As a small business, you want to optimize your finances everywhere possible, including regarding how you process payments for customers. Because credit card processing usually includes fees on transactions and can mean extra required payments for equipment and maintenance, you may be tempted to just put up a “cash only” sign at your business and accept paper money only.
But processing cash still includes many risks, from security, to counterfeiting of money, to losing customers who don’t normally carry cash. If you’re wondering what’s more expensive — processing credit cards or only accepting cash, consider these pros and cons of each.
Accepting Credit Cards: Pros and Cons
If you desire a simple, bare-bones business, moving to credit card acceptance does introduce some complexities into your business. If you have a retail location, you’ll need to secure payment processing equipment, whether it’s a point-of-sale terminal or mobile card swipe reader. If you’re an ecommerce business, you’ll need to install a secure virtual terminal that keeps customer information safe when they’re purchasing from you online.
There are also Payment Card Industry compliance standards that your business must adhere to if you’re going to accept credit card payments. Some credit card processing companies may charge you a fee just to stay compliant.
Despite the initial time it takes to set up and get going to accept credit card payments, though, adding this service to your business enables you to provide value to more customers. More than 70 percent of American consumers own a credit card, and many own more than one, according to data from the Federal Reserve.
Psychology Today reports 78 percent of people prefer to pay using plastic, compared to just 9 percent of people who prefer to pay with cash. A 2017 study reported by Reuters shows 38 percent of Americans would prefer to be cashless, and 34 percent already rarely pay with cash or carry it on them.
The preference for a “cashless society” is expected to continue to increase. Even if your business doesn’t move toward it now, you might decide to embrace it anyway within a few years.
Processing Cash: Pros and Cons
While taking cash from customers may not be associated with fees like monthly maintenance of machines or fees to maintain security, there are still plenty of costs and risks associated with accepting cash at your business. These include:
- Purchasing secure cash drawers
- Training employees on organizing money and managing change
- Risking theft via employees or those who enter your business
- Any fees associated with depositing money into a business bank account
- Taking a chance that the cash that is given to your business may not be authentic
- Losing customers who leave your business because they don’t carry cash
Human error can cost your business significantly, when an employee gives back the incorrect amount of money to a customer or fails to count what is given to them correctly. In hectic and fast-paced environments, the likelihood of errors increases. A 2014 study published in Science Alert found factors like stress, repetition, fatigue, and a tense work environment all lead to more errors. If you want your business to process a considerable amount of transactions but you only accept cash, you should be prepared to lose money because of employee error.
Besides the risks associated with accepting cash, if your business limits its customers to only cash payments, you also face the danger of losing customers who prefer paying with a credit card. Even if you decide to accept credit cards shortly after they leave your business, you may have lost them for good. There is the option of installing an ATM machine in your business (which also incurs set-up and maintenance costs), but the presence of one can be a turn-off to customers or cause negative sentiment if there are fees for customers to use the ATM machine.
How to Accept More Payments and Keep Costs Low
It is possible to accept all forms of payment, increase customer satisfaction, and mitigate high costs to your business. Some businesses choose to offset any charge they may incur from a credit card processing company by adding a surcharge for credit card payments to customers. Before taking credit cards, an associate may tell the customer that they will accept the payment but a small fee is added. It’s then up to the customer whether they want to proceed with the credit card transaction or pay you with cash.
One of the best ways to optimize your payment processing is to work with a company that doesn’t have hidden credit card processing fees and that charges low rates. If you work with a processor like North American Bancard that offers free equipment, no monthly fees, and PCI-compliant features throughout its offerings, you can install secure credit card acceptance that thrills your customers and protects your bottom line.