Charge for cash transactions proposed

Digital payment administrator says consumers need a disincentive to use cash, which they call a costlier payment type than digital alternatives

Salt, gold and silver were all once used as payments for goods and services before the advent of metal alloy coins and paper notes allowed for cheaper and more efficient ways of trading wealth.

But now coins and paper too might bite the dust if a proposal to incur a charge on cash transactions becomes a reality.

"Cash was smart when it replaced raw materials as form of payment,” Tina Füssel, the managing direct of digital payment administrator Nets, told Poltiken newspaper. “But now we are in a digital age and people should understand that we now mostly use electronic means to pay rather than paper and metal. In light of that, a charge for using cash would provide an incentive to swap over.”

A recent Nationalbanken report showed that the cost of using cash amounted to 5.8 billion kroner in 2009. This cost is higher than those incurred from all other forms of payment, including the Dankort debit card, credit cards, bank transfers and direct debits.

But while cash may be more expensive for businesses than all other payment types, consumers are still charged for using direct debits and credit cards. From October 1 shops have been able to charge consumers 0.75 percent of the value of their card purchases.

These charges, however, are misleading when compared with the real cost of processing payment types, the bank lobby organisation Finansrådet argues.

“The consequence of the new charges could be that people stop using credit cards and move move to cash. That means that you create the wrong incentive structure because it promotes the most expensive payment type,” deputy chief executive Klaus Jensen told Politiken.

Other arguments against cash are that money and coins are unsanitary, and that carrying cash makes you vulnerable to theft.

Despite these drawbacks, cash still offers unique opportunities that other payment types do not.

“Everyone has access to cash. It’s universal and useful and with it one can pay immediately,” Karsten Biltoft, Nationalbanken's deputy director, told Politiken.