Many small business owners balk at the idea of accepting credit cards – a surprising number, considering the financial benefits that taking card payments can have for often-cash-strapped small businesses. If you’re one of those small business owners, you might be worried about covering processing fees or shouldering the risk of fraud. But for small businesses, the benefits of accepting card payments outweigh the risks. Here’s why:
1) You’ll Get More Customers
Perhaps the biggest benefit of accepting credit and debit card payments is the fact that you’ll simply get more customers if you give them the means to pay that’s alternative to cash and checks. Only 23 percent of Americans still use cash for point-of-sale purchases – and of those who do carry cash, more than two-thirds say that they never have more than $50 cash on them at any one time.
Hoping to make up for that with check purchases? Good luck. Forty percent of Americans say they never write checks anymore, and 20 percent write them only a few times a year.
All of this means that if you’re asking customers to pay in cash only, you’re turning away a significant number of people who might otherwise be inclined to make a purchase. Give customers the option to pay with credit, and suddenly you’re able to appeal to everyone, not just the narrowing margin of consumers who still carry a minimal amount of cash with them in continuity subscription merchants.
2) They’ll Spend More in Your Establishment
Of course, the second problem with only accepting cash ought to be obvious by now, and it’s that customers are limited to spending only the amount of cash they have in their wallets, which may be less than $50. When you accept credit card payments, you’re letting customers’ purchases be limited by their (presumably much higher) borrowing limits or account balances instead.
But that just removes one obstacle to spending more. Asking your customers to pay in cash only means they’ll be forking over a tangible portion of wealth, getting back an amount of change that drives home how much they’ve just spent, and feeling how much thinner their wallet is as they put it back in their pocket. That creates a psychological block that makes people much less likely to spend freely when they’re spending cash. With cards, on the other hand, it’s easier to rationalize impulse purchases because you don’t see the impact until the bill comes weeks later. So card-paying customers will spend more than cash-paying customers.
3) Cards Are More Convenient for Everyone
Paying by card is easier for your customers, but here’s the thing – it’s more convenient for you, too. Your merchant services account will include software tools that simplify accounting, managing your inventory and other metrics. Card transactions will be automatically entered into your analysis software. Cash transactions, on the other hand, have to be entered in by hand. Even if you still get some cash customers, you’ll be saving yourself a lot of work by accepting card payments from the majority of consumers who prefer this payment method.
4) Credit Is Safer than Cash
While you might be worried about the possibility of credit card fraud, you should be at least equally concerned about cash’s big security flaw, which is that anyone can walk off with it and spend it anywhere, no questions asked, and it’s impossible to replace once stolen. If you have lots of cash sitting around in the business, you’re vulnerable to theft, whether by strangers or your own employees. You’re also vulnerable while you’re taking the cash to the bank to be deposited.
When you accept more credit cards, you’ll have less cash on hand, which will reduce your vulnerability to theft. Credit card transactions also leave a paper trail, which makes it easier to track payments and resolve issues.
Even if you haven’t yet started a business, are someone with an immigrant credit card or don’t have a U.S. bank account yet, your financial benefits are still higher when you use a credit card.
5) Handling Credit Cards Is Actually Cheaper than Handling Cash
While it’s true that merchant services providers charge processing fees for handling credit and debit card transactions, it’s also true that handling cash has its costs, too. The hidden costs of handling cash include the costs of guarding it from theft with cameras, safes, silent alarms, and other measures. Then there are the costs of transporting cash deposits to the bank, which can include time, gas, and self-protective measures taken.
Finally, there’s the cost of cash theft that does occur, which can total about $40 billion annually across the U.S. All things considered, the average cost of transactions for businesses that handle a lot of cash come out at $0.43 per debit card transaction, $0.67 per credit card transaction, and $1.06 per cash transactions.
If you’re a small business owner who deals only in cash, it’s time you reconsidered. Accepting credit and debit cards could increase your business’s security, make less work for you, and save you money. Plus, your customers will love you for it.