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8 Reasons the Cash-Only Model Doesn't Work for Small Businesses

By Market Expert, writer
Jun 17, 2014
Image Credit: Utah778 / Getty Images
> Business Basics

A surprising number of small businesses operate on a cash-only basis -in fact, a full 55% don't accept credit cards (Tweet This Stat!). And 8 out of 10 businesses fail. Is there a correlation? You bet.

Many small businesses pride themselves on operating as cash-only, thinking it ties them to the past ("we've always accepted cash only and done just fine."). But those same businesses often struggle to make ends meet. It's not a coincidence. What worked in the past doesn't necessarily still work in an era where technology has all but obliterated cash from the transaction equation.

Here are eight reasons why cash-only isn't the best formula for future growth.

1. You Limit Your Sales Potential

Beth owns a boutique, and every day shoppers fill her store. But time and again, when they get to the cash register and see her "cash only"sign, they sigh, put their items back, and walk out of the store. She's missing out on serious sales opportunities.

According to Bankrate, 9% of people don't carry cash on them at all (Tweet This!). And of those that do, 40% carry $20 or less. That's a lot of people who can't buy from you if you refuse to accept credit cards.

Related:[Infographic] Why SMBs Should Accept Credit Cards

2. You Seem Old-Fashioned

Face it: we live in an era where technology talks. If you're still using a hand-cranked cash register and only accepting cash, your customers will leave you in the dust, with the rest of your antiques.

Joes Coffee prided itself on being cash-only for years. It was part of its charm. But then the coffee shop started seeing negative reviews on Yelp, with comments about the fact that they didn't accept credit cards. The brand changed its tune, accepted cards, and their Yelp review "skyrocketed".

3. Your Average Transaction is Lower

Research shows that the average spend per transaction is 120% higher when customers pay with credit card compared to cash (Tweet This!). If your customers are limited to a purchase equal to what they have in their wallets, they won't buy as much from you. If you want larger transactions, you have to open up your payment options.

4. Each Transaction Takes Longer

If you've ever had to wait for a little old lady to count out pennies at your checkout, you can understand the frustration of the other customers waiting in line. Credit cards are fast! With just a swipe, they're done.

5. Cash is So Last Year

Trying to stay en vogue? Cash won't do it for you. In fact, cash transactions are expected to drop to 23% by 2017, while credit card transactions are expected to rise to 33% of all transactions (Tweet This!).

Remember that cautionary tale of Joes Coffee: not accepting credit cards goes beyond curbing your sales. Your brand's reputation is on the line as well. And with online review sites, word of mouth can smear an ugly campaign before you even wake up in the morning.

 Related:The Retailer's Guide to Processing Payments

6. Checks Take Too Long

If you're in a services industry and wait around for your clients to mail you a check for payment, you'll be waiting a lot longer than you would if you accepted credit cards online. Customers like payments they can make with a few easy clicks of their mouse.

7. Cash Doesn't Protect Your Customers

There's assurance when customers use cards: after all, there is consumer protection built into most debit or credit cards. Having trust in the transaction means people are more willing to spend with you. Cash doesn't give that comfort.

8. Cash Doesn't Offer Loyalty Points

For many consumers, those reward points credit cards offer are reason enough to make major purchases using a credit card. But no matter what kind of promotion you're offering, you can't compete with the cash back that credit cards provide, and so those customers go elsewhere to be rewarded.

Related:5 Things You Need to Know About Credit Card Processing

If you're truly looking to grow your business, you'll have trouble doing so if you operate as cash-only. Credit card processing boosts your bottom line, and the additional revenue more than pays for the cost to upgrade.

Author Bio: Jaimie Yun has more than 15 years experience across financial sectors of public accounting, corporate finance and more. She is on the advisory board of, a credit card processing marketplace that allows businesses to compare multiple credit card processing rates and get the best offer while remaining anonymous to processors. Connect with Jaimie on Google+ and follow PayDemand on Twitter.


Best Small Business Credit Card Processor - Helcim



Best Processing Terms - Flagship

When you're looking for a credit card processing service, one feature you should insist on is a contract with month-to-month terms.



Best Processing Rates - Fattmerchant

Looking for a solution for low card processing rates? Consider Fattmerchant to save the most per transaction.




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