Why do card processing companies discourage “cash advance” activities
"This is most likely protecting Square's relationship with Visa/Mastercard/AMEX/etc. Credit card companies typically charge their customers a much higher interest rate with no grace period on cash advances (withdrawals made from an ATM using a credit card). If you use Square to generate something that looks like a ""merchandise transaction"" but instead just hand over a wad of banknotes, you're forcing the credit card company to apply their cheaper ""purchases"" interest rate on the transaction, plus award any applicable cashback offers†, etc. Square would absolutely profit off of this, but since it would result in less revenue for the partner credit card companies, that would quickly sour the relationship and could even result in them terminating their agreements with Square altogether. † This is the kind of activity they are trying to prevent:  1. Bill yourself $5,000 for ""merchandise"", but instead give yourself cash.  2. Earn 1.5% cashback ($75).  3. Use $4,925 of the cash and a $75 statement credit to pay your credit card statement.  4. Pocket the difference.  5. Repeat. Note, the fees involved probably negate any potential gain shown in this example, but I'm sure with enough creative thinking someone would figure out a way to game the system if it wasn't expressly forbidden in the terms of service" Square does not care if you run a $10 transaction to test the system. They are concerned with its use to move meaningful amounts of money.    The only people who do this will be the Dunning-Kruger gang, who only think they are clever.  Because of course Square will hunt them down, sue, garnish and/or prosecute them!  But the expense of doing so is all on Square, making it a total lose.  The cheapest resolution is to not let it happen in the first place.   The ~3% cash advance fees, lack of rewards points, and the higher interest rate are not just for profiteering.  They reflect, and pay for, the higher risk of loaning money via cash advance: to put it indelicately, the risk of default.   Cash advance credit limits are often much lower than purchase limits.   If a merchant is selling himself phantom merchandise to get easy cash advances, it means he is not using regular ways of borrowing money.  Perhaps because he can't, because he has exhausted his other opportunities to borrow, risk managers have cut him off.  Square has no reason to care either way; but the issuing bank does, and through Visa etc., they will disallow this behavior.   **  PayPal Here's rate used here instead of Square's, to simplify math. "Square charges a 2.75% fee (which the merchant pays), so you would be losing money if you only got a 1.5% cashback bonus. I would guess that the real reason Square prohibits you from getting cash is because of Visa/MC, state and federal regulations.  Visa/MC probably prohibit it for regular merchants due primarily to laws that are designed to prevent money-laundering. Certain merchants (like casinos) are allowed to give you cash advances against a credit card, but regular merchants are not allowed to do this. It is much more difficult to get Visa/MC to approve merchants to handle cash advances and they are subject to many additional regulations.  Services like Western Union will let you send cash with a regular credit card, but they are classified as ""money transmitters"" and must comply with additional state and federal regulations. If Square were to allow cash advances, this would likely subject them to a bunch of additional regulations.  It would cost them more to comply with these regulations and is outside their business model, so they simply prohibit it." I thought this was because credit card companies charge the retailer a fee to accept credit card payments. If you spend $100, the retailer pays $1 (or whatever percentage they have negotiated) to the credit card provider.  Handing over $100 cash and paying $1 fee to Visa means a loss to the retailer. The same transaction on $100 worth of product means the loss is accepted out of the profit margin which the retailer accepts to attract custom.
The Federal Reserve website notes that creditors must accept cash for debts on services already rendered, but that businesses may refuse cash for services not yet rendered unless prohibited by local law. The Treasury website includes examples of businesses limiting what cash they will accept:  For example, a bus line may prohibit payment of fares in pennies or   dollar bills. In addition, movie theaters, convenience stores and gas   stations may refuse to accept large denomination currency (usually   notes above $20) as a matter of policy. Many small businesses are still cash and check.  For example my landlord does not take credit card or online transfer.   My choices are cash and check, and I prefer checks for the paper trail. This is a question with a flawed premise.  Credit cards do have two-factor authentication on transactions they consider more at risk to be fraudulent.  I've had several times when I bought something relatively expensive and unusual for me, where the CC either initially declined and sent me a text asking to confirm immediately (after which they would approve the charges), or approved but sent me a text right away asking to confirm (after which they'd automatically dispute if I told them to).  The first is legitimately what you are asking for; the second is presumably for less risky but still some risk transactions). Ultimately, the reason they don't allow it for every transaction is that not enough people would make use of it to be worth their time to implement it.  Particularly given it slows down the transaction significantly (and look at the complaints at the ~10-15 seconds extra EMV authentication takes, imagine that as a minute or more), I think you'd get a single digit percentage of people using that service. Probably not. I say probably because your credit card's terms of service may treat certain purchases (I'm thinking buying traveler's checks off-hand) as cash advances. See also this question. Probably because large chains can absorb the loss from fraud better than small stores do.  Thus, small stores want to ensure that the person holding the card is the same as the name on the card. "~~Not only would it be illegal, but~~ the $10k doesn't even sound like it would be a ""bonus"" of any sort for doing so. From the article:  &gt; If a restaurant opts in, it'll get a $10,000 gift from Visa (V) **to help pay for technology upgrades**, the company said.  Emphasis is mine.  ---  **Edit ::** I was curious about this, so I started doing a little reading-up on businesses not accepting cash. It turns out that it **is legal** to refuse cash, but only if there is no debt to pay. If you get your product first, then there's a debt to pay, and the business must accept cash. If the customer pays first, then there's *no* debt to pay (the customer is already paid up), so the business *does not* have to accept cash.  Link for the info: https://u.osu.edu/zagorsky.1/2016/08/05/do-businesses-have-to-accept-cash/  There are plenty of additional articles that talk about it, but I opted to link this one as it's a recent article by an economic researcher at a university. I figured that, if I'm going to link something, a primary source is probably better than a news agency reporting on it.  It's kind of interesting, really, and I wonder how it would work in a place such as a restaurant. You typically get your food first, and pay later. This creates a scenario where the customer is in debt to the restaurant, so the restaurant would theoretically have to accept cash. However, if you pay first, *then* get your food, you don't have an outstanding debt, and thus the restaurant doesn't have to accept cash.  Looking at the article again about Visa's offer, two of the types of groups it mentions are cafes and food trucks, which typically require you to pay before you get your food. This would mean that the customer isn't in debt to the service, and thus cash can be refused.  How that would work out at a restaurant is another question entirely, as the vast majority of the American restaurant-goers expect to pay *after* they eat. This may be why the article specifically mentions *small business* restaurants. A local mom'n'pop restaurant is going to have a much easier time going cashless than a national chain would (and the $10k would do more for them to update their systems than it would for the national chain). Additionally, people might be more willing to accept the different practices at a mom'n'pop restaurant than they would at a nation-wide chain.  Definitely an interesting bit of reading, and a fun bit of learning!" They charge merchants a transaction fee, typically between 1% and 3%, for processing every credit card transaction. And of course they make money on interest charged to customers even if they pay on time, as long as the customers don't pay off their balance in full every month. "in theory, yes. in practice, no. largely because merchants pay a fee to process credit card transactions which normally exceeds the cash back you can get. i tried this with square, since their vendor fee was 2.75%, and i got 5% back on restaurants.  however, even though i registered with square as a restaurant, transactions were categorized as ""other services"" or something, so i only got 1% back and lost 1.75% net. moreover, if you did find a card/processor combination that left you with a net gain, they would eventually catch on and charge you with some sort of fraud.  i wasn't worried about it with the square experiment because it was only 1$, but if you tried to do this with large sums, a human would catch you. and if it was enough money to matter, there would be a lawsuit. if you were really unlucky, you might get charged with some terrorism crap like ""structuring"" deposits." The only card I've seen offer this on credit card purchases is Discover.  I think they have a special deal with the stores so that the cash-over amount is not included in the percentage-fee the merchant pays.  (The cash part shows up broken-out from the purchase amount on the statement--if this was purely something the store did on its own without some collaboration with Discover that would not happen). The first few times I've seen the offer, I assumed it would be treated like a cash-advance (high APR, immediate interest with no grace period, etc.), but it is not.  It is treated like a purchase. You have no interest charge if you pay in full during the grace period, and no transaction fee.  Now I very rarely go to the ATM. What is in it for Discover?  They have a higher balance to charge you interest on if you ever fail to pay in full before the grace period.  And Discover doesn't have any debit/pin option that I know of, so no concern of cannibalizing their other business.  And happier customers. What is in it for the grocer?  Happier customers, and they need to have the armored car come around less often and spend less time counting drawers internally. Their income is from the two sources you mentioned - they charge the merchants for each use, and they make interest money on people who carry a balance. This is one reason a lot of merchants will be willing to give you a discount if you pay cash - they don't have to give a portion to VISA or MasterCard.   I wouldn't be able to speak to the relative proportions between the two income sources, but when many cards are at 30% interest for balances carried, and many people have tens of thousands of dollars owed on their cards, the interest income is not insignificant.  They'll also charge interest immediately on cash advances. A few cards also make money off of annual fees, although I'd suspect this is not very much in the full scheme of things. The way to get the most out of a card, is to always pay it off fully at the end of each month. "There are hidden costs to using rewards cards for everything. The credit card company charges fees to the merchant every time you make a purchase.  These fees are a small amount per transaction, plus a portion of the transaction amount.  These fees are higher for rewards cards.  (For example, the fees might be 35 cents for a PIN-transaction on a debit card, or 35 cents plus 2 percent for an ordinary credit card or signature transaction on a debit card, or 35 cents plus 3.5 percent on a rewards card.) After considering all of their expenses, merchant profit margins are often quite small.  To make the same amount of profit by serving a rewards-card customer as a cash customer, the merchant needs to sell higher profit-margin items and/or more items to the rewards-card customer. People who ""pay with plastic"" tend to spend more than people who ""pay with cash"".  If you pay with a rewards card, will you spend even more?" "Banks are in it to make money. But they're expected to provide a social good which powers our economy: secure money storage (bank accounts) and cashless transactions (credit/debit cards).  And the government does not subsidize this.  In fact, banks are being squeezed. Prudent customers dislike paying the proper cost of their account's maintenance (say, a $50/year fee for a credit card, or $9/month for a checking account) - they want it free.  Meanwhile government is pretty aggressive about preventing ""fine print"" trickery that would let them recover costs other ways.  However there isn't much sympathy for consumers who make trivial mistakes - whether they be technical (overdraft, late fee) or money-management mistakes (like doing balance transfers or getting fooled by promotional interest rates).  So that's where banks are able to make their money: when people are imprudent.  The upshot is that it's hard for a bank to make money on a prudent careful customer; those end up getting ""subsidized"" by the less-careful customers who pay fees and buy high-margin products like balance transfers.  And this has created a perverse incentive: banks make more money when they actively encourage customers to be imprudent.  Here, the 0% interest is to make you cocky about running up a balance, or doing balance transfers at a barely-mentioned fee of 3-5%. They know most Americans don't have $500 in the bank and you won't be able to promptly pay it off right before the 0% rate ends.  (or you'll forget).  And this works - that's why they do it.   By law, you already get 0% interest on purchases when you pay the card in full every month.  So if that's your goal, you already have it.  In theory, the banks collect about 1.5% from every transaction you do, and certainly in your mind's eye, you'd think that would be enough to get by without charging interest.  That doesn't work, though.  The problem is, such a no-interest card would attract people who carry large balances.  That would have two negative impacts: First the bank would have to spend money reborrowing, and second, the bank would have huge exposure to credit card defaults.   The thing to remember is the banks are not nice guys and are not here to serve  you.  They're here to use you to make money, and they're not beneath encouraging you to do things that are actually bad for you. Caveat Emptor." "There is also the very simple fact that cash is a *significantly* self-limiting thing: you are limited in amount you can spend on any give day to the cash you have on hand -- this along makes you either reticent to spend it, forces you to spread your purchases (or forgo one in order to enable another), and/or requires additional planning to spend larger amounts.  Conversely, most debit &amp; credit cards while they also have some limits on them, enable far more free spending.  So whether the spending of cash is a negative ""painful"" reaction, or really just an awareness that their available resource is being reduced, would be a better question.  After all, similar things are seen in other things that have short-term physical limits: smokers tend to smoke cigarettes more quickly at the beginning of a new pack, and tend to space out the intervals between them as the pack empties; likewise with other resources (food, beer, soda) within a home -- if/when the supply is abundant, we tend to gorge &amp; snack, as the available supply decreases, we cut back." Any institution that issues checks and is connected to the ACH system can be the passive side. Any institution that clears checks and is connected to the ACH system can be the originating side. Not any institution that can be - in fact is. Your credit union doesn't provide this service because they don't want to. It costs them money to implement and support it, but they don't see the required benefit to justify it. They can. My credit union does that. "This might not be the answer you are looking for, but the alternative to ""don't patronize these merchants"" is this: DO patronize these merchants, and pay cash.   Credit cards are convenient.  (I use a credit card often.)  However, there is no denying that they cost the merchants an incredible amount in fees, and that our entire economy is paying for these fees.  The price of everything is more than it needs to be because of these fees.  Yes, you get some money back with your rewards card, but the money you get back comes directly from the store you made the purchase with, and the reward is paid for by increasing the price of everything you buy.  In addition, those among us that do not have the credit score necessary to obtain a rewards card are paying the same higher price for goods as the rest of us, but don't get the cash back reward. Honestly, it seems quite fair to me that only the people charging purchases to a credit card should have to pay the extra fee that goes along with that payment processing.  If a store chooses to do that, I pay cash instead, and I am grateful for the discount."