Cash Handling – It costs, too

When parking businesses look at the use of credit cards, they are immediately concerned with the cost of processing the card. The business pays anywhere from 2-5% to the clearing house and the bank for the privilege of getting the money moved from a person’s credit card account to their bank account. If you are processing say $10 million a year that’s between $200 and $500 thousand dollars. Not chump change. In some cases, the numbers are even higher when charges for back office processing and reporting are added in.

Some cities see these numbers and say “hell no.” But are they looking at the true cost of handling cash.

Many of my friends in the private sector embrace credit cards. They understand the cost of handling, counting, auditing, and accounting for cash. They know that banks charge to take cash, particularly coin. It can be a problem. When they get 60 or 70% of their revenue in credit cards, they know that these issues disappear.

There is another problem cities in particular have, weight. Chad Lynn at the city of Beverly Hills gave me a tour of his counting vault. Now they are a relatively small city, but they have pallet jacks, counting machines, and other tools they use to move and account for tons of nickels, dimes and quarters they process every day. It’s a big deal.

Cities need to take all these factors into consideration before dropping credit cards in their parking system. Sometimes the hidden costs outweigh the ones on that credit card statement from the bank.

JVH

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4 Responses to Cash Handling – It costs, too

  1. To be clear not my comments or point of view necessarily but an interesting point to consider given the debate about merchant fees for credit and debit cards on both sides of the border..
    http://www.delld610.com/

  2. Keith Ehrensing says:

    Bank fees are one of the reasons that Cities are thinking about pay by phone, which puts the user fee on the phone rather than the municipality.
    Smart cards, with one fee per transfer instead of many fees per transaction, are another area of interest, but they haven’t taken off. A good marketing program and lowering the card cost could revive this option.

  3. Larry Donoghue says:

    John,
    Based on my long experience and research, parking Owners are well advised to encourage the use of credit cards. The prcessing fees are only in the 2.5%-3.5% range. If Cashiers are stealing, they are not satisfied with 2.5%-3.5%. On average, they steal 5%-10%. Also, credit card trnsactions eliminate the need to count the cash. Everytime cash is handled there is an exposure to some “erosion”.
    Larry Donoghue

  4. I agree with the comments made by Larry as i also encourage my clients to accept credit & bank cards. However the main way to reduce stealing is to remove cashiers and have machines taking the money. Here in the UL we have few cashiers left in parking and mostly payments are made to automatic machines.
    For information in the UK bank cards transactions charges are reasonable at between 15 and 20 cents disregarding of the transaction value, whilst credit cards are charged at between 1.5% and 2.5% of the transaction. New types of bank and credit cards using contact-less technologies are now been issued for payments of up to $22 and the transaction charges for these cards are also lower and more attractive to parking owners and operators.

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