Does My Small Business Need To Accept Credit Cards?
Though you have control over the forms of payment you accept when you own a small business, your decision to accept credit cards might have more impact on your profitability, revenue and customer loyalty than you think.
Here’s a look at whether your small business should accept credit cards.
Cash is being dethroned. Remember that saying “cash is king”? It’s no longer the preferred way to pay among customers who are 49 years old and younger, according to a CreditCards.com poll. In fact, this consumer group is twice as likely to pay with a credit or debit card rather than cash, even for smaller purchases of $5 or less. SurveyMonkey’s data revealed a similar sentiment: 86 percent of 300 respondents to its survey said they prefer to pay with a credit card.
Though the increasing propensity for plastic may mean your business incurs nominal processing fees (of about 2 to 3 percent of the transaction amount), not accepting credit cards could mean you lose the opportunity to sell to these potentially profitable consumers altogether.
Accepting credit cards no longer requires investing in equipment. The increased prevalence of mobile devices has amplified the efficiency of mobile payment technology and its benefits for small businesses. Once you establish a merchant account with a mobile payment processor, you may use the mobile device you already own to securely process customer credit card payments, and even, send receipts electronically via text or email.
They can help you stand out from small businesses’ competitors. According to data compiled by the National Federation of Independent Business (NFIB), about half of all small businesses accept credit cards — but you’re not just competing against other entrepreneurs. Customers may also consider purchasing from corporations and e-commerce retailers, both of which likely accept credit cards.
They can reduce price sensitivity. In a study published by the Journal of Consumer Research, researchers found that when customers intended to pay with credit cards instead of cash, they focused on different features, benefits and cost attributes of a product when making a purchase decision. For small businesses that may not have the ability to source brand-name products, or offer the most competitive price on an item, this shift in how benefits and features are perceived when using credit can help move customers through the sales funnel with less hesitation.
Your relationship with creditors can overcome customer trust issues. Regardless of the quality products and services your small business offers, consumers may be hesitant to make a significant purchase until they trust your brand. Particularly when it comes to larger purchases or longer term service contracts, accepting credit cards can give customers peace of mind that their purchase is protected by their credit card issuer — even if they’re not satisfied with the outcome of their purchase, or your policies for refunds. (With that in mind, NFIB’s data indicates that such disputes over “chargebacks” between a small business that accepts credit cards and the creditor are uncommon, having impacted just 4 percent of the business respondents).
They can improve your customer service. Consumers don’t like to wait in line — even if your processes are quite efficient. When you accept credit cards, you can experiment with ways to improve customer experience at the point of sale, regardless of the size of your physical storefront, or the amount of people you employ. Accepting credit cards via mobile payment for example, empowers you to efficiently and securely process a customer transaction from anywhere in your store, or even off site.
You may increase your average order value. A consumer behavior study on the impact credit cards have on spending conducted by Dun & Bradstreet revealed that customers spend an average of 12 to 18 percent more per transaction, simply because they paid with credit instead of cash.
A cash-only business model may have served you well up to this point, but customers’ financial behavior and expectations for convenience and speed of service are changing as technology continues to impact how we communicate, find information and purchase. Accepting credit cards is no longer cost prohibitive for small businesses, and will likely provide more benefits than it does drawbacks.
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