Federal Reserve Bank of Atlanta
04/01/2024 | Press release | Distributed by Public on 04/01/2024 11:09
National Parks and the Cost of Cash Acceptance
You may have read that the National Park Service reports it spenticon denoting destination link is offsite about $40,000 to process $22,000 in cash entrance fees at Death Valley National Park in 2022. That's why paying to enter Death Valley and some other national parks is now card-only.
As this blog has pointed out time and again, refusing cash can exclude some people from full participation in the economy or, in this case, the enjoyment of our national parks. Today, let's look at cash acceptance from a different vantage point: the cost to merchants, including the National Park Service.
Why is the cost of collecting cash at Death Valley almost twice the value of the cash receipts? And why is Death Valley better off accepting only cards while it may not matter so much at Acadia National Park in Maine, which continues to accept cash at its entrance?
In the Kansas City Fed's Economic Review, Fumiko Hayashi icon denoting destination link is in an Adobe PDF file formaticon denoting destination link is offsite dissects the costs of processing any payment instrument. First are fees paid to banks, payment processors, and networks. Second are "resource costs," such as labor, equipment, and materials. For cash, fees paid would include cash deposit fees; for cards it would be interchange fees. For cash, resource costs include expenses related to handling, accounting, and transporting cash to a bank. For cards, it's the cost to process chargeback requests.
It's safe to guestimate that travel costs for making cash deposits from Death Valley are more than those from Acadia. Just compare the respective travel times: 45 minutes by car (armored, that is) to the nearest bank in Amargosa Valley, Nevada, versus seven minutes to one of more than a half dozen banks in Bar Harbor, Maine, respectively.
Most retailers don't face this transportation challenge. Anecdotally, large merchants say cash is cheaper than a network card because fees for cards so far outweigh fees for cash.
Another factor for all the national parks is the value of cash entrance fees supporting the cost of periodic cash transit and other processing. In 2024, it's likely that more visitors will choose to use cards for park entrance fees, so the cost of transit would support less cash revenue than in the past. Just consider the increase in card use for in-person payments over recent years. According to the Survey and Diary of Consumer Payment Choice, US consumers used cards for 70 percent of in-person payments in 2022, compared to 56 percent in 2016.
Our increased propensity to make purchases online, including for national park passes, also could affect the number of cash payments and, thus, the average cost of cash acceptance. In 2022, US consumers made 19 percent of purchases online, compared to just 8 percent in 2016. I, for example, already purchased my Acadia pass for this summer-online, using a card.
This one example of the national parks shows the complexity of analyzing the cost of payments acceptance, examined thoroughly in the Kansas City Fed report. Customer mix, product mix, pricing, and competitive environment come into this decision-making (for example, the worthy goal of universal access to our parks) and are just as relevant as the checkout costs, processing costs, infrastructure including cash registers and terminals, and costs of fraud prevention.
If you're planning a trip, keep in mind that three-quarters of national parks are always free and all parks are free on six days in 2024, including this month on Saturday, April 20, the first day of National Park Week.
Portrait photo of Claire Greene
By Claire Greene, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed
April 1, 2024 in Cards, Cash, Financial Inclusion, Payments Inclusion, Payments | Permalink