2 Reasons Every Business Should Accept Credit Cards

This post may seem a little out of date in 2015, but I am always amazed by the fact that many small business owners still do not accept credit cards or they feel taken advantage of by the system itself.  In other words, many small business owners wish that everyone still used cash so they would not have to pay fees to accept these other forms of payment.  This idea is completely backwards and as a payment processing sales professional, you need to understand what you really bring to the table.

I make it a habit to read at least one article per day from “Digital Transactions Magazine” online and today I read an article about Costco.  For over 30 years, Costco accepted only cash and checks in the food court.  The registers accepted a variety of payment forms, but not the food court.  Management was skeptical about adding other forms of payment because of the costs associated with accepting them.  They started with a test at a few stores in Phoenix.  This test went so well that they rolled it out to all 420 stores very shortly following the test.

Here are the numbers that Costco executives shared at a recent payments convention.  The average ticket size at the food courts increased by 40% for check card purchases and 50% for credit card purchases.  Customers have also expressed appreciation for adding this convenience so that when they are not carrying cash they can still grab a quick bite to eat in the Costco’s food court after shopping.  This story perfectly illustrates the two reasons that every business should accept credit cards.

#1 – Increased Revenues.  There is absolutely no doubt that if a store accepting only cash payments begins accepting credit cards that their revenue will increase.  This is an indisputable fact from the data.  Here is how you can help your prospective client see these numbers and how they effect their business.  Ask them to help you do some simple math.  If they only accept cash, take their total revenue and multiply it by 40%, this is roughly the amount of their current revenue that would shift from cash purchases to credit card processing.

Let’s use an example of a business currently accepting $20,000 in total cash purchases per month.  If they started accepting credit cards, the odds are that after 3 months, their cash purchases would decrease to $14,000 with $6,000 moving to credit card processing volume.  But that is not the end of the story!  This $6,000 in current revenue would increase by a minimum of 30% and usually around 50% (you can use the Costco story as an example).  So, the same group of customers that spent $6,000 in cash, would have spent $7,800 if they could have used their check or credit card.

So, this example business that was processing $20,000 in cash and check, is now processing $14,000 in cash and check and $7,800 in credit card.  This means they increased their total revenues by $1,800 per month or 9% top line revenue growth.  They will probably end up paying around 3% of the $7,800 in fees to a processor which equals $234.

If you have a merchant that does not accept credit cards, walk them through this math and ask this final, obvious question.  “If you could increase your revenues by 10% within 3 months, would it be worth paying a few hundred dollars per month to a credit card processor?”

#2 – Increased Loyalty.  This is a much more difficult effect to quantify but it is just as real.  Most business owners who don’t accept credit cards argue that they are not losing business because they have a cash machine in their store or a bank around the corner.  This idea lacks a fundamental, common sense understand of consumer behavior in 2015.  Although consumers are not telling you that you should accept cards or complaining in your store, that doesn’t mean it isn’t a problem, it simply means they are not stopping by at all.

A business that doesn’t accept cards has a reputation for not accepting cards and this reputation spreads like wildfire!  Think about your own experience.  You probably have an ice cream shop or convenience store in your community that doesn’t accept cards.  How many times have you told a friend something like, “You would probably love their ice cream, but don’t forget they only take cash.”  This last part is an important piece of information and will keep many consumers from stopping at your place of business.  If you have a barrier to purchase in place, new customers will not be willing to jump over the hurdle and try what you have to offer and existing customers will decide to go elsewhere when they don’t have cash on hand.

The question is this.  Do you really want to put up any behavioral barriers for a first time customer?  And secondly, “Do you really want your loyal customers visiting the competition at all?”  I believe from my experience that most businesses who are accepting only cash will see a 15% increase in top line revenue during the first 6 months of accepting credit cards.  It takes a lot of time and money to get a marketing plan in place that will increase your top line revenues by 15% and it would certainly cost a lot more than paying a tiny percentage of this new revenue in credit card processing fees.

Hopefully you are now armed and prepared to face those business owners that don’t fully understand the value that you bring to the table!

James Shepherd

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