The Pros and Cons of Accepting Credit Cards
As a merchant, one of the first decisions you must make when starting your business is whether or not you will accept credit cards as a form of payment. Many experts will argue that the benefits of credit card acceptance far outweigh any disadvantages, but there are some. Credit cards are so entrenched in the American culture that it almost seems the biggest disadvantage would be not to accept them! Below are some of the pros and cons of accepting credit cards that will help you decide if credit card acceptance is right for your business. First the pros:
More customers. Only 23 percent of consumers currently pay for goods and services with cash these days, meaning if you don’t accept credit cards you are alienating 77 percent of potential customers. By that statistic, you can see that customers clearly prefer plastic, using primarily debit for everyday purchases and credit for online shopping or larger purchases. Cash is still king for small-dollar payments, however.
More spending. Credit card users tend to spend more than cash customers, plus their purchases tend to be larger and more impulse-driven, leading to an increase in the average sale amount. Some studies believe this is due to cash being real and tangible – you immediately see you have less of it after you spend it. Credit, on the other hand, is just a piece of plastic that doesn’t change regardless of how much you use it, and you don’t really see how much you’ve spent until you get the bill.
Convenience. Payment cards are simply more convenient for both the customer and the owner. For customers, cards are simply more convenient than cash, and can be much more helpful in keeping a budget, as the monthly card statement shows all transactions, so customers can see on what – and just how much – they’re spending their money. For business owners, merchant accounts include software that makes tasks such as accounting, inventory management and other metrics easier to do and track. Cash forces you to manually enter every transaction into your analysis software and that can not only be tedious, but time-consuming, as well.
Safety. Let’s face it, carrying cards is simply safer than carrying wads of cash. If your wallet is stolen, whatever cash you had in it, whether it’s a dollar or $1,000, is gone. With credit, all you would have to do is contact your bank and tell them the situation, and they will take care of it. You won’t be held liable for any unauthorized purchases made on the stolen card. Yes, it’s a pain to have to go through the whole procedure of reporting and replacing stolen credit cards, but it is better than not getting your money back. Credit is also much safer for merchants, as it means you will have less cash in your store or at your business, reducing your attractiveness to thieves.
Now for some cons:
Cost. Yes, accepting credit cards can seem kind of pricey. You will have to pay several fees, including merchant service fees, monthly statements, interchange and processing fees. Depending on your processor, there may be monthly sales minimums you must meet, or you will be charged with another fee. Plus, there are PCI compliance charges that you may have to pay. It’s best to talk with several merchant service providers, find out what each has to offer, then go with the one whose services and fees best fit your business and budget.
Chargebacks. A chargeback occurs when a customer disputes the amount of money you charged her, or if the customer is dissatisfied with your product or service. The card issuer – the bank – may debit your account for the disputed amount without warning, which can really mess with your bottom line. If a chargeback happens to you, it is best to deal with it right away, because if you get too many, you may find your processor will revoke your card acceptance privileges. In extreme cases, you could be blacklisted, making it difficult to find another processor to take on your business.
Liability. There has been a lot of talk about the EMV liability shift, which occurred on October 1, 2015. It essentially puts the onus on the merchant, if the merchant isn’t EMV compliant and the consumer is. If a customer has an EMV chip card and you do not have a POS terminal that accepts EMV cards, you are responsible if the card is fraudulent or stolen. The best way to protect yourself against liability is to get EMV compliant. If you haven’t upgraded your POS terminals to accept EMV cards, or if you have EMV terminals but the EMV part hasn’t been activated, do so now. You may save yourself a lot of headaches and lost revenue later.
In today’s commerce-driven world, accepting credit cards seems to be a no-brainer, but it is still a decision that must be made carefully. The pros and cons of card acceptance must be looked at from all angles, so you, as a merchant, can determine if it is right for your individual business. While there is some cost included in accepting credit cards, in most cases the benefits – which include more potential customers, higher purchase amounts, and merchant and customer convenience and safety – will far outweigh any potential drawbacks.