, when most people he knows use debit or credit card via contactless smartphone ‘wallet’ to buy goods and services and their physical card for larger purchases. Do you use mainly cash or card?
Merchant Accounts
To be able to take payments online or via a payment terminal with a business, the business will need a Merchant Account. This is separate to the business bank account in that the Merchant supplier processes the payment for American Express, Mastercard, Visa et al, secures and approves the transaction and then passes the money paid, less a merchant transaction fee to the retailer.
Merchant accounts fees vary, according to online sources, from around 1.5% of the value of the transaction for a large volume retailer and 3.5% of the value of the transaction for a smaller volume retailer.
This means that each time a transaction is made, say 3.5% is deducted. If you look at the following table:
|
|
|
High Card Volumes Retailer |
Low Card Volumes Retailer |
Cash Retailer |
|
|
Merchant Fee |
1.50% |
3.50% |
0.00% |
|
|
Starting Balance |
£20.00 |
£20.00 |
£20.00 |
|
Value After Transaction |
1 |
£19.70 |
£19.30 |
£20.00 |
|
|
2 |
£19.40 |
£18.62 |
£20.00 |
|
|
3 |
£19.11 |
£17.97 |
£20.00 |
|
|
4 |
£18.83 |
£17.34 |
£20.00 |
|
|
5 |
£18.54 |
£16.74 |
£20.00 |
|
|
6 |
£18.27 |
£16.15 |
£20.00 |
|
|
7 |
£17.99 |
£15.59 |
£20.00 |
|
|
8 |
£17.72 |
£15.04 |
£20.00 |
|
|
9 |
£17.46 |
£14.51 |
£20.00 |
|
|
10 |
£17.19 |
£14.01 |
£20.00 |
|
|
11 |
£16.94 |
£13.52 |
£20.00 |
|
|
12 |
£16.68 |
£13.04 |
£20.00 |
|
|
13 |
£16.43 |
£12.59 |
£20.00 |
|
|
14 |
£16.19 |
£12.15 |
£20.00 |
|
|
15 |
£15.94 |
£11.72 |
£20.00 |
|
|
16 |
£15.70 |
£11.31 |
£20.00 |
|
|
17 |
£15.47 |
£10.91 |
£20.00 |
|
|
18 |
£15.24 |
£10.53 |
£20.00 |
|
|
19 |
£15.01 |
£10.16 |
£20.00 |
|
|
20 |
£14.78 |
£9.81 |
£20.00 |
For the above example:
- A retailer sells goods to the value of £20. The purchaser uses their card and at 3.5% merchant fee, the retailer receives £19.30 for that first transaction.
- The retailer now has £19.30 and spends this at the wholesaler with a card purchase of £19.30. The wholesaler then processes the card payment also at 3.5% merchant fee. The wholesaler receives £18.62.
- The wholesaler now has £18.62 and spends this at the manufacturer with a card purchase of £18.62. The manufacturer then processes the card payment also at 3.5% merchant fee. The manufacturer receives £17.97.
- The manufacturer now has £17.97 and spends this with a raw materials producer with a card purchase of £17.97. The raw materials producer then processes the card payment also at 3.5% merchant fee. The raw materials producer receives £17.34.
- The raw materials producer now has £17.34 and spends this at a seeds/tools supplier to produce the raw materials with a card purchase of £17.34. The seeds/tools supplier then processes the card payment also at 3.5% merchant fee. The seeds/tools supplier receives £16.74.
- The seeds/tools supplier now has £16.74 and spends this on a few cool beers after work with a card purchase of £16.74. The publican then processes the card payment also at 3.5% merchant fee. The publican receives £16.15.
- The publican now has £16.15 and spends this on beer barrels from the brewery with a card purchase of £15.59. The brewery then processes the card payment also at 3.5% merchant fee. The brewery receives £15.59 to pay the brewers and hop suppliers and they then go out to a retailer to buy goods and services, and the cycle continues.
- After 10 transactions, at 3.5% merchant fees, the £20 is now worth £14.01 and after 20 transactions, the £20 is now worth a staggering £9.81.
By using cards, our spending power is reduced meaning we pay more as retailers/suppliers put their costs up to cover their merchant fees in an ever ‘vicious circle’ and the bank/merchant account suppliers continue to make a lot of money.
Compare the above to using a £20 note:
£20 cash purchase > £20 cash for retailer > £20 cash to wholesaler > £20 cash to manufacturer > £20 cash to raw materials producer > £20 cash to the seeds/tools supplier > £20 cash to the publican and so on ….
Use Cards but also Use Cash
We appreciate that card transactions have an audit trail to contribute to a reduction in crime, fraud and ‘black market’ services and we also appreciate the security of not carrying cash and using a card, but it is also a contributor to rising prices and higher inflation and the government should encourage more cash-based transactions. If not, take consider taking action yourself.
