Many business owners would prefer that you pay with cash, debit card or a check. You might be wondering why certain stores and restaurants do not accept plastic if you have ever had a hard time using your credit card or debit card.
Cost, certainty and complexity are some of the most common reasons.
Processing Costs
Businesses are charged fees for accepting card payments. These fees are usually expressed as a percentage.
Note:
Credit card fees can range from 2 to 3 percent, depending on the card you use. However, some cards charge more than others.
Slim Margins
It may not seem much, but many businesses make only a small profit from their goods and services. Processing fees can eat away at margins. Businesses are forced to choose between reducing profits or passing on the costs to their customers. Many businesses would rather avoid either option.
Debit Cards
Debit Card Payments are usually cheaper to process than credit card payments, but some owners may not be aware of this–or might not know the difference. To keep things simple, some businesses require that everyone pay with cash or checks.
Minimums and Surcharges
The merchant is not supposed to charge fees or set minimums for debit card purchases. However, some stores do.
Earn Rewards with Your Credit Card
Why are credit card fees so high? Debit cards do not offer the same protection to consumers as credit cards. Merchants are particularly affected by cards that provide rewards such as cash back and travel miles. These benefits are only available to a small group of card holders, but the store owners have to pay higher fees in order for them. If you look at it another way, the higher prices paid by all customers subsidise those who use reward cards.
Taxes
Some businesses may prefer to pay in cash, while others might say that taxes are a major expense for them. It’s much easier for businesses to underreport their total revenue or taxable income without an electronic record. It is difficult for the IRS, therefore, to prove you are underreporting. It’s probably an exception, not the norm.
Certainty in Payment
Cash is king. Cash is king. Businesses know when you pay in cash that you have completed the payment. There’s little risk that it will disappear (as long they deposit cash). Money could be fake, but it’s unlikely.
Business owners can use or deposit cash immediately.
Card Payments
Chargebacks can be issued by card issuers within a matter of days if the card is used fraudulently, or a customer has a complaint about a service or product.
Check Payments
Checks are a safer option for merchants, as it is harder for customers who write bad checks to get their money back. Anyone could write bad checks and stop payments on a check. But once the bank of the customer pays the check (which may take several weeks), there’s no way to withdraw the money unilaterally. They need to use a “more impartial” dispute resolution process, rather than clicking buttons or going through the card issuers.
Note:
Check Verification Service can alert businesses to bogus accounts and people who bounce checks frequently.
Complexity
Some businesses choose to ignore cards entirely due to the above issues. Some businesses may benefit from accepting credit cards, but are not motivated to find a better payment solution.
These businesses are already doing well enough to not need to accept credit cards. Businesses that provide a unique service that customers enjoy can afford to do this. Imagine a taco shop with a long line at the door. Customers already spend enough money, so it’s not necessary to fix something that’s working.
It’s becoming easier and cheaper for businesses to accept credit card payments.
Why stores don’t accept AmEx or Discover
Some stores will accept plastic but are selective. The majority of merchants accept Visa, MasterCard and Discover. However, they may decide not if they want to accept American Express or Discover. This is slowly changing. Approximately 99% of shops now accept American Express and Discover.
AmEx and Discover are popular cards among consumers. The fees associated with accepting these cards are higher than those of Visa and MasterCard. 5 In addition, customers may find it easier to dispute charges and reverse them. AmEx cards are often used by people who also own a Visa, MasterCard or both. This means they can pay with any card they want. Some cardholders claim to be so loyal that they will not do business with merchants who don’t accept the cards they prefer.
