Do restaurants prefer payment in cash, credit, or debit card? —Scott C., Eureka
The second part of the question was, “Is cash still king?” That answer is no. It’s far less noble these days.
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In past generations, restaurant patrons paid for meals in cash. Personal checks (remember those?) were used as well, plus the occasional “house charge.” The introduction of credit cards in the late ’40s led to the onset of travel and entertainment cards (Diners Club and AMEX) in the ’50s, then other rewards cards, debit cards, chip cards, and, most recently, cryptocurrency and “mobile wallets” (contactless systems like Apple Pay and Android Pay).
Different types of food-and-beverage establishments prefer different forms of payment.
Smaller businesses, especially those with small check averages, still prefer cash. Occasionally, paying with cash earns you a discount, an enticement that can offset the cost of credit-card processing. Bars—especially technology challenged ones—prefer cash to speed transactions. Many restaurants (such as Carl’s Drive In) and bars (such as Tick Tock Tavern) take only cash. For seven years, The Civil Life was cash only as well, but owner Jake Hafner recently started accepting plastic since “it was the No. 1 complaint on Yelp and other public forums.”
Restaurants that advocate the use of cash point out the high cost of mobile wallet and credit-card processing (from just under 2 percent to 4 percent). Processing fees are levied on check totals (sales, sales tax, and tip), which is why both tipped employees and the house prefer that guests tip in cash.
In addition, credit cards can get declined, the funds typically take several days to get posted, and using cash eliminates the possibility of credit card fraud (occasionally by restaurant staffers) or charges that get disputed (which costs the restaurant money). Cash is private, liquid, secure, immediate, and there are no fees (or strings) attached.
At the other end of the spectrum are establishments (including some of restaurateur Danny Meyer’s restaurants) that have gone completely cashless. In addition to gathering data about their customers, the argument is that cash-free establishments improve both efficiency and safety. (Transaction fees are preferable to the potential costs of handling cash, reduced internal theft, and less threat of a burglary.) The downside is that cashless restaurants discriminate against anyone without another form of payment (i.e., some low-income citizens, those without credit cards, and “cash is king” advocates, which includes the coveted upscale millennials, according to Bankrate.com data).
(Sidebar: Restaurateurs are ambivalent about accepting house-issued gift cards. While they welcome the opportunity to serve another guest, they stand to gain the most financially if the paid-up-front gift card is never redeemed.)
In general, we found that most local restaurants keep an open mind, preferring any kind of customer payment to having no customer at all. We asked several St. Louis restaurateurs.
Niche Food Group owner Gerard Craft: “Cashless restaurants have a lot of issues that are coming up about inequality—which I completely agree with—but cash is problematic in larger organizations for a lot of reasons. I am more of a fan of credit cards, because it is easier to account for and speeds things up, but not sure we will ever be able to rid ourselves of cash.”
Clementine’s Naughty & Nice Creamery co-owner Tamara Keefe: We will always accommodate the customer’s choice of payment, part of our hospitality mindset. However, as a small-business owner, cash is always better. Those few percentage points that a restaurant can save by receiving cash can sometimes mean the difference of being profitable or not. Think about that next time you pay; cash is a gift for those independent businesses that you love and want to support to make sure that they survive in this challenging economy.”
Crispy Edge owner David Dresner: “In this day and age, we are technologically tuned to accept all payments. It’s not just about what form of payment but considerations for the flow of money from tips, various taxes, income, etc. At Crispy Edge we are looking for convenience and transparency for our customers, employees, and bookkeepers. The key is solid bridges between POS and systems like Quickbooks. Unfortunately, such interfaces are poor industry wide, but we look forward to improving these flows as technology catches up.”
Mission Taco Joint co-owner Adam Tilford: “I’m not sure if there is a right answer here—unless, of course, you’re running a shady business. Then it’s cash all the way! But here are some thoughts based on our experience at Mission Taco Joint. As a sit-down restaurant, we run a very high percentage of credit/debit cards, around 80 to 85 percent of our transactions based on the store. Debit cards run the lowest merchant rates, so those are preferable, and reward-based credit cards run the highest rates (yes, someone has to pay for those rewards), so those are least desired cards to take. And, of course, AMEX runs really high rates, which is why you see some places accept all cards but AMEX. That being said, there are benefits to accepting cards: less cash handling at the store—so less chances of staffers coming up short, reduced chances of any type of theft, and having to make (or pay someone to make)—cash deposits. Cash is obviously great because there are no fees attached. It is also important because most restaurants pay the service staff credit card tips out in cash at the end of each shift. Sometimes, when credit card sales run too high for a day, there is not enough cash to pay out all the credit card tips, resulting in the cash drawers being short and the restaurant needing to go to the bank to make a withdrawal to bring their drawers back up to par. Some restaurants have dealt with this issue by not paying their service staff’s tips at the end of the night and instead putting them in their paycheck (and some actually take credit card fees out of their employees’ tips, which never sits well with the staff). So to answer your question as well as I can, the best-case scenario for us would be getting a combination of cash and debit cards and not have to accept high-cost credit cards at all. This would keep cash handling at a minimum, keep fees as low as possible, and allow us to have enough cash to pay out the service staff every shift.”
If you have a question for George, email him at [email protected]. You can also follow him on Twitter @stlmag_dining. For more from SLM, subscribe or follow us on Facebook, Twitter, and Instagram.
