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“He had three girls working on Burroughs bookkeeping machines, each handling 1,000 to 1,500 accounts. I looked at the size of the accounts: $4.58. $12.82. And he was sending out monthly bills on these accounts. Then the customers paid him maybe three or four months later. Think of what this man was spending on postage, labor, envelopes, stationery! His accounts receivables were dragging him under.”

I never got why credit cards were such a big deal for merchants, until reading this.

I never got why credit cards were such a big deal for consumers, until I heard this: https://www.npr.org/2019/06/26/736352315/episode-922-the-cos...

What a week of learning about credit cards it has been!






I was born in 1980, and do remember our family having a credit account at the local grocery store. This was in Helsinki, Finland.

I think our account number was 14? Simple enough for a child to remember.

Around age 9 I was using the account on my own to buy food after school. I'd state the account number, and the cashier would write the credit down with a pen into a special notepad they kept under the cash register.


Still common in largely Jewish-centric grocery stores in NYC. While you are waiting your turn at the checkout isle, you can hear little kids buying food after school and the primary phone number is the account ID.

A recent observation:

Shop to a little girl: What's your Numbra?

Little Girl: 718-.....

Owner comes by: That's Sharon and Jacob's account. You are not his daughter.

Little girls freezes.

Owner continues: Unless you are their niece from Upstate who has come for Christmas.

Little girl visibly relaxes and the grocer bags her items.


We also had a similar system in Turkey too, with local grocery shops. The owner would have two notebooks per customer, one would stay at the store and one would be given to customer. Whenever you needed to buy something but you wanted to pay later, the merchant would put the transaction on his notebook with a copy on your notebook, so at the end of the month you would simply bring your notebook and cross reference the transactions and pay your debt.

Maybe it’s a Turkish thing? Because the owner of the copy shop I mentioned [0] is a Turkish immigrant ;)

[0]: https://news.ycombinator.com/item?id=22047151


It definitely could be!

This is still very common in Tunisia too

I’m having something like this for a copy-shop in a pop 200k city. In 2020. Not an account number, and essentially a manual debit account. The owner has a book with balances of people who pre-paid, when you print something, he looks you up in his book, edits in the new balance and then edits the balance on a piece of paper I have :)

Mailboxes, Etc. used to do something similar. They had a card to pre-pay for 100 discounted copies that you could then use at your leisure. The clerk punched a hole for every copy you made.

I saw a smiliar but totally different scenario in a Stockholm suburb a couple of years ago (I guess the practice is still there): An old lady was in front of me in the line at the grocery store and paid with her card, and the clerk took out his notebook and entered the pin code. It was like the two keys to a vault. Neither of them could do the transaction without the other. I hope the notebook didn't keep the code together with an identifier, but I found it really cute.

With contactless today I guess you can solve it with just one person, but I really liked the two-factor.

And the community service, of course.


> I never got why credit cards were such a big deal for consumers...

For me, it's always been about that buffer between my actual money and the merchant. Sure, credit card rewards programs have been great, but having a middleman who is more or less on my side in all financial transactions is a game changer.

If I use my debit card, the money is out of my possession; it's possible to get it back, but it's not certain, and while I'm waiting for that to happen, I don't have access to that money. (And if I use cash, I pretty much just have to accept that the money is gone the second it leaves my hands.)

If I use a credit card, I still have the money, and can dispute the charge. Even if I don't notice the problem until after I pay my credit card bill, I still have a single entity (who, again, is more or less on my side) who will refund my money if I have a valid complaint, even if the merchant isn't playing ball or is a fraudster.


My problem is that I'm effectively paying 2-3% in fees on every transaction for this privilege. If there was a way to pay (not cash) that removed this fee, and let me keep the savings, I'd do it for most transactions, even if it removed my ability to charge back transactions.

My problem is that I'm effectively paying 2-3% in fees on every transaction for this privilege.

If you pay your credit card bill off in full every month, you're not paying anything extra unless the merchant charges a premium for credit card transactions. If you carry a balance, you're paying on that, sure, but nothing requires you to do so.

(Also, of course, you might be actually getting 1% or more back on credit card transactions, if they have cash back programs.)


> If you pay your credit card bill off in full every month, you're not paying anything extra unless the merchant charges a premium for credit card transactions.

The merchant is paying extra, and that cost is hidden in the price I pay.


That hidden cost is subsidized by the other customers charged the same price but that pay cash, or via debit card rather than credit card, or even with a credit card with lower rewards than yours.

As a merchant that accepts credit cards, I can say that the vast majority of the money comes in via credit cards themselves, and costs 3% in fees. It absolutely comes out of the customer's pocket at the end of the day.

Okay, when you originally you wrote you were effectively paying 2–3% in fees on every transaction for this privilege [the buffer between your actual money and the merchant, quoting the post you were replying to], I took it to implicitly mean every credit card transaction.

If what you really meant is that the cost of the credit card transaction is implicitly in the price everyone is being charged, then sure, I see your point -- except that I think it actually strengthens the original poster's argument for using credit cards! If you pay $25 for a widget in cash and I pay $25 for the same widget on my credit card, then we're literally both paying the same price, but I'm getting the ostensible benefit of using the credit card and you're not. (I would actually argue, unlike the OP, that this is mostly true for debit cards as well, in that you still have a bank fighting to get your money back in a way that isn't true with cash.)


In Australia now, the restriction that Visa/MC used to enforce (same price for cash or CC) has been changed by the Reserve Bank (AU equiv of the Fed) so that surcharges etc are visible. So these days most merchants apply a ~1% surcharge for CC transactions.

We also have an "EFTPOS" network that is independent of Visa/MC. It's a debit account network owned by the banks that give you access to savings or cheque accounts. It's charges are much lower than Visa/MC, so merchants like when you use it and don't apply a surcharge.


But the top poster clearly demonstrates that there are significant costs in setting up such as system, much less that everybody has on their wallets or phones.

Even cash likely has a higher fee, if not from simple counting mistakes on many small transactions, then complexities like the safe, the risk to employees (insurance), the controller effectively managing the cash each day, the security of a bank truck, and more.


Isn’t it crazy to think that so many stores used to run their own credit books and have to do all that accounting and servicing by themselves? Every pharmacy, hardware store, grocery store... anywhere that wanted to accept credit had to do it all.

What was the reason to “accept credit” in the first place, in an era when anyone with stable employment could have applied for a line of credit (i.e. a personal long-term loan) from their local bank, such that they could then pay these services with cash?

I can understand credit as a natural extension of “running a tab” at a hotel or restaurant—you order now, and settle your account later, for various definitions of “later.” But why would a retailer be interested in offering private/internal credit that they had to manage and settle? Sounds negative-ROI to me.


So people didn't have to carry cash around.

People would set up accounts at their local stores so all their common daily and weekly errands could be done without cash. Then once a month (after payday) they would take cash around to all the local stores paying their accounts. (Or write a check, I guess)

Stores supported this because it was a form of lock-in, and because it reduced friction. Faster than exchanging cash too, or writing a check.

When working correctly (the customer comes in and pays without prompting) it's super low effort. Especially for stores with only one location and checkout counter. Only really costs time and money when a customer requires chasing up.


Well, for one it reduces friction, which increases the likelihood of making a sale. If a customer comes in to a store, but has to leave to go to their bank, there is a chance they won't return to make the purchase. Even if it is something they need, a competitor might lure them in between the point they get money from their bank and they get back to your store. The value, of course, depends on how many additional sales the reduced friction generates, versus the cost of maintaining credit books.

In most cases they were just running a tab. Unless you make the customer pay a deposit up front, any gap between the purchase and the invoice being paid is an extension of credit.

Because it is the norm.

You're probably coming from the opposite frame, that requiring cash up front for all transactions was the norm. It wasn't. We've been extending credit and taking on debts for millennia. It's just how money works.


It for some weird reason is not the norm in a large part of the world (the individual credit lines for every little store thing, not the debt-based finance system in general) where it has been totally the norm to bring cash into stores for those everyday purchases. You had cash on you anyway, because people have always owned wallets, and it's not that much of a burden to carry a wallet with you.

It seems to me that this store credit thing has been very much a US thing, and it probably is the reason why credit-based electronic payment systems took over the US while at the same time debit-based systems accomplishing the exact same goal became dominant in many European countries.

Funny thing: when it comes to gasoline, the roles are reversed. In the US, you get no gas if you don't first go into that store and prepay or provide a credit card that guarantees a payment. In most of Europe, you just drive up to the gas pump and fill up, and then you go into that little store in order to pay.


That's a nice theory, but having credit at stores etc was a thing in Europe too.

It's for scenarios like "I'd like to buy those $40 steaks, but I've only got $30 with me."

One reason is that in the old days people would run out of money before the next payday. The other is as an alternative to giving your kid cash to go buy something for dinner.

When I first read this several hours ago, I was surprised and in agreement with the conclusion of that quote, that this would "drag down" the business. As those numbers seem very low for the costs associated with getting payment.

But it should be pointed out that those numbers are in the context of a quote from ~1958. Back then, postage was $0.04. Also, $4.58 and $12.82 (as examples) would be worth $40.52 and $113.41 today. So I'm not actually sure if a 6% charge on sales would be worth it here. I don't know what the cost of labor would have been back then (assume minimum wage in that area in 1958 maybe). Anyway, the point is the numbers don't seem as alarming and obvious to me after looking up postage and inflation at the time.


Good grief! Why didn't she send a $1 first to make sure she had the right person!?

Why do people make mistakes at all? Everything would be much easier if people would just be less fallable.

Anyone who's ever set up direct deposit knows how this works. It's almost common sense.

I imagine most people have not done that (I've mostly seen that when linking accounts like brokerage accounts online), and I don't think it's common sense.

For setting up direct deposit at most workplaces (in the US, at least), you just give HR your bank routing and account numbers when you start and that's it. I've never gone through any kind of verification process.


I don't know, but I know I've never thought of that.

Pocketing this technique for future use!




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