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Is Not Accepting Credit Cards Hurting Your Bottom Line?

Mona Bushnell
Mona Bushnell

Small businesses might be losing billions by not taking credit.

To avoid credit card processing fees and sidestep the need for additional swipe and chip hardware, a surprising number of small businesses still don't accept credit cards. Unfortunately, not accepting credit cards could be hurting your bottom line. Here's a breakdown of why some businesses don't accept cards, what you might be losing out on by refusing credit card transactions, and how you can get affordable credit card processing for your small business.

Why some businesses still don't accept credit cards

Cash-only businesses are extremely common in certain places in the United States, like New York City, where locals know to keep cash on hand or else risk being unable to pay for things. Generally, very high-traffic areas (like dense urban centers with ample wealth, or a large percentage of unbanked people) and remote areas (like ultra-rural areas with limited internet service) are more likely to be cash-only than suburbs, towns or midsize cities.

In urban areas with a plethora of customers in the vicinity, small business owners may be able to operate at full capacity without accepting credit cards, simply because customers are willing to pay in cash. Businesses in such areas can turn away non-cash customers without the risk of alienating their local community, because they have so many other potential customers nearby.

By contrast, if a grocery store in a small city didn't accept credit cards, it might quickly gain a negative reputation and go out of business. But in a dense metropolis, a cash-only deli is just one of many delis in a multi-block radius, so customers who want to pay in credit will simply go elsewhere, while customers who don't mind paying cash will patronize the cash-only establishments without thinking twice.

In rural areas, internet connectivity is sometimes the reason businesses do not accept credit cards. They may also choose to only accept cash due to a lower volume of customers or a larger percentage of unbanked customers. Since it does cost a business money to accept credit cards, the interchange fees may simply not be worth it for business owners in remote areas. Plus, like urban dwellers, customers in rural areas are likely to know that some businesses don't accept cards and carry cash on them for purchases, understanding that internet connectivity can be a problem. Thus, they will also be less put off by cash-only establishments than residents in most towns, midsize cities and suburbs.

It should be noted that some small business owners also prefer operating on a cash-only basis for a more nefarious reason: because there's less of a paper trail when tax season rolls around. When business owners report their profits to the IRS at the end of the year, it is up to them to track and honestly report cash purchases. Credit card purchases can be easily cross-checked with credit card companies, but cash is easier to conceal. Of course, not all cash-only businesses are engaging in illegal activity, but it does happen.

Finally, some businesses don't offer credit card processing simply out of habit. Small mom and pop shops, especially those that have been in business for a long time, are often highly resistant to change and may have put off credit card adoption so long they no longer even consider it.

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Why not accepting credit might be costing you

Like it or not, the world is becoming less and less dependent on cash. Young people and tech-savvy consumers of all ages are flocking not just to credit, but to cashless and card-free transactions via such apps as Apple Pay and Google Pay, and major retailers like Starbucks and McDonald's are increasingly offering alternative payment methods. As this trend continues, businesses that don't even accept standard credit cards will be viewed as even more outdated, and some research suggests that cash-only businesses are already losing billions of dollars a year.

A recent study published by the Pew Research Center shows that the trend toward cashless payment transactions is steadily climbing, especially among high earners under 50. The report said, "Roughly 3 in 10 U.S. adults (29%) say they make no purchases using cash during a typical week, up slightly from 24% in 2015." It also noted the difference in high-income and low-income consumers, pointing out that "adults with an annual household income of $75,000 or more are more than twice as likely as those earning less than $30,000 a year to say they do not make any purchases using cash in a typical week (41% vs. 18%)."  

As the expectation for customers to pay for goods and services through cashless transactions grows, the odds that you're losing money by refusing to accept credit increase as well. This is especially true if you're trying to appeal to high-income people and people under 50. Additionally, customers are even less willing to pay cash when the purchase cost is more than $25, so if you're not a low-cost retailer, you should seriously consider offering credit card transactions. Multiple studies from banking institutions and independent research associations show that fewer Americans are carrying cash, and the trend appears to be continuing.  

Affordable credit card processing  

Most small business owners have three major concerns about accepting credit cards: interchange fees, chargebacks and adopting new technology (such as swipe or chip systems). However, there are many affordable options available to small business owners, and some of the fees might be lower than you'd think. [Looking for a credit card processing provider? Check out our best picks and reviews.]  

Interchange fees

There are transaction fees associated with credit card processing, but they are lower than you might think. The fees vary by type of credit card and are significantly lower for debit card payments than for credit card payments. The most widely accepted debit card and credit cards have fees of 0.05% to 2% of the purchase price, which is why many retailers only accept certain cards and institute the legally allowed $10 minimum on card purchases.  


A chargeback is what happens when a customer who has paid for a transaction with a credit card gets their money back. The most common type of chargeback occurs when a customer returns a purchase and is issued a refund, but a customer can also request (not necessarily receive) a chargeback if they feel they were unfairly charged for a good or service. This might occur if an employee accidentally charges a customer twice for the same good or service or otherwise overcharges them, but customers may also attempt to receive fraudulent chargebacks.

Chargebacks come with a processing fee, which is paid by the business owner and is part of why some businesses post policies such as "no refunds" or "store credit only." Offering store credit allows a retailer to give the customer their money back without also paying a chargeback fee to the credit processing company. If your business has a high percentage of returns or refund requests, you may want to institute a policy to offset chargeback processing costs.

Credit card processing software and hardware

If it's been a few years since you last considered implementing credit card processing, you might want to revisit it, because the days of bulky POS systems that require thousands in upfront costs are in the rearview mirror. While those systems are still around, they're no longer the only option; in fact, it's much cheaper to set up a credit card system than it ever has been. 

There are lots of lightweight POS-style solutions that are ideal for small spaces (and even mobile businesses), like Square, which makes it easy to swipe on the go. There are online-only credit processing solutions too, like PayPal, which works very well for both low-volume and high-volume online businesses and even side hustles.

Money-saving credit card processing policies

A cash-free society might not be right around the corner, but refusing to implement the systems necessary to accept credit cards may be seriously hurting your bottom line. Here are some ways to accept cards while keeping your processing costs as low as possible.

1. Ask if the card is debit or credit.

Ever wonder why some retailers ask if you want to pay with debit or credit? It's because the interchange fees for debit cards are much lower than for credit cards. Asking a customer this reminds them they can pay with debit, which can help you cut down on monthly fees.

2. Set a credit limit.

It's legal for businesses to set a $10 minimum for credit card purchases, which can offset the costs associated with credit card purchases and eliminate interchange fees on small sales.

3. Consider a surcharge policy – carefully.

Credit card processing services always charge fees for accepting payments, but some businesses choose to use surcharge policies to pass the fee on to the customer. Before you start a surcharge policy, however, you should be aware of all the laws and regulations surrounding surcharging and how it may affect your business.

Image Credit: wavebreakmedia/Shutterstock
Mona Bushnell
Mona Bushnell
Business News Daily Staff
Mona Bushnell is a Philadelphia-based staff writer for business.com and Business News Daily. She has a B.A. in writing, literature, and publishing from Emerson College and has previously worked as an IT technician, a copywriter, a software administrator, a scheduling manager, and an editorial writer. Mona began freelance writing full time in 2014 and joined the Business News Daily/business.com team in 2017. She covers business and technology.