Cash or Credit – What’s Better for Business?

Cash or Credit – What’s Better for Business?As the retail landscape continues to evolve amid the coronavirus pandemic, small business owners are taking a look at their strategies and reevaluating. Cost-cutting measures are top-of-mind, and no technique is off the table. Today we thought we’d take a look at what’s a better bet for your business: cash or credit?

Many smaller retailers, especially those in the foodservice space, only accept cash transactions at their establishments. Cash doesn’t always have to be just paper money, either. It can also include checks and other payment methods such as Paypal or Venmo. The logic behind businesses operating on a cash-only model is simple: first and foremost, cash transactions are cheaper. You also get your money instantly—no credit card processing necessary, which can take days.

Credit card processing fees, or swipe fees, are defined by Investing Answers as “the hidden cost paid by merchants to card-issuing banks and credit card companies for processing credit card and debit card transactions.” They can be as high as 3 percent of the purchase. If you’re a small business, fees like this can really add up—especially if you don’t want to pass that cost onto your customer (which you can legally do in most, but not all, states). In that respect you could lose business by increasing your prices to cover credit card processing fees, but losing revenue can also occur if you choose to stick with the paper-over-plastic route. Read on…

While the cost-savings may be tempting, there are drawbacks to only accepting cash. First of all, few people carry cash these days. In limiting your transactions to only this form of money, you could be compromising your revenue. According to, “In 2017, card payments accounted for 62.3% of consumer payments by dollars spent, while cash accounted for 15.5%.” What’s more, customers paying with a credit card tend to spend more than customers paying cash (in some cases, as much as 83 percent more).

You likely have an accountant for your small business, right? If you’re only accepting cash, this person has their job cut out for them. It’s far easier to process credit card transactions than cold, hard cash. Credit card funds are transferred right into your coffers—no dedicated accountant required. And while credit card fraud is a very real risk, so is having a lump of cash sitting around in a safe. All it takes is one break-in or robbery to wipe you clean of the day’s profits. On the other hand, there are people out there—possibly some of your customer base—that can’t get approved for a credit card. Not accepting cash instantly eliminates them as a customer.

There are pros and cons to both of these options. Cash only, card only, or a mix of the two? As with any great retail strategy, do your customer research. If you’re thinking of switching to a solely paper or solely plastic model, see which your customers prefer before making the leap. We understand the need to cut costs these days, but losing consumers ultimately means losing out on your bottom line.