However, a new study by the economic consulting company Economists Incorporated reminds us why the investment in accepting card payments is a worthwhile one. Put simply, accepting cash comes with costs of its own, and “cash only” businesses ignore these costs at their peril. The costs of accepting cash are hidden—they don’t appear on a bill like credit card fees do—but they are nonetheless substantial, and can exceed the cost of accepting credit and debit cards.
The costs of accepting cash payments come from a variety of places, and they add up. Here are some examples:
- Accepting cash payments means that you or your employees need to spend time processing the cash—counting cash at the point of sale, counting change for your customers and counting cash in your register at the end of the day. Not only does this mean that your checkout line may move more slowly, it also takes away time that your employees could spend doing more productive things.
- Transporting cash to and from your bank also takes time. This could mean that you have to keep hourly employees on the clock longer than you would otherwise. If you hire an armored vehicle service to transport your cash, that also adds to the cost.
- Unlike electronic payments, cash can be lost, stolen or destroyed. If your business keeps a large amount of cash at your stores, you’ve probably already invested in security cameras, alarms and a safe. Even with these safeguards, you cannot eliminate the risks of theft, flood, fire, etc. entirely.
All in all, the study found that these costs of accepting cash are similar to, and in some cases higher than, the costs of accepting credit and debit card payments. Even more importantly, the study found that “merchants experience significant increases in revenues” when they accept electronic payments. In addition to reducing the costs of cash noted above, businesses that begin accepting card payments often see a significant increase in sales, because customers prefer to pay by card. They are likely to spend more if they can pay by card than if they have to pay by cash, and they are more likely to visit merchants that accept payment cards.
For all of these reasons, credit and debit card acceptance is a good investment for small businesses!