Our favourite ways to pay for purchases are credit cards and debit cards, which together accounted for close to two-thirds of payment transactions last year. But what would retailers choose if you asked them how they wanted to be paid?
“Debit, by far,” Karl Littler, the Retail Council of Canada’s senior vice-president of public affairs, said in an e-mail. “Debit is inexpensive and a fixed price for most types of payments.”
Thought you’d hear that cash was the No. 1 choice for retailers? People who prefer to pay with cash over plastic sometimes imagine that retailers rejoice in receiving cash, but this is only partly true.
Mr. Littler said cash is second to debit for retailers, but it carries costs for counting, sorting and deposits, and there’s the risk of theft.
Credit cards are least preferred because they involve the heftiest fees for the retailer. Here’s an example from Mr. Littler on a $300 transaction. Debit would cost something in the area of 15 cents, while credit would cost roughly between $4.50 to more than $7, depending on the type of credit card used.
Paying in cash is having a modest revival lately and I have a theory about one of the contributing factors. At a time when it’s common to feel victimized by high living costs, paying with cash gives you precise control over how much you spend.
Paying in cash will also be regarded favourably by the stores you frequent. But if you want to really do retailers a favour, pay with debit.
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Rob’s personal finance reading list
A radical solution to making housing more affordable – crash the housing market. Make prices fall by taxing housing price gains and other measures. Sure to be a crowd pleaser with boomers.
Must-reading for all investors who hold Canadian equity mutual funds: An analysis of why these funds so often underperform the S&P/TSX composite index, which you can buy directly via low-cost exchange-traded funds.
Holiday social occasions are just ahead. Here’s a list of unique host gifts at a variety of price points. Wine, booze, chocolate, kitchen stuff and more.
Bank branches are stores selling financial products
A big bank is eliminating tellers at some branches and moving to what it calls “advice services only.” The idea here is for branch staff to sell products like mutual funds and mortgages rather than handling bill payments, deposits and withdrawals. ATMs and apps are a better way to do basic banking transactions, but sometimes you need human contact to resolve a problem. Beware the term “advice” when used in a bank branch. Unless the person serving you is a credentialed financial planner, it’s just a marketing term.
Call-out: We all remember our first stock. The tip from a friend, the “can’t go wrong” bet on your favourite brand or the gifted security from grandma. The Globe is looking for your first stock stories, including lessons learned and how the experience influenced how you invest today. If you’d like to be interviewed for this feature, please e-mail us at: globemyfirststock@gmail.com.
Podcast fans
Subscribe to Stress Test on Apple podcasts or Spotify.
Ask Rob
Q: What has happened to interest rates on lines of credit?
A: Good news here. Each Bank of Canada rate results in an equivalent decline in the rates on credit lines. Changes in the bank’s benchmark overnight rate are reflected in the prime rate at major banks. The prime is, in turn, the pricing guide for lines of credit. As in, prime plus a markup. The overnight rate has come down 1.25 percentage points this year, which means rates on credit lines have fallen by the same amount.
Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.
Tools and guides
To mark Financial Literacy Month, a map of how FinLit is taught in schools in each province. The data is featured in the A Word From the Wise newsletter by Robin Taub, an expert on teaching kids about money.
In the social sphere
Social media: A chart showing the popularity of various mortgage options – variable rate and fixed-rate mortgages with terms up to five years.
Listen: A podcast about “success addicts” in the work force and how they will manage retirement.
Money-Free Zone: A song for these times – Things Have Changed, a Bob Dylan original sung here by Bettye LaVette. And another one from Ottawa musician Lynn Miles.
More PF from The Globe
- Why Canada’s economy is facing a turbulent four years – regardless of a Trump or Harris win
- Look out for these personal finance pain points in the U.S. election aftermath
- Lost gigs and lower pay: How AI is already affecting freelance artists and writers
- How to pick an executor – and why you should have a backup
- Renting isn’t a sign of financial inadequacy. It can be a strategic choice that leads to substantial wealth accumulation