With credit and debit cards increasingly becoming the norm, the business that doesn't accept them could be setting themselves up for failure
By Chris Freeburn


In a recent VISA commercial, dozens of hungry customers march in an easy, rapid dance through a coffee shop, pausing only briefly to tap their VISA card on the cash register, paying for their food and moving on with the greatest efficiency. Unfortunately, one woeful customer who tries to pay for his coffee with cash brings the whole ensemble to a crashing halt, earning a look of stern disapproval from the cashier. The message to consumers is clear-credit cards are not only a faster way to pay, they're increasingly the way you are expected to pay. Though VISA targets consumers with its commercial, the message shouldn't be lost on merchants either: No purchase is too trivial to be paid for with plastic.


Pervasive Plastic
Credit and debit cards are now so often used by American consumers it is becoming ever more difficult for merchants to avoid accepting them. In 2004, a U.S. Federal Reserve study found that more than 74 percent of all American families held one or more credit cards. But credit cards are rapidly being eclipsed by debit card use. According to a 2006 Federal Reserve study, debit card use has grown by 20 percent a year since 1996, while the use of credit cards has stalled. Purchases by cash and personal checks were also found to have declined to a tiny percentage of overall consumer spending. In fact, the study revealed that over the past two years, debit cards have actually overtaken credit cards as consumers' favorite means of payment. "Debit is becoming the dominant form of payment for many consumers," the study's authors concluded.


Consumer Expectations and Lost Business
Today's consumers expect a wide array of payment options when they shop. With cash and check transactions in a sharp downward spiral, merchants who offer only those payment options are likely to find many consumers simply willing to pass them by in favor of competitors with more convenient options. "At this point, it's almost common sense," says Dave Bowman of TTG Consulting, a Los Angeles-based consulting firm. "Very few people carry enough cash with them to fund their every day purchases, and the idea of having to run to an ATM to get more cash to buy something is enough to put them off the idea of buying it at all."


More Sales with Plastic
Not only does accepting plastic prevent you from losing sales, it can bring in more business than cash transactions. "Studies have repeatedly shown that consumers will spend more money when charging purchases to a credit card than they would have with cash," says Gerri Detwieler, a consumer debt expert. "Cash in pocket sets a strict limit on what can be purchased," she says. "A credit card, on the other hand, takes away the tangible sense of money leaving their wallets, and leaves the idea of paying that debt off into the future."


Online Sales
If your business hopes to sell its products online, accepting some form of electronic payments is almost a requirement. Electronic payment insures instant payment in U.S. currency no matter where in the world your customer resides. This makes processing international (and domestic) purchases incredibly easy and speeds shipping. In addition to credit and debt cards, online electronic payment systems include eChecks and PayPal, eBay's dominant payment system.


Obtaining a Merchant Account
Not long ago, businesses had to jump through all sorts of hoops before being permitted to accept credit cards. Credit cards had complicated approval processes. High fees made it affordable to only those businesses that would see a large number of credit card transactions. Today, however, most financial institutions are eager to get their plastic accepted in as many places as possible. Numerous credit/debit card and electronic payment processing providers exist, including VantageCard, Sage Payments and Bank of America.


Chris Freeburn is an associate writer for Business 24/7 and Priority magazines.