Cost Recovery income – although only in the type of currency involved in the transaction – and
that income is a perfect candidate to cover the running expenses.
Combination: Many systems use a combination of the above. Typical
examples of such combinations include:
- Charges on both positive and negative balances beyond a certain level
(i.e. demurrage and interest).
- Membership fees are also often used to cover the conventional money
expenses, while other one or more of the above mechanisms deals with
the complementary currency costs.
Advantages and Disadvantages of the Cost Recovery
Mechanisms
Of course, keeping the costs as low as possible is the best approach of all.
Particularly if the costs in conventional currency are high, a complementary
currency system is predictably going to have difficulties over time. Costs in
complementary currencies are easier to deal with because, particularly with
mutual credit systems the recovery problem can be dealt with easily within the
system itself.
Whenever cost recovery mechanisms are needed, there are some advantages
and disadvantages in the different solutions listed above. One key criterion to
keep in mind is to try to use the costs recovery as an incentive that is lined up
with the objectives of the system. For instance, normally it is highly desirable to
ensure that the incentives to circulate the currency are lined up.
In that sense, the worst recovery mechanism is transaction fees, as those
provide an incentive not to trade with the currency. In contrast, membership
fees and demurrage fees both give incentives to trade and are therefore
preferable.
How will your Community Currency System Recover the Costs of Operation?
þ Flat Fees
þ Transaction Fees
þ Interest
þ Demurrage
þ Other time related charges
þ Combination: ______________________________
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