Why Germans pay cash for almost everything(qz.com)
qz.com
Why Germans pay cash for almost everything
https://qz.com/262595/why-germans-pay-cash-for-almost-everything/
479 comments
As a Swiss German I think the currency stability argument is moot. Swiss Frank is one of the most stable currencies available and we still have a similar attitude to cash as Germans. IMO it's mainly due to the following reasons:
1) CC is slow, at least in Switzerland. Like in Germany, efficiency is baked into the culture - people hate to wait on someone paying his chocolate bar with credit card. It's also not rare for people to show you that discontempt. This trains people into behaving.
2) Switzerland, as most of Germany, is a mostly urbanized place with good public transport and facilities close to where people live. Meaning, there's way less weekly mall-shopping going on than in less dense countries like the US or France. So, the average total price is lower since shopping trips are more frequent, often about every second or third day after work.
3) Security concerns. For a long time CC were as insecure as the US ones, with a simple swipe of the magnetic stripe being sufficient, and CC fraud was relatively frequent. So, many people have an instinct of only using CC when necessary, and if at all possible not in public places. Debit card on the other hand have always been relatively secure (6-digit pin code, 3 tries), so they are used more often, maybe more so than in the German example since Swiss banks have pushed them since around 20 years ago.
1) CC is slow, at least in Switzerland. Like in Germany, efficiency is baked into the culture - people hate to wait on someone paying his chocolate bar with credit card. It's also not rare for people to show you that discontempt. This trains people into behaving.
2) Switzerland, as most of Germany, is a mostly urbanized place with good public transport and facilities close to where people live. Meaning, there's way less weekly mall-shopping going on than in less dense countries like the US or France. So, the average total price is lower since shopping trips are more frequent, often about every second or third day after work.
3) Security concerns. For a long time CC were as insecure as the US ones, with a simple swipe of the magnetic stripe being sufficient, and CC fraud was relatively frequent. So, many people have an instinct of only using CC when necessary, and if at all possible not in public places. Debit card on the other hand have always been relatively secure (6-digit pin code, 3 tries), so they are used more often, maybe more so than in the German example since Swiss banks have pushed them since around 20 years ago.
I spent a few weeks working in Munich and was surprised when I first went into a supermarket to buy lunch. The payment process was like stepping back in time 20 years in the UK. No self-checkout kiosks, just a single cashier, and a line of people all paying in cash.
It worked, but it was a much slower process than was I was used to. I guess the stereotype of German super-efficiency made me assume they would be quick to adopt such technologies. But I think perhaps that is countered by a degree of conservatism about switching away from systems that are understood, and proven to work.
It worked, but it was a much slower process than was I was used to. I guess the stereotype of German super-efficiency made me assume they would be quick to adopt such technologies. But I think perhaps that is countered by a degree of conservatism about switching away from systems that are understood, and proven to work.
As a German, I think ot's always intersting to get an outsiders perspective. The article strikes me as absurd, though.
There is a deep caution against technology here, especially if it's foreign technology. There were numerous attempts by German banks to reinvent the wheel with incompatible payment systems (Geldkarte, ...) none of which could be used for online payment. All of them failed. I would also counter the efficiency argument: having recently visited Norway for vacation, I'm still impressed with the efficiency of grocery shopping where everyone pays with their credit cards. Imho it's a mixture of privacy concerns and generally negative attitudes towards technology.
There is a deep caution against technology here, especially if it's foreign technology. There were numerous attempts by German banks to reinvent the wheel with incompatible payment systems (Geldkarte, ...) none of which could be used for online payment. All of them failed. I would also counter the efficiency argument: having recently visited Norway for vacation, I'm still impressed with the efficiency of grocery shopping where everyone pays with their credit cards. Imho it's a mixture of privacy concerns and generally negative attitudes towards technology.
German living in UK here. I think the flaky-currency argument is non-sense. I see this argument mostly in anglo-american articles when the authors try to figure out why germans are still mostly cash-transactional.
I paid in cash back home mostly because it's faster. Cashiers are used to calculate the change and quick getting it out. CC/Debit card payments take a bit longer, since you almost only have chipped payments, get the device to work, enter pin, wait for receipt that you have to sign sometimes, etc. I was never pick pocketed on the street, so this wasn't an issue either.
I only started paying by card with the introduction of NFC/ "contactless" payments, since this one is faster.
Also, the UK coins are quite heavy having €10 worth of coins is half the volume at least compared to the old pounds.
I paid in cash back home mostly because it's faster. Cashiers are used to calculate the change and quick getting it out. CC/Debit card payments take a bit longer, since you almost only have chipped payments, get the device to work, enter pin, wait for receipt that you have to sign sometimes, etc. I was never pick pocketed on the street, so this wasn't an issue either.
I only started paying by card with the introduction of NFC/ "contactless" payments, since this one is faster.
Also, the UK coins are quite heavy having €10 worth of coins is half the volume at least compared to the old pounds.
The question isn't why germans pay cash. the question is, why would you do it any other way?? I'll tell you why. In other countries we allow credit card companies to tax the masses. By creating regulations that prevent merchants from charging a different price for cash vs credit, you effectively force everyone to pay 2.5% extra for every purchase. That 2.5% goes straight to the credit card companies, even if you pay cash! So, you have no choice but to use a credit card, so you can recover 1.5% on the 2.5% tax your paying.
Use of credit cards in the US really took off in 1980 when interest rates were deregulated[1], credit cards were then heavily promoted. I remember at that time, to use a credit card in a grocery store had a social stigma. But now, many people here rarely use cash.
What are the credit card interest rates in Germany? (In the US credit card interest rates can be 20-30%). Maybe there's less incentive to promote use of cards in Germany, or maybe transaction fees are regulated to make small transactions impractical?
[1] https://www.fdic.gov/bank/analytical/bank/bt_9805.html
What are the credit card interest rates in Germany? (In the US credit card interest rates can be 20-30%). Maybe there's less incentive to promote use of cards in Germany, or maybe transaction fees are regulated to make small transactions impractical?
[1] https://www.fdic.gov/bank/analytical/bank/bt_9805.html
I have experimented with it too, and you may as well, leave your credit cards at home, and only use 'Cash' ... you will think twice before paying for $100 consumer item ... whereas using Credit Card, you barely had noticed the price tag .... so bottom line is, Yes, paying through Cash can 'significantly' cut your expenses on 'extravagant spendings'.
I think you'd have to dig deeper in the debt argument, and what it has to do with cash.
> "But the real point isn’t that Germans love cash. It’s that—for the same historical reasons—they loathe debt. (Armchair anthropologists have also long noted that German word for debt—Schulden—comes from the word for guilt, Schuld.)"
Sweden has the same culture and words for debt. "skuld", and the saying "Den som är satt i skuld är icke fri" ("He/She who is in debt is not free").
Yet Swedes likes using Credit Cards a lot. But as the author might say we have a lot higher household debt than Germany.
But Switzerland also has high household debt. And as another commenter notes Switzerland has the same cash behavior as Germany. I'd like to see some data on that though.
https://data.oecd.org/hha/household-debt.htm
I do feel like an armchair anthropologist though.
> "But the real point isn’t that Germans love cash. It’s that—for the same historical reasons—they loathe debt. (Armchair anthropologists have also long noted that German word for debt—Schulden—comes from the word for guilt, Schuld.)"
Sweden has the same culture and words for debt. "skuld", and the saying "Den som är satt i skuld är icke fri" ("He/She who is in debt is not free").
Yet Swedes likes using Credit Cards a lot. But as the author might say we have a lot higher household debt than Germany.
But Switzerland also has high household debt. And as another commenter notes Switzerland has the same cash behavior as Germany. I'd like to see some data on that though.
https://data.oecd.org/hha/household-debt.htm
I do feel like an armchair anthropologist though.
As a German, I disagree. I've had many discussions about the upcoming NFC payment options and the main argument was privacy.
This seems counter-intuitive to me. The author argues it's due to hyperinflation from the pre-WW2 era, concluding that "People in countries that suffered banking crises quite sensibly often prefer to save in cash."
If there really is some national memory of that crisis, wouldn't they actually prefer to actually avoid saving in cash? During the hyperinflation period your cash could lose half of its value overnight. This just doesn't make sense.
Most brick & mortar stores in Germany will not offer debit card payments under 10 Euros, since the fees they have to pay are extremely high. Most clerks will frown upon small card payments for that reason, and sometimes outright decline the payment, even if that means no purchase happening.
Credit cards are rarely accepted in any store but larger ones in malls. Most Germans, and that was pretty spot-on in the article, don't even have a credit card. You can imagine how detrimental that is to building a German SaaS business. Stripe and the like have started going into the ELV market, which is pretty much a direct debit payment - and you need to pass quite a few restrictions to even be allowed to offer ELV as a vendor.
All in all, it is both a consumer, banking and a merchant issue, and it severely limits the German E-Commerce landscape in terms of payment solutions. Paypal has taken over German online payments, since it can be linked with a bank account. Credit cards? Not so much.
Credit cards are rarely accepted in any store but larger ones in malls. Most Germans, and that was pretty spot-on in the article, don't even have a credit card. You can imagine how detrimental that is to building a German SaaS business. Stripe and the like have started going into the ELV market, which is pretty much a direct debit payment - and you need to pass quite a few restrictions to even be allowed to offer ELV as a vendor.
All in all, it is both a consumer, banking and a merchant issue, and it severely limits the German E-Commerce landscape in terms of payment solutions. Paypal has taken over German online payments, since it can be linked with a bank account. Credit cards? Not so much.
As a german, this techno-phobic attitude was really getting to me for the longest time. It's just so incredible convenient not having to scramble for coins when taking the tram and many other examples. Living in London, I rarely take my wallet with me anymore. Apple Pay and my Mondo card is all I need.
Come to think of it, some time in the not so distant future, Germany will probably have the last laugh once the entire electronic payment system collapsed under the Next Big Cyberattack (tm)... insert coin here.
Come to think of it, some time in the not so distant future, Germany will probably have the last laugh once the entire electronic payment system collapsed under the Next Big Cyberattack (tm)... insert coin here.
"German aversion to mortgage debt is part of the reason why the country has some of the lowest homeownership rates in the developed world."
That's not just because of an aversion to debt. German Banks require a much larger down payment for their mortgages. Usually 30% or more.
Banks will also look at the physical age of the borrower. They will not hand out 20-30 year loans to someone in their 60s.
That's not just because of an aversion to debt. German Banks require a much larger down payment for their mortgages. Usually 30% or more.
Banks will also look at the physical age of the borrower. They will not hand out 20-30 year loans to someone in their 60s.
In my experience Germans use cash due to privacy concerns — they don’t want anyone knowing what they buy.
It's funny that Lidl, the store in the picture at the top of the article, is one of the stores I always pay with debit card in Germany. They have great NFC support and don't give a damn if I pay my 79¢ bread with card.
They're smart.
I went all cash a few months ago for everything except hotels and rental cars. It's very liberating. Credit cards give you 3-5% incentives to spend because you spend more. Since going all cash, we spend in average 15% less.
I went all cash a few months ago for everything except hotels and rental cars. It's very liberating. Credit cards give you 3-5% incentives to spend because you spend more. Since going all cash, we spend in average 15% less.
I suspect the main reason is that in a safe country like Germany people feel more comfortable carrying around large amounts of cash. Japan is extraordinarily cash-oriented, but it works because people don't get mugged; even if you leave your wallet on a train you can expect to get it back with all the cash still inside.
> One explanation is that, as researchers have found, memories of hyperinflation have quite a bit of staying power. People in countries that suffered banking crises quite sensibly often prefer to save in cash [...] For the same historical reasons—they loathe debt.
This explanation seems absurd (or at least counter-intuitive). If your fear is hyperinflation the two things to do would be to avoid hoarding cash that can be worthless tomorrow and to buy as much tangible stuff as possible with a debt you will have to pay back with this devaluated currency.
This explanation seems absurd (or at least counter-intuitive). If your fear is hyperinflation the two things to do would be to avoid hoarding cash that can be worthless tomorrow and to buy as much tangible stuff as possible with a debt you will have to pay back with this devaluated currency.
I thought it was the other way around - that the reason German people pay cash is simply because shops and bars refuse to support credit cards. Whenever I visit Berlin I'm so frustrated because I have to plan my spending ahead and make sure I have enough cash in my pocket before I go buy anything.
In America, I would prefer to use a debit card or cash, but many credit card issuers offer 1%-3% cash back, meaning, they give back 1%-3% of the purchases you make.
That amount adds up over time.
That amount adds up over time.
Maybe it is my German roots, but I share the preference for cash and dislike of personal debt.
More than 90% of my Brick & Morter purchases are in cash up to about $500. I stop at an ATM every couple of weeks and withdrawal $300-$500 dollars and I'm set. Cash is anonymous, quick, a one-time thing (no bills to pay later), and the standard method of payment in the small (rural) stores I frequent.
Credit cards are reserved for buying gas, large purchases, online transactions, and travel.
More than 90% of my Brick & Morter purchases are in cash up to about $500. I stop at an ATM every couple of weeks and withdrawal $300-$500 dollars and I'm set. Cash is anonymous, quick, a one-time thing (no bills to pay later), and the standard method of payment in the small (rural) stores I frequent.
Credit cards are reserved for buying gas, large purchases, online transactions, and travel.
Credit card stigma is interesting to me. For the individual that would otherwise be paying with a debit card, why would you not want to earn rewards on that?
Treat it like real money, pay every month, literally zero downside.
That said, I imagine rewards in the US are much more attractive than elsewhere, since credit card companies have so much profitability to distribute.
Treat it like real money, pay every month, literally zero downside.
That said, I imagine rewards in the US are much more attractive than elsewhere, since credit card companies have so much profitability to distribute.
I think tax is the killing factor. Most of small shops don't want to reveal how much they earn, thus resisting against electronic payments.
How is Japan not on that list of countries that pay for things primarily in cash?
The article is missing one key piece: how are card payments developing over time? My personal experience is that things have changed rapidly over the last years with most larger stores now accepting credit cards and contactless payments are increasingly becoming normal (just months ago cashiers might have looked dumbfounded at you when waving your card over the reader).
It is also critical to note that Germany has some of the lowest prices for groceries. Shops have hence been very slow in offering credit card payments.
It is also critical to note that Germany has some of the lowest prices for groceries. Shops have hence been very slow in offering credit card payments.
A few months ago, there was some construction going on just outside the busiest mall in the city center of Dresden. When they dug into the ground, they accidentally dug a bit too far and cut the internet cable for that mall (and a few more blocks around it). That was on a Friday evening, so the replacement cable could not be delivered until Monday.
The entire mall was without internet access and, consequently, all credit card terminals, EC terminals and ATMs stopped working. If I had not been able to pay cash (as I always do because of Datensparsamkeit [1]), I would not have been able to go to the cinema that weekend.
[1] Does the word "Datensparsamkeit" have a good translation in English? It's sort of an idiosyncrasy of the German language and the German people. It refers to the practice of protecting one's data by not generating it in the first place. Cash is datensparsam because it is anonymous, hence the metadata of my purchase cannot be associated with my identity.
The entire mall was without internet access and, consequently, all credit card terminals, EC terminals and ATMs stopped working. If I had not been able to pay cash (as I always do because of Datensparsamkeit [1]), I would not have been able to go to the cinema that weekend.
[1] Does the word "Datensparsamkeit" have a good translation in English? It's sort of an idiosyncrasy of the German language and the German people. It refers to the practice of protecting one's data by not generating it in the first place. Cash is datensparsam because it is anonymous, hence the metadata of my purchase cannot be associated with my identity.
There was another article on HN this week that was attempting to predict when the stock market was going to crash. https://isthestockmarketgoingtocrash.com/
There's also been a number of suggestions of the kind of economy that we're existing in. The most alarming to me is that we're in a debt economy.
Germany struggled to pay it's abhorrent war debt and reparations after WWI, and I'm curious if rather than the government facing that problem if the population in the US, or China will instead? What is the big picture these pieces of information are trying to tell us?
Should we be taking a more cautious approach when it comes to using debt? (This commentor has no debt, and wants to keep it that way)
There's also been a number of suggestions of the kind of economy that we're existing in. The most alarming to me is that we're in a debt economy.
Germany struggled to pay it's abhorrent war debt and reparations after WWI, and I'm curious if rather than the government facing that problem if the population in the US, or China will instead? What is the big picture these pieces of information are trying to tell us?
Should we be taking a more cautious approach when it comes to using debt? (This commentor has no debt, and wants to keep it that way)
I am glad, there are some serious privacy issues concerning credit and debit cards. Not to mention that bringing a third party into this causes all kinds of issues, such as their ability to block your card at any time or taking a percentage of the money.
I hope that cryptocurrencies replace cards someday.
I hope that cryptocurrencies replace cards someday.
A few years ago I was working on some bank software. We had access to bank's anonymized data, and I was really surprised when figured out what information is stored with card payments. For instance, I learnt that a guy had bought a pack of cigarettes in a small town at 12:31, Monday. Then I realized how much information a bank may posses. And how dangerous it is, because we have no control on how and who process that info.
That day I decided to pay with cash whenever I can, despite inconvenience. I prefer cards or bank transfers when buying expansive stuff, like a car, furniture, a camera, etc.
That day I decided to pay with cash whenever I can, despite inconvenience. I prefer cards or bank transfers when buying expansive stuff, like a car, furniture, a camera, etc.
> "of course, [the Germans] attitudes toward currency must owe something to Germany’s tumultuous monetary history. During the Weimar-era hyperinflation that peaked in 1923 [...]"
> "the German tendency to settle up in cash undeniably reflects the fact that for much of the last century, Germany has been either on the brink of, in the midst of, or struggling to recover from, disaster."
As a German I call that theory into question. Our currency has been stable for 60+ years. It would've been nice if other countries with recent disasters (war, hyperinflation, sanctions) and their attitude toward currency was compared against.