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ASaP Hair Studio stylist Paul Ouellette

A year and half ago, hair stylist Paul Ouellette moved to a new salon in Saint John, N.B., that accepts no credit- or debit-card payments. The only way to pay up is in cash.

"No credit or debit cards? It is the 21st century, you know," one aghast patron said to Mr. Ouellette when he came in for his first cut at ASaP Hair Studio.

But the customer has gotten used to it, even though he rarely has cash on hand. His solution: While his son follows him in the cutting chair, the customer runs to the bank to get some money.

In a world of plastic, there aren't all that many businesses operating on a cash-only payment basis any more. In a 2011 survey of members carried out by the Canadian Federation of Independent Business, 95 per cent of businesses in the retail and hospitality sector, for instance, said they accepted credit cards and 93 per cent said they took debit cards. For all businesses, 73 per cent were set up to take credit cards and 59 per cent could handle debit cards.

For businesses to accept only cash these days is a "gutsy move," says CFIB president and chief executive officer Dan Kelly, whose organization has been leading a campaign against high credit-card fees to merchants by encouraging consumers to make more payments in ways, such as debit or cash, that are less costly to small businesses.

Small businesses that won't take any kind of plastic and only cash, he says, need "an incredibly loyal clientele" to operate this way.

But there are small businesses flourishing with cash payment policies. For them, it's not a gutsy move; it's a pragmatic business decision.

For many, it's simply not worth absorbing the costs associated with debit– and credit-card purchases. And they have clients willing to pay cash for their products and services.

The ongoing debate about high credit card fees doesn't necessarily consume the attention of these businesses. Nor are they necessarily closely monitoring  the CFIB campaign, nor watching for a ruling from the federal Competition Tribunal on its case against the major credit card issuers Visa and MasterCard, which could allow merchants to add surcharges on credit cards or refuse to accept higher-cost cards.

Mobile payment technology may be changing the way some cash-only businesses operate, as this story recounts, but there are still many businesses that are sticking to a cash payment policy.

Cash businesses aren't just under-the-table operations trying to avoid taxes, though Bakr Ibrahim, a management professor at Concordia University's John Molson School of Business specializing in entrepreneurship, small and family business, says this is a problem with some. Still, a diverse range of businesses operate on a strictly cash basis, from construction firms to IT startups to mom-and-pop retail and service businesses, he says.

Dr. Ibrahim, who recently surveyed cash-only small and medium sized businesses in Montreal and Ottawa, says some firms do it to have more cash on hand to pay bills and make equipment purchases, while some simply want to save the expenses associated with credit and debit cards.

Dr. Ibrahim says a cash payment policy can work for may small, local retail or service businesses that want to keep expenses low and are largely happy with an existing customer base. "Many of them don't have the desire or potential to expand," he says.

ASaP is that kind of small business. Owner Pam Munn wasn't motivated to save on the costs of plastic when she launched the business 15 years ago without credit– or debit-card payment options. The salon rents chairs to four self-employed stylists and one aesthetician, rather than employing them directly, she explains, so she feels it's too comlicated to keep track of money owed to each one.

Ms. Munn says she never receives complaints from customers because the salon doesn't accept credit or debit cards. "We've always done it this way," she says.

Even if credit card fees were lowered dramatically, Ms. Munn says ASaP wouldn't change its policy. "It's working fine as it is," she says.

Though Mr. Oullette moved to ASaP from a salon that had a range of payment options, he was comfortable joining one that accepted payment only in forms that didn't cost him a lot of money. He refers to himself as an "extra-small" business, and has to keep his expenditures low.

Even debit cards, with their relatively low transaction fees, aren't worth the investment once you take into account the monthly fee for renting a machine and buying a cash register, he says.

"I just don't see [offering payment using cards] as a necessary cost of doing business," he says. "You add up all the costs and say, 'Whoa, I'm not spending that.'"

Mr. Ouellette says he can afford to take this stand because he has loyal clients. He was a little worried at first when one long-time customer complained because he could no longer accept her credit card, which she uses to collect frequent flyer points. She switched hair stylists as a result.

She turned out to be an exception, though. Mr. Ouellette held on to most of his client base from his former salon. Clients made the adjustment, even those that pay for services like his with credit cards when they don't have enough money in the bank.

"They book appointments around their pay week," he says. "They make do. They're loyal to me. It's nice they like you that much."

Mr. Kelly says there are other factors that can determine whether a business can operate without plastic options.

He says prices should be relatively low so customers don't have to carry around a large amount of cash to make a purchase. As well, competitors should also be operating this way so no business has an advantage in offering more payment options, he says. Mr. Kelly also says the product or service also needs to be highly valued by its customers.

Montreal's Schwartz's delicatessen is one example he mentions. The 85-year-old business is popular with both residents and visitors, with frequent lineups outside the door. Schwartz's has a cash-only policy for one reason: efficiency, says general manager Frank Silva. It takes longer to process payments by credit card or debit, he says.

"We have up to 200 people lining up to pay. If we introduced credit cards or debit, the lineups would be endless," says Mr. Silva, noting that Schwartz's does take credit and debit cards at its take-out area because customers can spend a lot. "It's hard to expect those customers to carry that much cash."

Gig Keirstead,  co-owner of Elmhurst Outdoors in Erbs Cove, N.B., has been operating on a cash-payment basis his entire 20 years in the outdoor recreation business.

In the beginning, Mr. Keirstead groomed cross-country ski trails on his rural property, about an hour's drive from Saint John, and opened them to the public. He left a box outside a warm-up shed near the entrance, and asked people to deposit $2 when they went for a ski.

Eight years ago, Mr. Keirstead formally established Elmhurst Outdoors, which he operates year-round with his wife, Denise Howlett. In busy times, they hire temporary help, but mostly run the business themselves.

Over time, they expanded and added new components, including snowshoeing, kayaking and canoeing, and tours of their maple sugar facilities. They also conduct outdoor education programs for local schools, and rent out meeting space to businesses for retreats and workshops.

As the business grew, Mr. Keirstead adopted a more systematic process for receiving payment to replace the honour system he used in the beginning. But he still takes cash for most of his services. "It's simpler for us, and it doesn't inconvenience people," he says.

Elmhurst is a seasonal business with no phone line at its main lodge; he says it would be cost-prohibitive to offer a payment option none of his customers demand. Mr. Keirstead also accommodates the occasional customer who arrives without the cash to pay the $6 it costs each person to use the trails.

"I tell them to pay the next time they come," he says. "I've gotten burned once or twice over the years by people who never did pay. It's hardly worth worrying about losing $20 in all that time."

Mr. Ouellette also accommodates customers who forget to bring cash; he tells them to come back later that day after they've been to the bank, which sometimes means the next week for some forgetful customers.

"We're very fortunate to be in a small city where everybody knows everybody," he says. "You're not going to get somebody 'stiffing' somebody else."

Elmhurst and ASaP are both flexible about their "cash-only" policy. They do accept cheques from some customers, and Mr. Ouellette welcomes e-transfers to his bank account, saying they don't cost him any money.

Mr. Ouellette likes the relaxed and trusting relationship he has with his clients. He's actually wary about the ones who would insist he accept their credit cards.

"If they're particular about that, imagine what they'll be like when it comes to their hair," he says with a laugh. "They'd be impossible."

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