Nickeled and Dimed: New coffee shop adopts cash-only policy to avoid fees

$17,000: That’s how much money in credit and debit card fees local restaurateur Becky Tranchell incurred at her old restaurant, the now-shuttered Rose and Fern, in 2021.


When Tranchell announced a new business venture earlier this year – a coffee and juice bar called Rough Pony – she did so with a surprising twist: The new establishment would be cash-only, with no credit card or debit card payments allowed.

According to the financial advice website The Motley Fool, credit card processing fees in the United States in 2021 ranged from 1.3 to 3.5% per transaction, depending on the payment network. For instance, Visa cards tend to carry the lowest processing fees of the major providers, while American Express cards tend to have the highest fees. If you’ve ever wondered why many restaurants and retailers don’t accept American Express, it all comes down to merchant fees.

Establishments like Rose and Fern, a breakfast and lunch café, usually end up bearing the burden of those fees. And according to Tranchell, they add up significantly over the course of the year. Last year, she even started passing the credit card processing fee on to the customer – a move that raised awareness of merchant fee costs among her clientele, prompting many customers to make paying with cash part of the Rose and Fern routine.

“So if you think about it, my processing fees last year would have been even higher (than $17,000) if I hadn’t begun passing the processing fee on to the customer in the beginning winter months,” Tranchell said.

That experience – and the willingness of most customers to pay in cash, whether to help out the restaurant or to avoid the extra fee – ultimately inspired Tranchell to go cash-only for Rough Pony.

It’s an approach she thinks is doable, especially given that 1) her new spot in the Warehouse MKRT will put her just down the hall from an ATM and 2) a coffee shop falls into the category of establishments – along with ice cream parlors and small bakeries – that tend do best with a cash only approach.


Rough Pony won’t be the first establishment in northern Michigan to decline credit card payments. Bardon’s Wonder Freeze, for instance – one of Traverse City’s most beloved summertime institutions – has long been a cash-only spot. And Art’s Tavern in Glen Arbor, known for its legendary chicken jalapeno soup, has been cash-only since it first opened its doors – all the way back in 1934.

“In the beginning, of course there was really no other option,” said Art’s Tavern co-owner Bonnie Nescot of the restaurant’s decision. After all, the modern credit card wasn’t even invented until 1950. Rather than pivot to the new payment method when it came along, Art’s stayed the course.

“As time went on, it was easier to keep things cash-only,” Nescot continued. “As credit cards became more accepted as a payment method, it came down to economics. As an example, take half a million dollars in credit card sales and multiply it by the fairly common credit card fee of three percent. $15,000 is a lot of money for a small business.”

Still, not accepting credit cards is a bold move for any business in 2022. Each year, the Federal Reserve conducts a payment study – called the Diary of Consumer Payment Choice – to understand consumer payment habits in the U.S. In 2020, cash accounted for 19 percent of all transactions, outpaced by both debit cards (28%) and credit cards (27%).

Historically, card payments have been even more common in restaurants. A 2017 survey from payment processor TSYS Payment Solutions, for instance, found that just 12% of restaurant transactions were paid for in cash, with debit cards and credit cards collectively accounting for 77% of payments.

Judging by general trends, those numbers would likely be even higher in the wake of COVID-19, when consumer habits shifted dramatically in favor of digital and contactless payments. Per the Federal Reserve Diary, cash transactions dropped seven percentage points overall from 2019 to 2020.

According to Tranchell, the pandemic proved especially problematic for restaurants in terms of credit card processing fees. Not only were more customers using cards, but the way they were paying was also often different – and oftentimes came with higher-than-normal fees.

“Most people don’t know that credit card processing fees change depending on whether the person is actually present or not,” Tranchell explained. “So if you walk into my shop, and you pay with a credit card, the fee is like 2.5%, plus five cents for every transaction. But during the pandemic, everyone was online or calling on the phone to order and giving us their credit card over the phone. And if the person is not present for that transaction, then the fee was like 3.2 or 3.5% (of the transaction), plus 20 cents on every transaction, because (that kind of transaction) is a security issue.”

Card processing fees get divided up among a few different parties: the issuing bank behind the credit card (a Chase or a Capital One, for instance), the credit card company (Visa, Mastercard, Discover, or American Express), the payment processor (such as the aforementioned TSYS), and the payment gateway (platforms like PayPal or Toast). Each bit of money cuts into the profit margins of the business the customer is actually patronizing – a problem for businesses like restaurants, which already operate on narrow profit margins.

“Restaurants, their profit margin is so small to begin with once you take out your labor, and your food cost, and your overhead, and random fees like merchant fees,” Tranchell said. “And I just couldn’t find a solution that I could stomach.”

Tranchell says she values her autonomy and freedom as a business owner and doesn’t need large corporation to conduct transactions.

“And my theory is, if I have $17,000 that I’m not paying at the end of the year to a credit card company, and I can instead pay that to my staff and keep them and provide a work environment where they thrive, that’s more important,” she said.

She points to two former staff who, though born and raised in Traverse City, left the area because they couldn’t afford to live here anymore.

“So, one of my theories of doing cash only is to hopefully be able to pay staff more money,” she said.

Tranchell admitted that she’s nervous to see how customers react to a cash-only situation, or how many customers Rough Pony has to turn away because they don’t have cash on hand.

“But I also just think there’s an opportunity right now,” she said. “I think people are waking up.”

For example, Tranchell points to a partnership with Wild Pages, a radical bookstore underneath The Coin Slot, whose books and zines will be featured at Rough Pony.

“And they told us that, when the Ticker article came out (announcing Rough Pony), customers started intentionally bringing cash to pay cash at their business – (they) just had no idea (about processing fees),” she said. “People don’t know unless we educate them, and that’s one of the reasons why I’m a business owner, is because it gives me a platform to help educate.”