This parodied line from the classic movie, The Treasure of Sierra Madre, is reminiscent of talking to small business owners about taking credit cards. They frequently talk about how they don’t want to “give someone” 3% of their money “for nothing”.  Their customers “have no problem” paying by cash or check.  Such thinking always makes me cringe because what they don’t seem to understand is, they are costing themselves huge amounts of business to “save” 3%.

Let’s look at some facts:

  • According to the website, 48% of those surveyed (1000 people who owned both a debit and a credit card) prefer to use a credit card and 30% prefer to use a debit card while only 9% prefer to use cash.
  • The rest use things like PayPal or other forms of e-payment.
  • Of all non-cash forms of payment, only 15% are checks while 59% are credit or debit cards and 18% are ACH.

So what does this tell us?  Those who are “saving” themselves 3% are losing at least 48% of their potential market (those who prefer to pay by credit card).  If you consider that 9% prefer to pay by cash and of the non-cash crowd, only 15% of them will pay by check, that’s only 24% of the market so that makes that 48% a generous number.  This means that a retailer whose customers “have no problem” paying by cash or check is dealing with only 24% of the potential market they could have by accepting credit and debit cards!!!  That’s 3 out of 4 possible customers walking past their door because they won’t accept credit cards.

Another fact shown by a Dun and Bradstreet study is that people spend 12-18% more when using a credit card instead of cash.  This means that those retailers who don’t take credit or debits cards aren’t actually “saving” themselves 3%, but are actually “costing” themselves 12-18% of what their customer might spend if they could use their credit card instead of cash or checks.

The bottom line here is that while there is a cost to accepting credit or debit cards for your business, the cost of NOT accepting them is even greater.  Not only do you open yourself to a much bigger share of your potential market and make it likely that every customer that you serve could potentially spend 12-18% more every time they step into your establishment (that’s $12-$18 more for every $100 you already make), many credit card providers (especially AMEX) promote small businesses that accept their cards through a variety of marketing venues.  This is just free advertising for your business.  Who wouldn’t profit from that?