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Cash is king! Not anymore

Posted by Jason Keith  September 16, 2011 06:02 AM

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It’s long been a standard practice for small businesses to deal primarily in cash.  The reasons for this are numerous, but one stands out.  By dealing in cash, small businesses never have to pay the standard 2-4% “swipe fee” for taking a credit card, charged by the credit card company.  Cash is simple. It changes hands, and from that point on there’s rarely a dispute, a fee, a chargeback, or a fraud claim. There’s also an open secret about things that are paid for in cash: there’s no paper trail.  So depending on the business, a cash transaction may or may not make it onto its tax return at the end of the year.  Of course, avoiding taxes always poses huge risks for small businesses.

But some businesses have moved to, or are still clinging to a “cash only” model, simply not accepting credit cards at all, dealing only in cash. On a Martha’s Vineyard vacation this summer, I came across at least a half-dozen businesses that didn’t accept credit.  At one point I had ordered something, but had to run across the street to an ATM when the employee informed me the business was cash only.  Some businesses, like gas stations, are open about the difference in credit card payments versus cash payments.  Stations are posting the “credit card price” against the standard price on top of the pumps. They are, without any hesitation, passing the credit card fees along to the consumer.  If you pay in cash, you’ll pay less, it’s that simple.

So if you’re a small business owner, should you pay the fees and offer the credit option?   

First, ask yourself why you’re not accepting credit cards as a cash only business. How much business are you potentially losing (or could potentially gain) with the credit card option?  You might want to take the time to survey your own customers to see whether or not their spending habits might change if paying with a card was an option.  Think about whether or not your competition offers it.  Also consider that statistics have shown consumers spend more with a credit card than with cash, because they aren’t limited by what’s in their wallet and don’t feel the “pain” of the purchase immediately.  Additionally, in 2010, 609.8 million credit cards were held by U.S. consumers. The numbers keep going up –consumers are paying consistently with credit and debit cards. 

As President Obama continues to focus on small businesses, the options for entrepreneurs will hopefully continue to expand.  More companies are catering to the small business market and offering products and services to manage their business. Intuit, as an example, now offers a pocket-sized credit card reader to small business owners, designed to attach to a mobile phone, so they can take credit card payments anywhere, anytime.

As U.S. consumers move toward electronic options, businesses of all sizes need to adapt.  The numbers don’t lie; more people are paying electronically and want options with the vendors they do business with.  If you’re not going to give your customers the ability to pay in a variety of ways, you could see them walking away to a competitor.   

Cash might be king, but credit is rapidly bridging the gap.  And if you haven’t noticed, when you pay in cash you’re considered strange, or so this Visa credit card ad would have you believe. 

Have you struggled with the decision to offer the credit card payment option as a small business? What reasoning did you use to stay cash only or expand your payment options?




This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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About this blog

Jason Keith has been working for and with small businesses in the New England area for more than 10 years, specifically small, micro businesses. Born and raised in Massachusetts and a former journalist, he provides a unique perspective on the issues facing small businesses locally and nationally.To reach him directly email

This is a personal blog. The opinions expressed here are the author's alone.

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