The Cost of Not Accepting Cards

Sure, accepting debit and credit cards at your business costs a bit extra…but it’s nothing compared to the missed revenue by not accepting them.

We are increasingly living in a cash-less society. While some still view credit cards as something you use for only big purchases and emergencies, more and more people are becoming comfortable using them for small, every day purchases. Many savvy customers actually shop around for the best reward systems or cash back options and load up all of their expenses on a credit card (or two).

And that’s to say nothing of the meteoric rise of the debit card. Although they’ve technically been around since the 60s, the debit card really caught hold in the late 90s and early 2000s – according to the Kansas City Federal Reserve, there were about 300 million debit card transactions in the U.S. in 1990, and that number exploded to 37.6 BILLION by 2009.

It’s easy to see why – debit cards have all the quick convenience of a credit card, but none of the worry that you’ll rack up a balance you can’t afford to pay off right away (and thus, accrue finance charges). Debit cards are the single biggest reason why we are, as this article started off, in an increasingly cash-free world.

If debit and credit card transactions are becoming the new norm and almost completely replacing cash and checks, the average customer will often wonder why a business wouldn’t accept them. For an extremely small business – say, a flower stand or a hot dog vendor – it is understandable. But a surprising amount of “larger” small businesses don’t accept them. Why would they shun such a ubiquitous form of payment? The answer, as with many things in life, comes down to money.

As every business owner and retail employee knows full well, there’s a bit of work that goes behind each debit and credit card transaction, and that work isn’t free. Merchants who accept credit and debit card purchases have to pay a fee for each and every transaction that occurs, and that is without a doubt the biggest factor for a business opting to only accept cash.

Upon first glance, the decision actually seems reasonable. A merchant typically pays three types of fees when it comes to credit and debit card transactions: a set, flat amount that is the same for each transaction; a percentage of the transaction itself; and a monthly service fees that is upfront and completely independent of the amount and volume of transactions.

All these fees (let alone the card scanning equipment costs and the necessity to have an Internet connection to process them) most certainly add up, and for a business operating on a razor thin profit margin, it’s easy to initially think that avoiding these fees would be smart. But when you consider how many transactions in general your business will lose as a result of not accepting cards, it quickly becomes clear that the savings you’ll see on skipping fees doesn’t come close to revenue you’d be missing.

Think of that earlier statistic from the Kansas City Federal Reserve. 37.6 billion is a huge number, but that number is now approaching 100 billion transactions per year according to Payments Source. How many of those transactions take place in your area, or in your area of business? Enough to make a difference.

Plus, with younger generations that have always grown up with a debit card (many of which have never even owned a checkbook), the concept of cash is odd. It takes more time to carry out a transaction (fishing through wallets/purses/pockets for bills and change), and it’s an unnecessary risk. They wonder (rightly so) why they should carry around cash in their wallet or purse when, if it becomes lost, the cash is gone forever? Why not use a debit card that links up directly to their checking account, which if it becomes lost, is almost certainly useless to the person who finds it without their secret PIN?

Many millennials, teens, and college students are almost 100% cash free. If your business only accepts cash, you are absolutely losing out on their business, which is becoming an increasingly large sector of the purchasing force worldwide. Sure, you can place an ATM machine in your business, which is still a fairly common practice. But almost all banks assess a fee to their customers for using an ATM that is not owned by the bank, which the customer doesn’t relish paying. Plus, most 3rd party ATMs assess their own processing fee, so the customer gets dinged twice simply for accessing their own money. Many won’t use in-store ATMs for this reason alone.

Business owners can be in a bit of a tricky spot – what’s the best approach to accept credit and debit cards to not lose out on a huge swath of potential customers, but minimize the amount spent in fees? By choosing a merchant services partner that offers the lowest rates in the industry. Guaranteed.

Valued Merchant Services will beat the price you’re currently paying on processing fees – again, guaranteed – or we will give you $500, no strings attached. Yes, you will still have to pay processing fees on card transactions – but you don’t have to over pay. Let us help.

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