Living in Korea Town, I know that cash is king as many places do not take credit cards, including hair salons. So why don’t hair salons take credit cards? According to this article, most barbers do not take credit cards due to high transaction costs and for tax evasion. This seems to make sense but how is this sustainable? Many customers may simply go to barbers that accept credit cards and IRS may soon come after them.  Yet the cash only policy seems to persist. The answer may lie in customer segmentation and IRS cost/ benefit analysis of enforcement. Most customers that go to barber shoppers are not very wealthy and the young generation who does not like cash is unlikely to go to a barber who cannot implement the latest hipster hairstyle. Hence, the barber is able to maintain his cash only policy given that his customers does not screamingly demand the usage of credit cards. Also, it is unlikely that IRS will come after barbers given that the median wage is $25,410, with 90 percentile making $45,000. Considering that the US household wage in 2014 was $53,000, barbers do not make much money, which does not really motivate the IRS to come after the barbers. Plus, busting small business may not be good for IRS’ public relation. Given customer segmentation and IRS’s cost/ benefit analysis of enforcement, we expect to see the barber’s cash only policy to persist.

PS

Hyde Park Hair Salon, Obama’s favorite barber shop,  takes credit cards. Plus, considering that the president gets his haircuts done there, tax evasion should be minimum.