Revenue keeps a business afloat. Unless a small business is able to accept payments for goods and services, then the business is simply not going to maintain the necessary cash flow required for solvency. Turning away customers who cannot pay in cash is a bad idea. Accepting checks as payment is always a risk. Mercifully, the long and storied history of using credit cards for purchases remains an option. New small business owners may wonder if setting up a credit card merchant account is a wise plan. In truth, there are pros and cons associated with accepting credit cards. Thoughtful minds eventually realize the pros absolutely outweigh the cons.
The Major Benefits to Accepting Credit Cards
The primary benefits associated with accepting credit card payments are fairly obvious. All are connected to the aforementioned point that credit cards increase the odds of boosting revenue. How do credit cards boost revenue? There are a few ways:
The Customer Base is Widened
A certain segment of customers simply does not like to pay in cash. Many do not even like to carry cash on them. Such consumers could be dubbed “credit card exclusive buyers”. A shop that accepts credit cards surely can tap into these buyers. Stores that don’t accept credit cards cede these buyers to others.
Ability to Spend More
Cash on hand may be far more limited than the available credit line a person has on a credit card account. As a result, the buyer is able to spend via using the credit card. He or she may be very willing to spend more than would ever be possible when paying solely in cash. The more the customers are spending, the more revenue a store is receiving. To repeat, stores really do need consistent revenue streams in order to thrive and survive.
Numerous credit cards are backed with tons of consumer protections. The competition in the credit card industry has led to many different banks and financial institutions putting together rewards programs, travel miles, and other added features on accounts. Protections against fraud or “lemon purchases” are popular perks as well. Buyers may be more inclined to purchase when knowing the credit card company might refund a bad deal.
Drawbacks Do Exist
Not all is perfect with credit card acceptance, though. A few drawbacks do exist and they are worth noting.
Merchants are stuck with having to pay the fees on the transaction. Everything from processing fees to monthly statements come with a cost. While the expenses are not excessive, such costs do detract from the profit margin of a business.
Chargebacks on Disputes
Remember the aforementioned point about customers being able to get refunds on purchases through their credit card? The credit card issuer is not the one who ultimately takes the loss on the transaction. A chargeback ends up being issued and that means money is taken right from the merchant’s account. The small business owners ends up with a loss when a transaction turns out this way.
Credit card fraud is, sadly, a common problem all throughout the globe. Criminals compromise and use other people’s credit card accounts at an alarming rate. The credit card holder has the option of filing a fraud complaint with his or her credit card company. Things might not work out so easily for a small business owner.
Credit card companies may not pay merchants who are the victim of someone using a stolen credit card to make purchases. Even when the merchant has absolutely nothing to do with the fraud, a credit card company could simply refuse to compensate the merchant. Chargebacks ensue.
Merchants Have Little Choice
Small business owners are likely to look at both the positives and negatives of accepting credit cards and come up with one logical conclusion. Not accepting credit cards would be a big mistake for a business. Small businesses do not want to direct any customers away. Not accepting credit cards could lead to this exact situation. Even with the risk of certain costs, accepting credit cards is a must.