Whether you are operating a brick-and-mortar store, restaurant, salon or any other physical business, or running an E-commerce business, providing a smooth payment method is the need of the hour. Small business accept credit cards to facilitate easy payment options and faster checkout times. These services though seem to be non-core aspects of your business, can become a game-changer when it comes to delivering a great customer experience.
With so many payment methods available, you could get overwhelmed when deciding the type of payments to offer to your customers. This results in many small business owners sticking to the conventional cash-only business model. While this may seem convincing, given the fact that there is less paperwork, processing fees, electronic hardware, etc. that you have to deal with, your business could face a major setback – lose out on customers!
Credit card has become the preferred payment mode for millions with 40% of Americans likely to use a credit card to make a purchase. Not accepting cards can result in your business incurring lower sales and lower your average transaction size. While credit card users have been increasing over the past years, business card acceptance is lagging. The various benefits like faster checkout times, deferred payment options, reward points and other similar benefits that credit card providers offer consumers are what makes this payment mode popular.
If you are a small business owner or entrepreneur but have still not started accepting credit card payments, here are reasons why you should start soon.
1. Digital Payments are Rising
Owing to various financial and logistic benefits, customers are gradually making a transition to cashless payment methods. Globally the use of digital payment methods like credit cards is increasing. Visa the largest of the credit card providers in the U.S. had a transaction volume of $1.96 trillion for the year ending September 30, 2020. Now, this is more than the GDP of many countries!
One research by Shift shows that people carry less than $40 in cash. On the contrary, the average value of a card purchase is $112, almost 3 times the amount of cash a person carries. In fact, the average credit card debt in 2020 was $5,525 in the United States. Furthermore, there are 1.06 billion credit cards in use in the United States with 70% of people having at least 1 credit card. These statistics highlight the increasing trend in the usage of digital payment methods like credit cards.
2. Authenticates Your Business
Small businesses that accept credit cards can display the logos of credit card providers at their stores or websites. When customers see the logos of companies like Visa, Mastercard, American Express, etc. on your cash counter or online payment portal, they will trust your business. These credit card providers are recognized globally and will immediately capture your customers’ attention. Displaying their logos will make customers feel they are transacting with a genuine business and they will also be satisfied with the security of their transactions. This will make them more likely to purchase from you.
Accepting credit card payments can also help tourists make purchases from you. Tourists generally use digital payment methods like credit or debit cards to make purchases. Allowing credit card payments at your store will help you build credibility with tourists and also in the market.
3. Stay ahead of Competition
You can lose sales if your competitors are accepting credit cards but you are not. Customers will be motivated to purchase at your competitor’s store because of the availability of fast and convenient payment options. In a highly competitive environment, this could significantly your earnings in the long run. This makes it extremely important to accept credit and match your competitors.
4. Increase Sales
Cash-only businesses are limited by the payment options they provide to customers. This could result in you losing hundreds of customers every year. Imagine a customer walking into say a grocery store and putting all the items he wants to buy in a basket and walking up to the cash counter. He takes out his credit card to make a payment but is informed that the grocery store doesn’t accept credit cards. What will the customer do?
Walk away because he is obviously not carrying cash. They are also unlikely to visit an ATM to withdraw cash. This could happen with any small business owner having a restaurant, store, or salon. Ultimately you will have fewer customers and incur lower sales.
You might be thinking losing a few customers will not have a major impact on your sales but you could be wrong. For instance, if on the conservative side, you get only 3 customers a week who want to purchase by swiping their credit card. If we take the average purchase size to be $25 it means you are losing out $300 every month! Now that is a lot of money for a small business. You can eliminate this loss by accepting credit card payments. Accepting credit cards will ensure no customers has to walk away from your store because you don’t accept credit cards. This will also increase your customer base and boost sales.
5. Customers Make Larger Purchases
A credit card is a type of debt instrument that allows consumers to make credit purchases. From the customer’s point of you, this means they can make purchases now and pay later to their credit card provider. This allows them to make larger purchases over what they would make when paying through cash. Ian Zimmerman, an experimental psychologist who studies consumer behavior says, “With credit cards, because you don’t pay for something the moment you buy it, it’s less psychologically painful to spend your future money than your present money. ”
For example, think about an average salaried American who receives his paycheck on the 7th of every month. If he happens to visit your shop before the 7th of a month, he may likely not have enough cash to make a large purchase. The best option for him will be to swipe his credit card. But if your business doesn’t accept credit cards the customer will either reduce his purchase size to the amount of cash he has or postpone his buying decision till he receives his paycheck. In both scenarios, you are losing sales.
Accepting credit card payments can offer a hassle-free payment option to your customer as they can shop now and pay later. As for you, your credit card payment processor will transfer the amount to your account within a few days. This could help you increase your average transaction size and grow your business.
6. Fast, Secure and Convenient
Credit card transactions are digitally processed and are settled quickly. According to Market Watch, credit card payment providers in aggregate execute 5,000 transactions per second (2017) and have the capacity to process transactions in several multiples of the number. This means when paying by credit card, your customer has to wait for only a few seconds and not minutes for the transaction to complete.
Contrast this with accepting cash or checks from customers. When accepting cash your cashier most likely has to return a change to customers that can slow down the checkout time. Furthermore, if a customer pays by check you may run the risk of incurring expenses if the check bounces. This could take away considerable time and effort in getting the payment cleared from the customer. Accepting credit cards eliminates the risk of bad debt as you are guaranteed to receive the amount from your credit card payment processor.
Credit card payments are also transferred directly to your business bank account. This minimizes the need of visiting your bank to deposit cash into your account. Since your money is credited directly to your bank account, accepting credit cards improves your cash flow. You can use the money to perform business transactions or pay salaries.
7. Accepting Credit Cards is Inexpensive
One reason why small business owners and entrepreneurs shy away from accepting credit cards is that they think credit card payments are expensive. While it is true that when accepting credit card payments, businesses have to pay a processing fee to the credit card processor, the same is not very high. You are likely to pay anywhere between 2-3% in aggregate of the transaction amount as a payment processing fee to all the intermediaries. If you consider the benefits that accepting credit cards can extend to your business, this nominal fee is worth it.
Nowadays, credit card processing fees are also becoming competitive. Many credit card payment providers are offering merchant packages that can get you started with accepting credit cards at a reasonable rate. You can even negotiate with credit card payment providers to get a competitive rate. This makes it viable for small businesses to accept credit cards from customers.
To conclude, accepting credit card payments can help your business get higher sales and achieve better customer satisfaction levels. The easy payment option and convenience of paying will help them become loyal customers of your business and contribute to your growth. If you still haven’t started accepting credit card payments, there are enough reasons for you to do it right away!