Time to Ditch Cash? Why Credit Card Only Might Make Sense

Most of your customers prefer paying by card, but does it make sense for your restaurant to accept card payments only? There are several advantages to moving your restaurant to a cashless system. It can save you time, increase your restaurant’s security and improve the accuracy of your accounting. Research shows that credit and debit cards account for the most commonly used payment instrument. In 2019, 54% of consumers made purchases with a credit or debit card, compared with just 26% who used cash, according to the Federal Reserve.

For restaurants, the need to accept digital payments has increased during the COVID-19 pandemic. Research has shown an increasing number of diners using digital systems to place orders. To ease the process of accepting these orders, being able to pay by credit or debit card is critical. 

Pros of going cashless

Now is a good time to evaluate whether the cashless movement makes sense for your restaurant. Consider these points:

• It can save you time. A cashless system allows you to eliminate cash management tasks from your daily to-do list. For example, you wouldn’t have to count the cash in the till at the beginning and end of each shift. When accepting payments, you wouldn’t have to count the cash you receive and the change you give back, as all you’d require is a receipt signature. You also wouldn’t have to regularly visit the bank to order small denominations. 
  
  
  
  
• It can make checkout faster. The checkout process is expedited during cashless transactions. There’s no exchange of bills, which eliminates the need to count out change to the customer. If you have a long checkout line, customers will appreciate how quickly the line moves.
  
  
  
  
• It reduces theft and increases security. If you don’t keep cash on hand at your restaurant, you don’t have to worry about securing cash drawers and a safe. It discourages employees from skimming off the cash register and criminals from robbing your restaurant, because there’s no money to steal – a significant benefit if your business is located in a high-crime area or keeps late hours. It also eliminates the need to go to the bank after hours to make deposits. There is also a lower risk of money laundering because when you go cashless, there is always a way to track transactions.
  
  
  
  
• It makes foreign exchange easier. When you go cashless, there is no reason to worry about currency exchanges. International customers can easily complete their transactions without having to exchange their currency beforehand.
  
  
  
  
• It improves accounting accuracy. When you accept card payments only, you don’t have to deal with cash shortages. All tips are recorded, so you don’t have to worry about unreported tips and potential audits come tax time.

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Cons of going cashless

Although the advantages to a cashless system are attractive, carefully consider the other side of the argument before deciding that card-only payment is right for your restaurant.

• You’ll risk turning away customers who prefer cash. Consumers are accustomed to choosing which payment method they use, and many prefer to use cash for smaller purchases such as food. Before refusing to accept cash payments, carefully think about your customer base and determine whether it’s a move that will work for them. Will your cash customers be willing to pay with a card, or will they take their business elsewhere? Analyze your books and develop a good understanding of what percentage of your clientele you risk losing if you move to cashless payments only.
  
  
  
  
• Rejecting cash payments is illegal in some states. In certain states (see list below), it’s illegal to require your customers to purchase on credit. Before moving to a cashless system, check your state laws to ensure it’s legal.
  
  
  
  
• Card payments are more expensive to accept than cash. When your margins are tight and your average sales tickets are small, you may prefer it when your customers pay cash, because you get to keep the 2% to 4% of each sale that you would otherwise pay the credit card processing company.
  
  
  
  
• It could alienate your customer base. Think about your clients before deciding to go cashless. If you serve certain populations that mainly use cash as currency, then you may hurt your brand. Elderly or low-income families tend to have fewer payment options to use and may turn away from your company if you stop accepting cash. 

Which states have cashless bans in effect?

• Massachusetts
• New Jersey
• Rhode Island
• New York City 
• Philadelphia
• San Francisco

What to consider before going cashless

Do your customers have a credit card?

Currently, 79% of Americans have at least one credit card, but there are disparities among different groups by race, age and income. Before going cashless, consider who your customers are and if they have credit cards. 

According to a study done by the Federal Reserve in 2020, credit card use varies by race and ethnicity. This is the percentage of the ethnicities it studied that have a credit card:

• 92% of Asian Americans 
• 87% of white Americans 
• 76% of Hispanic Americans 
• 75% of Native Americans 
• 72% of Black Americans 

Also, LGBTQ individuals are less likely to have a credit card: 82% of LGBTQ Americans have a credit card, as do 75% of LGBTQ adults between the ages of 25 and 34. Credit card use is low among lower-income Americans as well as undocumented immigrants.

Consumers aged 18 to 24 have the highest preference for cash as a method of payment compared to other age groups. However, they also use debit cards and cashless payment options like Apple Pay and Google Pay, which can be processed with credit card readers. Customers aged 65 and older, on the other hand, are the least likely to prefer cash and most likely to use a credit card, followed by consumers ages 55 to 64.

Over half (55%) of consumers with incomes of less than $25,000 prefer cash, and this percentage goes down as income goes up.

How much is your average ticket? 

Customers prefer to use cash for small purchases. For purchases under $10, 45% of Americans prefer to use cash. The average amount of cash transactions is $21, compared to $44 for debit cards. So, if your average ticket order is $20 or less, you will likely lose business if you stop accepting cash.

Even though more customers prefer credit and debit cards as their payment method, whether moving your restaurant to a cashless system is a good idea depends largely on the preferences of your customers. While some restaurant owners may enjoy the convenience of a cashless system, others may decide that catering to their customers’ preference to use cash outweighs the cashless benefits. Some restaurant owners may even choose to pursue a cash-only business model. For many restaurants and their customers, it’s still too early to declare cash obsolete.