Advantages and Disadvantages Of Businesses Accepting Credit Cards

What are the pros and cons of businesses accepting credit cards as a form of payment?

What are the advantages of businesses accepting credit cards?

There are many advantages of businesses accepting credit cards from their customers. Below are some of the reasons businesses should accept credit card payments.

  • Increased amount of potential customers: Businesses who accept credit cards increase the available buying pool of customers that use credit cards as a form of payment. Accepting credit cards opens up businesses to millions of potential customers.
  • Travelers and Tourists typically use credit cards: Travelers often use credit cards because they do not want to carry large sums of cash with them. This brings the most value to the types of businesses that travelers shop at. Such as retail shops, restaurants and tourist destinations. These types of businesses could lose out on sales by not accepting credit cards.
  • Some customers simply don’t carry cash: Carrying cash is not feasible for many customers. They prefer to use a credit card and never carry cash on them.

Disadvantages of businesses accepting credit cards.

Below are Some of the possible disadvantages of businesses accepting credit cards as a form of payment. taking credit cards is listed underneath. 

  • Processing Fees to Accept Credit Card: The number one disadvantage of businesses accepting credit for payment is that the business has to pay processing fees to accept credit cards. Unless they pass on the fee to the customer in the form of a surcharge. If they are passing on the fees they need to make sure they are implementing a compliant surcharging solution.
  • Lower Profit Margins: Businesses with low-profit margins cannot afford to accept a credit card because it has such a huge negative effect on the business’s bottom line. Example: a wholesale business tend to have higher transaction amounts and lower profit margins. Some wholesale businesses have profit margins of around 10%. This means that if the wholesale business sells $100,000 worth of goods they profit $10,000 dollars. So if they were to take credit card they would be paying 2.5% to 3.5% in fees on the transaction. This means that the wholesale business would pay between $2,500 to $3,500 in fees. By taking a credit card their profit goes from $10,000 down to $6,500. In this case, the credit card transaction takes off 35% of its profit.
  • Customers paying without credit card are at disadvantage: When a business builds in the cost of credit card to the price they are putting the people who don’t pay with a credit card at a disadvantage. This is because the people who pay with credit cards get an additional 30 days to pay and also receive points and rewards for using their credit card.

What a business should consider when deciding to accept credit cards?

Business owners have to make a decision whether or not to accept credit cards. It is easier for startup businesses to decide whether or not to take credit cards because it is not changing their process. If a business is already established and not taking cards they need to analyze how credit cards are going to affect their bottom line. They may need to readjust their price structure to make sure it covers the increase in fees the business will face. If a business is not accepting credit cards and decides to they can also look into implementing a surcharging solution. This allows them to pass on the fees to the customer while staying 100% compliant.

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