Should Your Business Accept Credit Cards for Goods and Services Payments?

Page content

Consumers are often aware of the advantages of using credit cards to make purchases. Consumers enjoy convenience, speed, secure online shopping, and the reduced need to worry about how much cash to have on hand. This last one can even eliminate the need to have a local branch of a bank around so the consumer can take advantage of online banks whose offices are located in other states, provinces, or countries.

However, the benefits of using credit cards are not all on the side of the consumer. Merchants and entrepreneurs enjoy several advantages when consumers use credit cards to make purchases. These advantages can even lead to lower prices for consumers because merchants enjoy lower costs. Some of the major benefits merchants experience because of consumer credit card-using behavior are discussed below.

Increased Sales

It is no secret that credit cards allow consumers to buy things they could not afford if they had to pay cash. These consumer benefits of using credit cards mean larger sales for merchants. In addition, consumer spending is more frequent when they can pay for their purchases over time instead of having to save up and pay cash. This is the reason many merchants prefer payment by credit card to cash. This is in direct violation of one of the precepts of financial management in which cash, the most liquid asset, carries the lowest risk in comparison to other assets. Merchants and entrepreneurs would rather have greatly increased sales volume and frequency of purchases than enjoy lower-risk cash-in-hand.

Lower Working Capital

Large merchants such as chain discount stores used to have to carry a lot of working capital on their books to account for the large amount of change required in each cash register. This working capital can account for a large amount of the cash needed to run the business on a day-to-day basis. Without the need to make change, credit card use reduces the amount of working capital a large firm must have on hand.

More Security

Credit cards are less risky than other forms of payment like checks. Checks can bounce and consumers can put a stop payment on checks that have not yet cleared. Once a credit transaction is complete, the merchant is far more likely to receive payment because during the process of a real-time credit check when the card is wiped through the credit card terminal, the amount of credit available is verified and encumbered (set aside) making certain that the consumer is not over his/her limit. This increases the likelihood that the merchant will be paid. In addition, reducing the amount of cash handled by cashiers reduces the likelihood that some of the cash will disappear into the cashier’s pocket.

Fraud in the form of counterfeit bills and forged checks is greatly reduced because credit cards are much more easily reported as lost or stolen. Once reported as stolen, the exact location, time, and items purchased on a credit card are immediately known. The card can then be rejected without the merchant or entrepreneur having to hand over merchandise that will never be paid for.

Faster Transaction Speeds

Credit cards have the advantage of speeding up transaction times. No longer do consumers have to wait for the person in front of them to fumble writing a check or count out cash to pay for purchases. This reduced transaction time means merchants can have fewer registers open at one time. In addition, the personnel required to run fewer registers is reduced. This also has the advantage of increasing consumer satisfaction because less time is spent waiting in line to pay for purchases. One final advantage of shorter transaction times is the reduced danger of balking. Balking is a term used in queue theory to describe a person who decides that a line is too long and removes him/herself from the line and foregoes the purchasing behavior.


Merchants, entrepreneurs, and consumers, enjoy several distinct advantages to using credit cards. Whereas consumers enjoy mostly convenience, merchants experience many advantages that increase sales, reduce risk, and create a more enjoyable shopping experience for customers. These advantages even make merchants prefer credit card use over cash, an unheard-of concept in the days before credit cards.