Should Your Small Business Accept Credit Cards?

Many small business owners agonize over whether to accept credit card payments. Some say it’s too expensive — that the cost of processing fees and the extra liability just aren’t worth it. Others argue that the added convenience to their customers makes the expense and potential hassle of accepting card payments pay off.

But, should your small business accept credit cards? These days, it’s easier than ever to take card payments; many payment processing providers offer mobile solutions that are perfect for all entrepreneurs, whether they’re selling from a traditional retail outlet, venturing out to farmers markets, working from clients’ homes or even out of cars.

Accepting credit cards

As more and more American consumers eschew cash in favor of credit and debit cards, more small business owners are making their peace with accepting card payments. Here’s what you need to know to make an informed decision.

Card Payments Aren’t the Future — They’re the Present

It used to be pretty easy for most small business owners to go cash only, but that’s no longer the case because many Americans no longer carry cash at all. A recent study sponsored by Capital One found that 25 percent of Americans don’t carry cash anymore, and 33 percent of millennials no longer bother with paper money. In fact, 41 percent of study respondents aged 18 to 35 called paying with cash “inconvenient.” Among those who do carry cash, most said they only have about $25 on them at any given time.

That’s bad news if you’re running a cash-only business that counts on impulse purchases because many of your customers won’t be able to pony up much to fund spur-of-the-moment purchasing decisions. Younger consumers have a point when they say carrying cash is inconvenient; not only do consumers have to go to a bank branch or ATM to obtain cash, but carrying it is a security risk because it doesn’t offer any protection against theft or fraudulent purchases, like credit cards do.

Accepting large amounts of cash payments poses a risk to your business, too. When you deal only in cash, you end up having a lot of it on the premises. That could make you an attractive target for thieves, especially when you’re transporting cash to and from the bank to make deposits or get change. Plus, cash has to be counted and sorted every day, and the more of it you have, the more time you’re going to spend counting and sorting.

Pros of Accepting Card Payments

Setting up your business to accept credit and debit card payments makes things easier and safer for both you and your customers. It can also boost sales. People spend more when they spend using credit cards; psychologists think it’s because spending cash creates a tangible feeling of loss while spending on a credit or debit card doesn’t leave you stuffing fewer dollar bills back into your considerably slimmer wallet. When you accept multiple payment methods, you won’t be limiting your customers to spending the $25 they have in cash. In 2017, 66 percent of point-of-sale transactions took place using credit or debit cards; if you’re not accepting plastic, you’re missing out on your slice of that pie.

Cons of Accepting Card Payments

Of course, the biggest drawback of accepting card payments for most small business owners is the fees. Payment processing providers charge statement fees, setup fees, per-transaction interchange fees, monthly minimum fees, monthly gateway access fees and sometimes even early termination fees. Many small business owners offset these fees with minimum amounts for credit card transactions. However, you can find a payment processing provider that charges minimal fees because costs can vary widely, especially when you factor in the costs of equipment.

Charge backs are also a concern once you start accepting cards. Charge backs occur when customers aren’t happy with a product or service, or when a charge is fraudulent, and dispute the charge. You’ll need to boost security to keep up.

Using a payment processing

Choosing a Payment Processing Company

When choosing a payment processing company, don’t just go with the first company you find. Shop around. Call each company that interests you and speak to a human being about fees, contracts and other aspects of doing business with that company. The ease with which you’re able to get someone on the phone, and their willingness to help, will reflect the kind of customer service you can expect if you have a problem or need help.

You can expect to pay two to three percent of each card transaction in interchange fees, and you might also need to pay monthly minimum fees, monthly gateway access fees and PCI compliance fees. Fees you can probably avoid include application fees and early termination fees. Avoid leasing credit card readers and other equipment; it’ll be cheaper in the long run to buy them outright, especially if you’re getting a mobile card reader that plugs into a tablet or smart phone.

If you’re looking for a way to boost sales in your small business, accepting credit cards might be the way forward. Accepting multiple payment methods gives customers the flexibility and convenience they need to make impulse buys as well as the security to feel good about supporting your business. Don’t let the drawbacks scare you away from accepting credit cards — the benefits will far outweigh them.