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

Pros of accepting credit cards only

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. 

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• 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.

Cons of accepting credit cards only

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 customers 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’s 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 percent to 4 percent 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. 

What to consider before going cashless

Although going cashless may be a good idea for some businesses, for others it can cause real problems. Consider the following before converting to a cashless model.

Do your customers have a credit card?

Currently, 82 percent 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 recent study by the Federal Reserve, credit card use varies by race and ethnicity. This is the percentage of the ethnicities it studied that have a credit card:

• 92 percent of Asian Americans 
• 87 percent of white Americans 
• 73 percent of Hispanic Americans 
• 71 percent of Black Americans 
• 69 percent of Americans with a disability

Also, Bankrate found that 82 percent of LGBTQ individuals have a credit card in their name. Credit card use is low among lower-income Americans as well as undocumented immigrants.

Consumers age 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 age 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 age 55 to 64.

Over one-third (36 percent) of consumers with an income of less than $25,000 prefer cash, and this percentage goes down as income goes up, according to the Federal Reserve Bank of San Francisco (FRBSF).

How much is your average ticket? 

Customers prefer to use cash for small purchases. For purchases under $10, the FRBSF found that 49 percent of Americans opt for cash payments. For items under $25, cash is also the go-to, with 42 percent using it. So, if your average ticket order is $20 or less, you will likely lose business if you stop accepting cash.

Are you willing to pay processing fees on 100 percent of your revenue?

If you revert to a card and digital wallet only payment system, you should understand that you will pay processing fees on all of your sales revenue. When some of your customers use cash or checks, you don’t pay those fees on that portion of your sales. Accepting cash will reduce the amount you pay to your payment processor and allow you to put more money in your pocket, something that is often important in a low-margin industry like restaurants.

How important is security to your business? 

If your business has experienced frequent theft of cash or been robbed en route to the bank, it may be worth it to shift to a cashless business model. 

Do you have long wait times to pay? 

If customers have to wait too long to make a purchase, some of them are likely to leave and others will have a negative customer experience. Accepting cash and making change takes time (and is prone to errors), so you might want to speed checkout lines by becoming cashless.

Which states have cashless bans in effect?

Some states prohibit businesses from only accepting cards as a form of payment. The rationale is that not everyone can qualify for a credit card and some people do not have a bank account and thus cannot get a debit card. Here are the states and cities that currently have cashless bans:

• Colorado
• Connecticut
• Massachusetts
• New Jersey
• New York
• Rhode Island
• District of Columbia
• New York City 
• Philadelphia
• San Francisco

Should your restaurant accept credit cards only? 

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.