Accepting credit cards has become a common practice for businesses of all sizes. While cash and checks were once the primary forms of payment, credit cards have quickly become a preferred method for customers. You can read more here about the declining use of cash and checks. In this article, we’ll explore the benefits and challenges of businesses accepting credit cards as a form of payment.
The credit card processing industry has experienced significant growth in recent years, driven by the increasing popularity of credit cards as a payment method. According to a report by Allied Market Research, the global credit card processing market was valued at $32.16 billion in 2020 and is projected to reach $94.76 billion by 2027, growing at a CAGR of 13.3% from 2020 to 2027. This means more consumers are using credit cards that is enticing more merchants to start accepting credit cards.
Benefits of accepting credit cards
Let’s get straight to the point and cover how accepting credit cards can offer several benefits for your business:
Increased sales: By accepting credit cards, you can open up new avenues for customers to make purchases from your business. Many customers prefer to use credit cards for purchases, and if you don’t accept them, you may be turning away potential sales.
Convenience for customers: Credit cards are a convenient payment option for customers, as they don’t have to carry cash or write a check. This can lead to increased customer satisfaction and loyalty.
Improved cash flow: When customers pay with credit cards, the payment is processed quickly, and the funds are deposited into your business account within a few days. This can improve your cash flow and make it easier for you to manage your finances.
Reduced risk of fraud: Credit cards offer more security than cash or checks, as they are protected by fraud prevention measures such as encryption, fraud monitoring, and chargeback protection. This can reduce the risk of fraudulent transactions and chargebacks for your business. Read more on how merchants can reduce fraud.
Competitive advantage: Accepting credit cards can give your business a competitive advantage over other businesses that don’t accept credit cards. It can also make your business appear more professional and legitimate to customers.
Drawbacks of merchants accepting credit cards
While there are many benefits to accepting credit cards, there are also some potential drawbacks to consider. Overall, the largest drawback is fees. For some low margin businesses, the 2% to 3% is a significant percentage of their profit.
There is a cost: Credit card processing fees can eat into your profit margins, as payment processors typically charge a percentage of each transaction, as well as other fees such as monthly minimums and chargeback fees. You’ll need to weigh the cost of accepting credit cards against the potential benefits. This is one reason why it is critical to use a top payment processor with low fees like Clearly Payments.
Chargebacks happen: Customers can dispute credit card transactions, which can result in chargebacks, where the payment processor refunds the customer’s money and deducts it from your account. Chargebacks can be time-consuming and costly, and may require you to provide evidence that the transaction was legitimate.
Potential for fraud: Credit card fraud is a risk for businesses that accept credit cards, and can result in chargebacks, financial losses, and damage to your reputation. You’ll need to take steps to protect your business, such as using fraud prevention tools and being vigilant about suspicious transactions.
There is some training required: Accepting credit cards requires specialized equipment and training for you and your staff. You’ll need to invest in payment terminals, software, and training to ensure that you can process transactions efficiently and securely.
Summary of businesses accepting credit cards
While there are certainly challenges associated with accepting credit cards, the benefits generally outweigh the risks for most businesses. Accepting credit cards can improve your cash flow, increase sales, and give your business a competitive advantage. However, you’ll need to carefully consider the costs and risks before deciding to accept credit cards, and take steps to protect your business from fraud and data breaches. Additionally, work with a good payment processor like Clearly Payments. With the right tools and strategies, accepting credit cards can be a great way to grow your business and meet the needs of your customers.