Why do some places not accept credit cards?

Ever wondered why some businesses proudly proclaim to be “cash only”? While this system works great for some small businesses, it may not be as financially strategic as it seems. When a business has the ability to accept any payment method, they can significantly boost their bottom line. Let’s discuss a few of the things you can do without that “cash only” sign weighing your business down:

Serve more people

Businesses with credit card acceptance enjoy a faster check out process that allows them to serve more people. Is it any wonder? Eliminating counting and making change—which is prone to error and made difficult by a national coin shortage—gives you more time during the day to increase your profit margins. Plus, not many people carry cash, so customers might have to leave your store after excitedly filling their baskets or browsing the menu, only to be faced with the fact that they can’t purchase anything after all.

Keep them coming back

Using a point of sale system that accepts digital payments and tracks your consumers’ purchases makes it easy to launch a rewards program. Business owners aren't the only ones feeling the pinch of inflation and economic stress. Savvy buyers are looking for programs that reward their loyalty with special coupons, rewards cards and discounts.

Going cashless can also give you valuable insight into consumers' overall buying behavior. Electronic and credit card transactions produce data that drives strategic decision making, giving you the information you need to order the right amounts of the right products. Cash-based businesses would have to pay for market research, costing extra time and money.

Stay out of the back-office

Your time is money—save it with accounting tools that do the work for you, keeping you from spending hours counting cash and balancing drawers. Many POS systems have a built-in accounts receivable (AR) tool, helping you increase on-time payments, automate time-consuming manual tasks and prevent costly data discrepancies.

Learn more about accounts receivable here.

Reduce your risk

Sadly, counterfeit cash is very real. In fact, there is an estimated $70 million of counterfeit bills in circulation, according to the United States Department of Treasury. With credit card processing, you can accept payments with peace of mind knowing end-to-end encryption, tokenization and secure EMV technology are working together to help protect card data and prevent fraud.

Problems with not accepting credit cards

While there may be viable reasons for a business to not accept credit card payments, there are also significant issues with this structure, especially when it comes to business opportunities and business operations. Some of the major problems for businesses and with limited payment options include:

• Reduction in transaction volume. With the decrease in cash transactions in the United States, a cash-only business runs the risk of having a lower volume of transactions over time. It also reduces the opportunity for high-value transactions, since accessing high levels of cash may be difficult, especially if your business does not have an ATM. If the business were to adopt credit cards, you could expand to other customer bases.
• Negative customer experience. Many types of cards are designed to provide perks for ongoing use. As such, customers are highly incentivized and motivated to use their credit cards as a mode of payment. When this is not an option, customers may not want to return to your place of business.
• Theft risk. Keeping money on hand is a huge theft risk for businesses. If thieves know that your business only accepts cash, your business will be more vulnerable to money theft. However, if you have a diversified approach to payment, you can be sure that some of your funds are more secure.

Why some businesses remain cash only

They are intimidated by fees

There can be several factors that go into a business’ decision to not accept credit cards. However, the most common reason is related to the  fees associated with payments via credit cards. When a payment is completed with a credit card, there are several types of credit card processing fees that can occur:

• Interchange fees are fees for the use of a card during a transaction and go toward the credit card issuer. These types of fees can also be considered swipe fees. These fees vary by provider and can be different for credit cards and debit cards.
• Assessment fees are extra charges on the total amount of sales made within each card network each month. Payment is made directly to credit card companies and financial institutions that service credit card carriers.
• Payment processor fees are included for additional payment processing services that the merchant may incur to pay for the technology to complete payment. There may also be an annual fee incurred for services as well.

It is worth noting that some businesses accept some card payments, but limit to certain major credit card carriers based on higher fees on certain card types. For example, some businesses may accept Visa® or Mastercard®, but not accept American Express® or Discover®.

Transaction fees and pricing packages can be intimidating, especially for small businesses. When cash is used as the primary use for payments, businesses often feel more secure knowing that what they see is what they get. However, this can be a false sense of security.

It is a misconception that businesses save money by going cash only. What they save through the absence of processing fees is quickly lost through fewer sales, smaller transaction amounts and greater security risk.

Lack of approval

Some businesses may not be approved for a merchant account due to the risk analysis completed by financial institutions. Your merchant category code (MCC) is assigned by the cardbrands and identifies the type of business you operate. If your code falls in the high risk category for chargebacks and fraud by a credit card company, it can be more difficult or impossible to get a merchant services account. Your business can also be denied due to the business’ debt, lack of credit history, low credit score or prior violations with card brand regulations like PCI compliance. If this is the case, the business may have no other choice than to run a cash-based business. Luckily, this is a very narrow category of businesses, and you will most likely be able to process credit cards without a hitch.

Don’t miss out

If you want to make a change to the forms of payments you accept, accepting credit cards could give your business a big boost. Cash-only is a relic of the past, but cashless businesses are on the rise and could be the best choice for the future. Don’t miss out on the benefits, start accepting credit cards today. We can help.

Global Payments Inc. (NYSE: GPN) is a leading payments technology company delivering innovative software and services to our customers globally. Our technologies, services and team member expertise allow us to provide a broad range of solutions that enable our customers to operate their businesses more efficiently across a variety of channels around the world.

EMV is a registered trademark or trademark of EMVCo LLC in the United States and other countries. www.emvco.com.

OpenEdge Payments LLC is a registered ISO of Wells Fargo Bank, N.A., Concord, CA and BMO Harris Bank NA.