The Real Deal with Cash-Only Retailers

The Real Deal with Cash-Only Retailers

The Real Deal with Cash-Only Retailers

It might sound tempting to eliminate the acceptance of plastic at your store. Cash is secure, it’s tangible, and involves little to no fraud. But what are the real reasons some businesses only accept cash? And furthermore, is it good for your bottom line? Let’s evaluate the real deal with cash-only retailers.

The Cost of Doing Business

One of the main reasons retailers opt for cash-only transactions is due to the fees imposed on them by card companies. Sometimes these fees are a percentage of each transaction, or there could be a flat monthly charge for the merchant. It’s for this reason you might see signs on small business registers announcing credit card minimums. If a retailer, such as a small coffee shop, has a very low Average Transaction Value (ATV), it could be costing them more money to accept credit cards than they’re making in revenue. While imposing credit card minimums isn’t illegal, retailers may be ignoring the agreement they have with their payment processing company. 

Instant Gratification

When you get a crisp $20 bill from a customer, that money is immediately available to you as a merchant to spend or deposit. What the average person doesn’t realize is that with credit card payments, those funds can take anywhere from 24 hours to several days to post to the merchant’s account. And there is always the possibility that those charges get reversed in a few months, as would be the case for a fraudulent transaction, for example.

Cash Only May Mean Lost Business

Research has shown that nearly 30% of adults don’t make any cash purchases in a week. That likely also means a good percentage of customers never carry cash at all. What with the inconvenience of finding an ATM (or one that doesn’t charge a fee) and the ease of just relying on a credit or debit card, your store may actually lose business if limited to cash-only purchases. At one time or another, we’ve all probably left a store—or worse, not entered at all—because we didn’t have any paper bills in our wallets. Your revenue is literally walking out the door.

Cards Only: A Discriminatory Practice?

On the flip side of the coin, some retailers are joining the trend of only accepting credit and debit cards as forms of payment. Recently, Philadelphia businesses attempted to ban the use of cash in their establishments. But the city council stepped in with a bill that would require many local businesses accept cash as payment. According to Councilman Bill Greenlee, “There’s a reasonable segment of people who wouldn’t be able to patronize those stores because they don’t have any kind of credit or debit card. It’s setting up an us and them kind of situation…And those people tend to be a little lower income, and also minority and immigrant. I don’t think that’s the kind of message we want to be sending.”

In theory, eliminating cash as a form of payment has pros just the same as banning plastic does—just different ones. There’s still theft to consider, however cash-only retailers run the risk of armed robberies, while credit card theft is far less violent. Being cashless also increases transaction speeds.

There are pros and cons to each end of the spectrum, but you need to do what’s best for your business and bottom line. Be sure to do your research before taking the leap one way or another, or stick with what has always worked best in today’s retail sector: Accept it all.