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Germans hang onto cash as rest of world goes electronic

The Local · 10 Oct 2010, 14:54

Published: 10 Oct 2010 14:54 GMT+02:00

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But the German love of using notes and coins in situations where cards are used in many other countries will make it an uphill battle to promote electronic payment here.

The Bundesbank says an average German carries €118 around with them in cash, of which €6.70 is in coins – weighing more than 100 grams. And in 2008, around 82 percent of all transactions were carried out in cash – particularly those for smaller amounts.

Those in favour of electronic payment say it is safer and cheaper than paying in cash, according to Die Welt newspaper on Sunday.

Cash is even more expensive, says the European Commission, and is a useful tool for criminals. In Sweden authorities are expecting cash to be practically phased out over the next few years, and the number of robberies of shops to plummet as a result.

This is not to be expected in Germany, said Malte Krüger of Paysys Consultancy, which advises cash and credit card companies.

“A cashless future is not realistic in the foreseeable future,” he said.

“Many act as if paying by card is much cheaper than cash, but that is not true.” He said the European Commission estimates that cash payments cost between 30 and 55 cents each time, in infrastructure, but Krüger said the figure was more like 14 cents.

As for criminality, Krüger said, “One can say that it is a problem with cash, but one can also say that it’s a security problem in the country.” He said if all payments were to be switched to cards, criminality would simply shift to focus on that.

Die Welt also argues that it is a cultural matter – that Germans simply do not like the idea of their every payment being recorded and thus traceable. Swedes are seemingly far more relaxed about such matters – tax statements are even available online there.

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Cash, “offers a space which is not under control – no-one asks where it has come from,” said Ingo Härlen, an economic psychologist.

It is also interesting to see people’s personal emotional relationship to cash when it comes to spending – or overspending. Härlen said the physical act of handing over money can be useful in keeping control of how much a person spends.

Globally, electronic payment methods are on the march, with consultants Arthur D. Little estimating that in 2012, around $250 billion will be paid with mobile phones over text messages.

The Local (news@thelocal.de)

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Your comments about this article

15:38 October 10, 2010 by maxbrando
Be careful for what you wish. You may get it.

Credit card usage in the USA is what caused its financial collapse. People were charging chewing gum, for example. As one relaxes one's spending habits, caution disappears. Then trouble begins. Why would anyone want to follow Sweden's example. They have never contributed anything useful to the world.
16:22 October 10, 2010 by MrOlsen
@swimmer / maxbrando: You are aware that this article is not about credit? It's about paying by card instead of cash. This has nothing to do with spending money you don't have. I have a bank card without credit, and don't withdraw cash at all when visiting countries as Norway, Sweden or England. When I'm there I will pay for a pack of chewing gum with my card. Much easier, cheaper and safer than carrying cash around, or to exchange Euro bills to local currency.

I think also the German state loose a lot of tax money when every transaction is made by cash. Going to a lot of shops and cafees in Berlin they can rarely give you a printed reciept, so I would guess this money is not all reported.

And why are the germans so afraid of the bank, and goverment? "Germans simply do not like the idea of their every payment being recorded and thus traceable". Still afraid of the Stasi?
16:45 October 10, 2010 by frankiep
This is one thing that I love about Germany, and hated about the US. I think its great that people actually use cash instead of relying on a plastic bank card to pay for things. The ability to use something other than cash to pay makes it all too easy to spend money foolishly. When you use cash you know (see) immediately how much you are spending, whereas with a bank card it is just a matter of entering a PIN. It certainly does make one think twice about whether or not you would really be willing to spend 50€ on some random thing that you really have no use for.
16:52 October 10, 2010 by tallady
Credit card usage is what keeps America going not what caused the financial collapse,,Faulty ,shady, lending was the cause from institutions like Fanny Mae,,

Freddy Mac ,Hedge funds ect.

Lets hope Germany dose not need C/Cs to keep its economy going in the future.

Responsible lending is a positive factor in any economy..

Pat as you go is almost extinct .
18:28 October 10, 2010 by toemag
€118 & €6.70 is in coins, hmm. I rarely have more than €40 on me at any given time, unless I'm going to buy something special, then I'll have that amount on me, as for electronic cash payments, no thank you, the banks over here charge way to much for each transaction.
18:43 October 10, 2010 by Weeee
A response to maxbrando on how Sweden "never contributed anything useful to the world": http://www.thelocal.se/15578/20081110/

For more examples, please see here: http://en.wikipedia.org/wiki/Swedish_inventions
19:27 October 10, 2010 by slawek
Come on, does anybody in these days still trust banks and the EURO for that matter? The EURO has already crushed Greece, Italy, you name it, by turning their citizens into cheap labour, killing their vulnerable industries and delivering underpriced products to their rich neighbors. I'm guessing keeping silver in safes is more popular nowadays in Germany than ever before. E-cash??? No other worries, really?
22:21 October 10, 2010 by css1971
Cash and credit are fundamentally different types of money.

When you pay a bank debt with cash, the cash still exists. It's a real, physical thing. The bank has it and can pass it on. In fact it's very much in their interest to get rid of it asap. This means the economic activity continues.

When you pay a bank debt with credit, both the debt and credit are destroyed. Credit is just book keeping. When the negative money meets the positive money, you end up with a big zero. This causes deflation/recession and is part of the reason the USA is still in such trouble.

Banks, bankers and politicians would all rather you use credit, because:

1. Every transaction is trackable.

2. Banks are allowed to create credit from nothing. Yes, really.

3. It would allow them to increase their reserve ratios above the 50:1 they average just now. Yes, that means there is only 1 real euro for every 50 euros created by the banks.

4. Credit is created from debt. The more credit around, the more debt there is and the more interest the bankers earn.

Basically. Allowing bankers to define the monetary system is like putting the fox in charge of the chicken coop.
23:07 October 10, 2010 by Deutschguy
I deliberately try not to use cash. If a store refuses to take my credit card, I do not shop there or severely limit my shopping there.

I collect a frequent flyer mile for every Euro I charge on my credit card. I resent not being able to use it when I buy something, as I see it as an opportunity lost.

I also have a Payback card, which lets me collect points, and I try to find stores that accept it, too.

Before I will spend cash on an item, I will look online to find a vendor who will take my credit card and/or my Payback card.

Cash is going to be obsolete.
23:10 October 10, 2010 by Mizzlsd
I've turned into one of these people who counts out the exact change in the supermarket :D
23:26 October 10, 2010 by Landmine
I hate that everything is cash here in Germany. You always end up with too many coins and no bank ever takes them back. It's an ass backwards way of doing business. You go by furniture and you have to go to the bank, you pay bills and you go to the bank and have to fill out a damned form, it is ridiculous! The most powerful country in Europe is a cash economy. Get with it Germany! Cash is a thing of the past!!!!!

I can go to ass backwards Croatia and can use my debit or credit card anywhere.

Seriously, Germany needs to move forward.....
00:50 October 11, 2010 by Prufrock2010
Having just filed my taxes after exhaustively going through every credit card and bank card statement to identify every possible deduction, I am very much in favor of paying whenever possible by bank card. If I had to keep a receipt for every cash transaction that I made during the year, I would be inundated with scraps of paper that would take me months to organize, preserve, sort out and add up. With credit card and bank card statements, I can see at a glance what I spent, where I spent it, on what and when. And I have an accurate record for the taxman if my deductions are ever challenged. With cash-only transactions with taxis, some restaurants, small merchants, U-Bahn tickets, etc., I calculate that I'm missing out on a great deal of money in legitimate deductions every year. I am like Deutschguy. I will go out of my way to avoid places that don't take bank cards. I refuse to buy anything at Saturn because they don't accept credit cards even for overpriced big-ticket items.
10:28 October 11, 2010 by raandy
Credit cards offer a lot of good programs ,such as Frequent Flyer miles which I often use.

I recently took a trip to the USA, and someone must have gotten my info as there were over a 1000$ worth of charges,my US bank immediately returned the funds pending an investigation,which was no problem as I was back in Germany .

I do not understand the reluctance not to accept cards as they also increase sales.

In all grocery stores I went to in the USA I also had the option of getting cash back,which was nice and with out fees.
10:53 October 11, 2010 by ridac
The issue in Germany that cards are no accepted in most of the shops. I saw many tourists shop and fill their trolleys in food shop and have to leave it at the cashier bcs cc is not accepted.
11:13 October 11, 2010 by michael4096
"Banks are allowed to create credit from nothing. Yes, really"

No. Not really. Every euro a bank lends to you must be itself borrowed by the bank from the central bank at the prevaling interest rate for that day - which is why central bank lending rates are in the news so much

The central banks are (in most places) permitted to print money - they are regulated by other measures such as inflation - if they print too much then inflation goes up, too little and deflation sets in. However, governments sometimes take a 'hands-on' approach here

Banks are not permitted to borrow as much as they want from the central bank - they are restricted by global rules called the Basle treaties which specify that they are not permitted to borrow more than x% (now, about 950%, I think) of their assets. The rules have just been strengthened following the banking crisis
12:09 October 11, 2010 by moistvelvet
Why are people still talking about Credit cards, this article is about cash and electronic cash, nothing about credit cards!!

From what I can see you can pretty much do most of your shopping by electronic cash. I can pay by card/electronic cash when I fill the car with fuel and the ticket in the car park, I can buy a bus ticket using my bank card, buy groceries at the Rewe, pay the bill at the pub and food in a restaurant. Very rarely do I actually need to use cash and I much prefer it that way, with online banking it is pretty easy to keep track of how much you spend. So the argument that it is easier to spend 100 Euro in electronic form than in cash doesn't make sense to me since it is just as easy to withdraw 100 Euro in cash and soon wonder where it has gone.

It is about time Germany moved with the times and stop this phobia they have of modern technology that they don't really understand the benefits of. Strange isn't it that Germans don't have this phobia when it comes to things like mobile phones and broadband internet, perhaps because they can see the benefit it brings. Give them time and they'll catch up with the world eventually, it wasn't that long ago that shops were closed at midday Saturday.
12:41 October 11, 2010 by elboertjie

'No. Not really. Every euro a bank lends to you must be itself borrowed by the bank from the central bank at the prevaling interest rate for that day - which is why central bank lending rates are in the news so much.'

That is incorrect. Have you heard of fractional reserve banking? This means that for every euro the bank has on deposit it can lend out 9 times (in a 1:10 fraction). Sometimes this fraction is higher even up to 30 times. This is why China over the last two years have slowly but steadily increased the amount banks need on reserve and I think it is currently 17%. This means, that for every Yuan they have on deposit at a bank, the bank is allowed to lend out 5 more Yuan (100/17 = roughly 6)

Have a look at the short, but very informative documentary called 'Money as Debt'. You will soon realise that talking about cash versus electronic money is futile and that you would soon be on your way in getting out of fiat currencies.
12:54 October 11, 2010 by LancashireLad
It's all very well saying that cash is dead .. which it probably will be in a few years - but there is another side to this.

My little boy loves counting his cash when he gets his pocket money. It's real and tangible instead of anonymous numbers on a piece of paper. How would we handle that without cash? He got Euro notes in his birthday cards from the UK, recently. How would we do that?

We can send him to the shop round the corner to buy Milchbrötchen - learning responsibility and dealing with money. That would be impossible for a 6 year old with plastic.
14:09 October 11, 2010 by Prufrock2010
I don't think anyone's suggesting phasing out cash altogether. That would obviously be impractical and wouldn't work. But Germany's rather obsessive aversion to electronic cash transactions is not only nonsensical, it creates a completely unnecessary burden on the consuming public and costs merchants, retailers, restaurateurs etc. a great deal of money from lost business, thus hurting the overall economy. It also costs the government tax revenues because cash transactions are easy to conceal for those who wish to do so. Eventually Germany will be dragged kicking and screaming into the 21st century, but probably not in my lifetime.
14:29 October 11, 2010 by LancashireLad
Does it still cost retailers to offer the facility to accept electronic payment? The retailers used to put forward the argument that by not accepting electronic payment, they can keep costs lower for their customers - I believe that's Saturn's take on it even though they do accept EC. In fact the only place I know of generally that acepts only cash is our local bakery.

In the past I have had credit cards refused, and not just in Germany, because the retailer claimed it cost them too much. AMEX used to be the biggest culprit here.
14:57 October 11, 2010 by ReaderX
Cash is for dinosaurs.

More German shops should allow their patrons/ customers the choice between cash or a card. Not to mention having a thinner wallet helps tremendously on the backside.

Further people, there is a huge and fundamental difference between credit cards and debit cards. Please do some research on the subject.
16:52 October 11, 2010 by moistvelvet
A local village petrol station has been robbed at least twice a year for as long as I can remember, the owner would prefer customers pay with bank card (which I do) as eventually he loses less money and becomes less of a target because it isn't worth it.
22:12 October 11, 2010 by veritas_69
Screw credit cards. Why pay VISA 3% of each transaction?
00:50 October 12, 2010 by Prufrock2010
The merchant pays, not you.
21:53 October 12, 2010 by akhilm176
In all probability, the 3% is built into the price. So, in such a scenario, you are unwittingly paying that extra 3% even if you use cash as a means of payment. No merchant will willingly cough up 3% for every article bought at his store.
10:02 October 13, 2010 by tallady
The 3% is always paid by the merchant in the USA, but on occasion ordering over the net here in Berlin I have had the Merchant add the 3% to the cost. Only when you pay from your konto before ,do you get the advertised price. I find the gross profit margins higher in Germany than the US,especially at Reichelds markets.I would guess they are in the range of 30 to 37%,there often is a large disparity in cost of goods ,where I sometimes find items over 12 euros for 10 euros elsewhere.

It seems that the 3% merchant fee would not be unreasonable for them to accept credit cards. It lowers their demand for coin and cash,easy book keeping and a good customer service.(which is lacking here),and could use some improvement.
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