If I know I can go to X supermarket and also withdraw cash, or Y supermarket where I can’t, I’m slightly more likely to go to supermarket X.
The cost of offering cash withdrawal is less than the gain in customers.
Although, at least in Europe, many supermarkets are actually stopping it because that calculation is upside down for them now. It’s expensive to offer and people don’t value it.
That if you periodically need cash, you might be more likely to go to that store, since you can get your cash and your groceries at the same time and in the same transaction?
Reduces the amount of cash in the bank deposit. With so much of the money that comes in to supermarkets being in the form of credit or debit card transactions, there’s less of need to keep cash in the store, which can reduce losses from robberies or employee theft.
It gets customers in the door and requires them to purchase something to get the cash. They may buy more than just candy bar since they’re already at the store.
Less cash they have to count/balance at the end of the night, less stored in the safe. If the cash register gets too full often a supervisor has to come by and do a pick up from the register. Cashback helps minimize this.
It saves them from having to take cash to the bank. Means less cash on hand and fewer employees taking bags of cash out of the store. So it lowers the risk of theft, robbery, employee danger, etc. Insurance premiums are lower because of this too. And it can lead to faster turnover from one cashier to another because there’s less cash to count in every drawer. Oh, and it encourages customers to use debit instead of credit which means less fees paid to the banks. It’s basically a win-win for everyone* involved.
*Except for cybersecurity folks like me that know that it’s a bad idea to use debit cards as credit cards. But that’s not the grocery store’s problem.
You know how places will say “$5 minimum for credit card transactions”? That’s because businesses pay a fee to credit card companies if you use credit. Debit transactions can also have fees, but they are generally lower.
By processing the purchase as a debit transaction instead of credit, the market avoids paying some fees and makes more money from your purchase.
Also it is convenient to the customer, which means that you are more likely to choose that market.
customer service that costs the store very little. They’re already paying transaction fee on your purchase, and they’re getting the e-money pretty much instantly.
gets cash out of the till.
hold over from the before times. Used to be there were no bank machines on every corner, especially in smaller communities, so we used grocery stores as banks. They’d cash your paycheck for you and everything.
Back in the days when paper checks were standard, you could withdraw with them too. You could write the check for some amount (limit was often around $40) over your purchase amount, and the store would give you the difference in cash. Being able to do that with a debit card now is just a hold over
Do you mean, “why do supermarkets have ATMs?” or why they allow you to get “cash back” if you pay with a debit card at the cash register?
For the first case, ATM companies generally want their ATMs placed in easy-to-access/high traffic areas that give as much visibility to the ATM as possible. A supermarket is generally going to meet these criteria – furthermore, because ATMs have historically been inside places like supermarkets, that is where we, as customers, would expect to find them.
The “benefits” for the supermarket in this case is that the ATM company will generally pay ongoing “rent” to place their ATM on the premises. The supermarket also gets additional foot traffic from those who stop by to use the ATM (but then perhaps pop in to pick up milk). The customer is provided with convenience because cash withdrawal becomes another “service” you can get at your local supermarket – many supermarkets also synergize with things like pharmacies, gas stations, flower stores, etc. to increase services offered and customer convenience.
If you mean, why do supermarkets allow you to get cash when you pay with a debit card, then I do not believe that there ultimately is any benefit to the supermarket outside of the fact that it is a common service offered by most companies that accept debit card transactions at a cashiers’ till. Essentially, they add whatever cash amount you request to the total they charge you on your receipt and then give you the cash out of their cash register – for the supermarket, they neither make nor lose money here, but they do provide a convenience to the customer (although, you can bet that ATM is probably also right there).
Y’all already mentioned it’s a service to the customers, and it’s less money to send to the bank, but i want to add another hugely important factor: using a credit card adds substantial fees to the super market. It’s why American express is so hated. The fee is very high. Debit with cash back will encourage you to use debit over credit.
It’s a service customers want. When it became a thing in the 90s it was heavily marketed as a convenience that allowed customers to skip a separate trip to the ATM/bank. It was also a differentiator for stores that offered it vs. stores that didn’t. Now it’s pretty ubiquitous, but it wasn’t always
It encouraged people to switch from checks to debit cards. When this service rolled out, debit cards were relatively new, at least in terms of paying at a register. Most people still used checks. By offering this service they could encourage people to pay electronically which is advantageous for the retailer since the debit card transfer happens instantly, is more or less guaranteed to be good (vs a check that might bounce) and also does not have to be manually handled by the accounting office. The carrot here was that they would have a very low limit on cash back on a check, or they may not offer cash back on a check at all anymore.
Like others have said, it converts some of the cash in the store to electronic payments, which reduces the amount of cash that has to be counted/handled/transported by people
It encourages people to run their cards as a debit transaction vs. a credit transaction. When you run your debit card as a credit on Visa/Mastercard’s network the store pays the full credit card fees. If you run it as a debit transaction with your PIN, the fees are much much MUCH lower and it saves the store money. If I had to bet, this + the encouragement to switch from checks are the two biggest drivers
They are using the point of sale (POS) networks to verify and transfer money instead of one of the credit card systems (Visa, Mastercard, Discover, etc.). These are two different payment networks with slightly different rules.
The credit cards have a 2ish% charge they apply to whomever is accepting the money in the transaction. This covers the costs of maintaining the network, funds transfers, etc. The POS systems are based upon the ATM networks. From the systems perspective (it’s been adapted some, but is functionally about the same) you are using a free ATM. This system has its own comprehensive network, costs less, but is also technically like using a teller at the bank.
The cost is the key factor here. It’s why so many big box stores like Walmart held out on credit cards but allowed debit transactions for so long. What’s important for you. That 2% buys charge buys you a few things:
A) If someone inputs your card and PIN at any location, the funds withdrawn are theirs. Period. If someone misuses the credit network, you are not responsible.
B) Credit card perks. This is how they get paid for. The game is happening anyway, may as well play.
C) Some places will charge you more for credit based transactions, but not POS. It pays to know the difference!
Convenience often translates to customers in the door. If processing $40 at a negligible cost gets you to come buy things for a profit, then it’s worth it to them.
I don’t know if you’ve ever heard the term “loss leader” or not, but essentially some stores will sell a single item at a loss because once you’re in the store, you’re likely to buy other things at the regular margins.
It’s a convenience to provide for customers. It doesn’t cost the supermarket anything. They basically add the cash to your transaction on the card they’re charging anyway. Where I live there’s ATMs everywhere so you can find one from your bank easily and not a lot of people do cash back.
But if you don’t live in a crowded area, cash back is really convenient. Imagine you’re thinking of getting cash, but you don’t want to drive a 20 minute round trip to the bank just to get cash. Or… you could go to the grocery store that’s an equal distance away, get some groceries you need, and just use cash back there. Now the store has made a sale they wouldn’t have otherwise made that day.
You can’t just walk up to the cashier and take $20 out of her till by swiping your card. You generally need to BUY something and then have the option for cash back. If my bank charges me a fee for using an out of network ATM and I happen to be in an area my bank isn’t, what do I do?
I go to the grocery store and buy a candy bar for .99 use my debit card and take $20 cash out. I’ve got my cash, I didn’t pay a transaction fee, and I got a snack. The grocery store sold a candy bar they wouldn’t have otherwise.
A single transaction doesn’t make a different to them, but if 100 people do it per day across 100 stores in the chain, it adds up quickly.
More of a legacy service they keep offering… was more beneficial in the pre-ATM days, when customers might write a check to the grocery store and if they needed cash it otherwise meant standing in line at a bank or waiting in queue for the drive-up human teller. So they’re write the check for $20 more than the grocery tab and get $20 back. It’s still useful if somebody needs some cash and doesn’t want to pay an ATM surcharge (eg. the ATM in the store is Chase and they bank with Bank of America).
Comments
Extra custom, minimal cost.
If I know I can go to X supermarket and also withdraw cash, or Y supermarket where I can’t, I’m slightly more likely to go to supermarket X.
The cost of offering cash withdrawal is less than the gain in customers.
Although, at least in Europe, many supermarkets are actually stopping it because that calculation is upside down for them now. It’s expensive to offer and people don’t value it.
That if you periodically need cash, you might be more likely to go to that store, since you can get your cash and your groceries at the same time and in the same transaction?
It keeps less money in the store. It’s basically turning paper money into electronic money on the spot.
Customers take $20 cash back, for example, that’s $20 less in cash in the register, and the store gets $20 in the bank minus any fees if any.
Less to steal!
Reduces the amount of cash in the bank deposit. With so much of the money that comes in to supermarkets being in the form of credit or debit card transactions, there’s less of need to keep cash in the store, which can reduce losses from robberies or employee theft.
It gets customers in the door and requires them to purchase something to get the cash. They may buy more than just candy bar since they’re already at the store.
Less cash they have to count/balance at the end of the night, less stored in the safe. If the cash register gets too full often a supervisor has to come by and do a pick up from the register. Cashback helps minimize this.
It saves them from having to take cash to the bank. Means less cash on hand and fewer employees taking bags of cash out of the store. So it lowers the risk of theft, robbery, employee danger, etc. Insurance premiums are lower because of this too. And it can lead to faster turnover from one cashier to another because there’s less cash to count in every drawer. Oh, and it encourages customers to use debit instead of credit which means less fees paid to the banks. It’s basically a win-win for everyone* involved.
*Except for cybersecurity folks like me that know that it’s a bad idea to use debit cards as credit cards. But that’s not the grocery store’s problem.
You know how places will say “$5 minimum for credit card transactions”? That’s because businesses pay a fee to credit card companies if you use credit. Debit transactions can also have fees, but they are generally lower.
By processing the purchase as a debit transaction instead of credit, the market avoids paying some fees and makes more money from your purchase.
Also it is convenient to the customer, which means that you are more likely to choose that market.
Back in the days when paper checks were standard, you could withdraw with them too. You could write the check for some amount (limit was often around $40) over your purchase amount, and the store would give you the difference in cash. Being able to do that with a debit card now is just a hold over
I need to withdraw money.
I know only one place that does allow me to do that with my shopping.
I go to that one place.
Other supermarkets see this and think “huh, maybe we should open for that too.”
Maybe next time I do my shopping at this new place.
Just one of many reasons.
Do you mean, “why do supermarkets have ATMs?” or why they allow you to get “cash back” if you pay with a debit card at the cash register?
For the first case, ATM companies generally want their ATMs placed in easy-to-access/high traffic areas that give as much visibility to the ATM as possible. A supermarket is generally going to meet these criteria – furthermore, because ATMs have historically been inside places like supermarkets, that is where we, as customers, would expect to find them.
The “benefits” for the supermarket in this case is that the ATM company will generally pay ongoing “rent” to place their ATM on the premises. The supermarket also gets additional foot traffic from those who stop by to use the ATM (but then perhaps pop in to pick up milk). The customer is provided with convenience because cash withdrawal becomes another “service” you can get at your local supermarket – many supermarkets also synergize with things like pharmacies, gas stations, flower stores, etc. to increase services offered and customer convenience.
If you mean, why do supermarkets allow you to get cash when you pay with a debit card, then I do not believe that there ultimately is any benefit to the supermarket outside of the fact that it is a common service offered by most companies that accept debit card transactions at a cashiers’ till. Essentially, they add whatever cash amount you request to the total they charge you on your receipt and then give you the cash out of their cash register – for the supermarket, they neither make nor lose money here, but they do provide a convenience to the customer (although, you can bet that ATM is probably also right there).
It’s just like any other convenience. I can get cash at the store, why do I need to go to the bank?
If I need cash and I know the store can give me cash, I’ll probably go to the store and buy other things too.
It’s probably been a thing for 40 years.
Y’all already mentioned it’s a service to the customers, and it’s less money to send to the bank, but i want to add another hugely important factor: using a credit card adds substantial fees to the super market. It’s why American express is so hated. The fee is very high. Debit with cash back will encourage you to use debit over credit.
Many reasons:
They are using the point of sale (POS) networks to verify and transfer money instead of one of the credit card systems (Visa, Mastercard, Discover, etc.). These are two different payment networks with slightly different rules.
The credit cards have a 2ish% charge they apply to whomever is accepting the money in the transaction. This covers the costs of maintaining the network, funds transfers, etc. The POS systems are based upon the ATM networks. From the systems perspective (it’s been adapted some, but is functionally about the same) you are using a free ATM. This system has its own comprehensive network, costs less, but is also technically like using a teller at the bank.
The cost is the key factor here. It’s why so many big box stores like Walmart held out on credit cards but allowed debit transactions for so long. What’s important for you. That 2% buys charge buys you a few things:
A) If someone inputs your card and PIN at any location, the funds withdrawn are theirs. Period. If someone misuses the credit network, you are not responsible.
B) Credit card perks. This is how they get paid for. The game is happening anyway, may as well play.
C) Some places will charge you more for credit based transactions, but not POS. It pays to know the difference!
Convenience often translates to customers in the door. If processing $40 at a negligible cost gets you to come buy things for a profit, then it’s worth it to them.
I don’t know if you’ve ever heard the term “loss leader” or not, but essentially some stores will sell a single item at a loss because once you’re in the store, you’re likely to buy other things at the regular margins.
It’s a convenience to provide for customers. It doesn’t cost the supermarket anything. They basically add the cash to your transaction on the card they’re charging anyway. Where I live there’s ATMs everywhere so you can find one from your bank easily and not a lot of people do cash back.
But if you don’t live in a crowded area, cash back is really convenient. Imagine you’re thinking of getting cash, but you don’t want to drive a 20 minute round trip to the bank just to get cash. Or… you could go to the grocery store that’s an equal distance away, get some groceries you need, and just use cash back there. Now the store has made a sale they wouldn’t have otherwise made that day.
You can’t just walk up to the cashier and take $20 out of her till by swiping your card. You generally need to BUY something and then have the option for cash back. If my bank charges me a fee for using an out of network ATM and I happen to be in an area my bank isn’t, what do I do?
I go to the grocery store and buy a candy bar for .99 use my debit card and take $20 cash out. I’ve got my cash, I didn’t pay a transaction fee, and I got a snack. The grocery store sold a candy bar they wouldn’t have otherwise.
A single transaction doesn’t make a different to them, but if 100 people do it per day across 100 stores in the chain, it adds up quickly.
More of a legacy service they keep offering… was more beneficial in the pre-ATM days, when customers might write a check to the grocery store and if they needed cash it otherwise meant standing in line at a bank or waiting in queue for the drive-up human teller. So they’re write the check for $20 more than the grocery tab and get $20 back. It’s still useful if somebody needs some cash and doesn’t want to pay an ATM surcharge (eg. the ATM in the store is Chase and they bank with Bank of America).