What are the pros and cons of accepting credit cards as a small business?
I am a relatively small business (I work full time M-F and have a small business I run nights and weekends). Not sure if it would be beneficial for me to begin accepting CC as a form of payment. I have always accepted cash and checks with no problems at all... yet.
Pros: You get money sooner, and it's more convenient.
Cons: The fees.
Pros of Credit Card Payments:
MasterCard & Visa credit cards are quickly becoming the most popular means of customer payment. This is due to a number of reasons, among which include the fact that businesses can easily set themselves up to accept them.
Convenience is the major factor for why consumers use credit cards. It's less convenient to have to stop at an ATM and take out money for a purchase. It's also very convenient to have a credit card handy for impulse purchases, which are much more likely to happen on credit than cash. The forced opportunity to think about the purchase price and the purchase itself during the time it takes to get cash drastically decreases probability of a sale. These individuals have to: leave the purchase point, travel to the bank or home where cash is kept, obtain the right amount and travel back to the store. That means that many who leave the store to "get cash" are not coming back for their purchase. Offering the ability to pay for a credit card will improve sales noticeably in almost every situation.
Cons of Credit Card Payments:
Credit card fraud is a concern for some who are considering various forms of payment. Though there are plenty of laws inhibiting those who would engage in fraudulent behavior, credit cards are still more likely to be "stolen" in comparison to cash. It is important to consider your company's ability to protect your customers and the security of their personal financial information when accepting credit cards as payment.
The other reason businesses might prefer to remain cash only is because every transaction processed using a credit card comes with a small fee. Some businesses find themselves refusing to offer the chance to pay with a credit card simply on principle. Others feel that due to their specific niche, product, etc. the fees add up and aren't worth it in comparison to total sales. In most cases, the increase in sales more than makes up for the minimal fees associated with credit card payment processing, but each business should consider the associated fees of their chosen provider in association with their average sale prices, etc.
Businesses considering adding the option for credit card payment to their company's repertoire should consider the costs of setup as well as any fees associate with credit processing services. Additionally, depending on the method of bookkeeping, business owners might find that adding credit cards as a payment option leaves them with a hassle when they attempt to maintain the business accounts.
If nothing else, it will cost a little bit of money to start accepting MasterCard & Visa credit card payments. However, this can be a necessary expense for your small business in exchange for the convenience and likelihood of impulse purchases. The popularity of credit cards as a means of payment has changed the name of the game for business owners. The ability to pay using a credit card is no longer a handy convenience or luxury. It's now something that consumers expect. If consumers aren't offered the option to pay with a credit card, many will find somewhere else to spend their money.
Credit cards are more convenient for customers and people will tend to purchase more if they have access to more of their money versus cash on hand.
The downside are the processing fee's and the potential for charge backs, also known for forced return of their funds if they disagree with your product or service invoice or work. Those are usually few and far between as long as your business fulfills its promises.
Hi Tamara, In a previous life i oversaw as part of my finance role the credit card business to merchants.
You will have to find a "merchant acquirer", next time you are paying debit or cc look at whose name is on the terminal. Such as "Moneris" or "Chase"
Depending on the size of your business you may have to pay a monthly fee, and face a "holdback", for a period of time on receipts you process.
In addition, you will have to pay fees of up to around 3% on transactions.
Upside: Its convenient for your customers, people get points (hence the high % transaction).
It really depends on what kind of business you are in, and what makes sense for your customers (is it a pain point for them, not being able to pay by debit or CC?)
Rob Szold, CFA
Thank you, I have just been looking for information about this topic for ages and yours is the
best I’ve found out so far. But, what concerning the bottom line?
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Pros - it is an expected and essential payment method when selling online.
Cons - charge-backs are they main pitfall, but risk can be minimised with the right payment gateway and your own vigorous procedures.
Are you and your payment processor ready to comply with PCI DSS v3.1 requirements? If the phrase "PCI DSS v3.1 compliance" isn't something your or your payment vendor understand then you are not ready.
Don't Sweat the Small Stuff - accept credit cards. Nowadays, is not only what you prefer or what you considerbest, but what can you do to ease your clients payment processing, how can you charge right away, how not to make them think twice. Engage, offer, and cashinggggg. Accept credit card on websites and mobiles right away.
Thanks all for your thoughtful replies!!!
I am really a very small business, and so far cash and checks have not been a problem. I think I"ll wait until I hit it big to ramp up to credit cards. I've only had one or two people ask me if I took cc's.
No cons Tamara. People are used to paying with credit cards for everything, even items as small as a cup of coffee at Starbucks. The 3% or so you pay in fees saves your clients the hassle of writing a check of having to pay with cash -- if it makes it easy for them, it's good for your business.