If you’ve researched how to reduce costs at your small business, you’ve probably heard this myth: Don’t accept credit cards—or at the very least, don’t encourage your customers to use them. Since you have to pay a fee for every credit card transaction, it’s easy to see why this might seem like a smart idea for the savvy small business owner. Not so! Get the lowdown on why accepting credit cards is a smart move for expanding your business, no matter your trade.
Why Cash, Checks and Debit Aren’t Enough
Fewer and fewer people walk around with cash these days, and if they do, they likely won’t have enough on them to make large purchases. Checks and debit cards are options, too, but not everyone has these. Plus, debit cards still involve fees, checks carry the danger of bouncing, and both could be potentially fraudulent and require additional manpower for processing, so you’re not saving yourself much time, money and risk by allowing these and not credit cards. The fact is, many consumers rely on credit cards and simply won’t make purchases if credit is not an option.
Broadening Your Consumer Base
Accepting credit cards at your business can increase your consumer base in the following ways:
a) Encouraging impulse shopping : Consumers are more likely to make purchases they wouldn’t otherwise make if they can worry about paying for it later.
b) Taking advantage of customers’ readiness to make a purchase : If a customer is ready to make a purchase and doesn’t have enough cash, they’ll turn to credit. If you don’t allow credit, they’ll have no choice but to leave, and in the meantime, they can think over the decision, decide not to buy at all or comparison shop and buy elsewhere.
c) Positive consumer relations : If a person who relies on credit cards knows that they can’t shop at your business, they’re not going to go the extra mile and find another method of payment for you if your competitor takes their preferred method. These consumers will write off your business entirely.
d) Expanding online business : Cash isn’t an option if you hope to make any sales online.
e) Encouraging cash back or point accumulation : Many credit cards offer rewards, such as cash back or points to be redeemed for products, the more a consumer uses their cards. If your business reminds consumers that they’ll save some money in the long run or get free products by using credit, they’ll be more likely to spend more.
Other Benefits of Credit Cards
Increasing revenue through a broader consumer base isn’t the only way credit cards stand to improve your business. Consider these benefits of dealing with credit:
a) Smaller cash reserve : The less cash you keep on hand at your place of business, the less likely you are to prove a target for thieves.
b) No need to complete Form 8300 for the IRS for large purchases : When dealing with cash, check or money order payments greater than $10,000, your customer has to complete a form for the IRS in case of fraud or inappropriate sources for that money. That’s more paperwork for you—and dealing with that much cash on hand can prove potentially fraudulent.
How to Make Accepting Credit Easier
At first blush, credit card processing might prove a headache you don’t want to handle while running your business, but what’s more of a hassle: having too much business or too little? Plus, there are ways of streamlining your business’ handling of credit card transactions, including :
1. Outsourcing processing
2. Taking advantage of third party payment solutions, especially for online transactions
3. Keeping your credit card equipment and software up to date
4. Taking advantage of credit card business bonuses that reward you for recommending payment with their card to your customers.
Tips for Handling Credit Cards
If you’re concerned that once you’ve opened your business to credit cards, you’ll be more susceptible to fraud, follow these tips :
- Ask to see ID when accepting credit cards in person, or at the very least, instruct your employees to carefully compare the signature on the card with the one on paper.
- Use third party services for online payment to stand as a buffer between you and the customer and to help you deal with potential fraud.
- Turn to IT consultants to set up your credit card processing system and maintain it when there are software issues.
About the Author : Mario Ramirez is a contributing writer, former small business owner and freelance business consultant. While he was initially reluctant to embrace credit cards with his own business, he eventually found them to be beneficial.