If you’ve ever pulled out your credit card at a store in order to pay for your purchases, you may have been told, much to your surprise, “I’m sorry, but we don’t accept credit cards”. Chances are you’ve heard this at least once or twice, particularly in smaller stores. You’re not alone. While credit cards are a standard accepted payment method in most restaurants, gas stations, grocery stores, and retail and department stores, there are plenty of stores who do not accept them, which leaves you to count out cash, or write a check.
So, despite the convenience that credit cards offer, and the fact that many consumers do not carry a lot of cash in their wallets, if any at all, why would a business potentially risk losing customers and thus profits by not accepting credit cards or debit cards as a payment method?
First and foremost, it costs money to accept credit card payments. Businesses must establish merchant accounts in order to accept credit card payments, and these accounts cost money, both with an initial setup fee (though sometimes this can be waived if the business agrees to a minimum contract length), and with a per-transaction fee, which is typically two to three percent of the purchase total (so if you pay for a $20.00 purchase with a credit card, the business loses $0.40 to $0.60 of that to merchant account processing fees). While two to three percent does not sound like a lot of money, over time these payment processing fees can add up, particularly on larger transactions. And if a business is already cutting it close in terms of competitive pricing, those fees can put them dangerously close to being in the red.
Then there is the cost of the credit card processing equipment itself. Some credit card merchants offer free or discounted equipment with the setup of a payment processing account; others may require a deposit, or a partial payment for the cost of the equipment, with a monthly payment agreement established in order for the remaining balance of the equipment to be paid off. And while credit card processing equipment is built to be durable and long-lasting, repairs of damaged pieces or stolen pieces can be expected.
Finally, there are the chargeback and other bank fees associated with a merchant account to deal with. If a customer disputes a charge on their credit card statement, chances are their bank is going to side with them, and you’ll be hit not just for that transaction, but possibly assessed penalties as well.
So when shopping, be sure to check ahead of time about acceptable payment methods. And when in doubt, bring along cash.