Credit cards are ubiquitous in the United States. Approximately 83 percent of Americans between the ages of 30 and 49 had a credit card, and millennials owned three credit cards in 2020.
Having a credit card makes sense because it’s a convenient way to pay, eliminating the need for cash in hand while making a purchase. However, credit card processing often comes at a cost. Small business owners need to understand why it’s essential for their company and what to look for in a credit card processing company.
- More than a third (38%) of all retail purchases are made via credit cards.
- About two-thirds (64%) of small business customers don’t have the cash to pay for purchases.
- Credit card processing fees for small business owners depend on the processor and needs of the business.
- Critical factors for choosing a credit card processor include transparency in pricing, versatility in accepting payments, and security.
- Mobile credit card processing companies might be the best option for small businesses.
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Why Is Credit Card Processing Important To Your Business?
The success of small businesses hinges on many factors. One factor that many business owners might not think too much about at the start is payment options, perhaps assuming that cash is good.
However, a survey shows that only 36% of small business customers carry about $80 in cash, which means 64% don’t. If you have a cash-only establishment, that means 64% of your customers won’t make a purchase, which isn’t the desired result.
More to the point, 38% of point-of-sale (POS) transactions in the U.S. used credit cards and only 12% was cash. Therefore, it would make sense for a small business to offer credit cards as a payment option.
However, small business owners worry about paying credit card processing and merchant fees, thus cutting their profit margins. Meanwhile, the significant loss of sales and revenue from not offering credit cards as an option is a bigger problem. A small business that doesn’t provide credit card options essentially rejects customers who want to pay using a credit card.
In a nutshell, you should offer the option of credit card payments for the following reasons:
- More shoppers: About 26% of US transactions were via cash and 23% by credit card in 2019, but in 2020, that changed to 12% and 38%, respectively. Cash use is declining sharply among American consumers even as the use of credit cards rises. So, it’s reasonable to expect that offering credit cards as an option brings in more shoppers to small businesses.
- Higher revenue:Credit card users tend to spend between 12% and 18% more than cash users because using a credit card lets them defer payment for purchases to later.
- Easier financial management: Getting paid through a credit card allows business owners to more manage business finances efficiently by having them go through a POS system like Square.