Credit Card Payments: Assessing The Pros & Cons For Your Small Business

Should your business accept credit card payments? Before we explore the pros and cons, let’s make it clear what we’re talking about. Credit card payments are different from debit card payments – the latter lets you accept payments directly from someone’s bank account. Credit cards are specific financial tools that let people borrow money to pay for things. In other words, you can accept debit card payments without accepting those from a credit card.

Why might you allow credit card payments for your business? They can have some interesting benefits, but they may also hold some drawbacks. Let’s run through the big ones to help you make a decision!

Pro: Draw In More Customers

Credit card payments will make your business appeal to more people. You offer yet another way for people to pay, which can attract customers that specifically want to use credit cards. Maybe that’s the only way they pay for a product/service like yours – this is extremely common when you sell high-value goods/services. Allowing this payment unlocks new customers that you may lose out on without it.

Con: A High-Risk Payment

Accepting credit cards means your business will accept high risk payments. This is because credit cards are more likely to be subject to fraud than any other payment method. There’s also a higher likelihood of chargebacks from credit cards because people go over their credit limit without realising. It’s undeniably a beneficial payment option, but it does carry more risks than most.

Pro: Added Convenience

Following on from the previous benefit, credit cards offer customers a new layer of convenience. They’re quick and easy to use, allowing for instant transactions and payments. Alongside this, credit cards give customers a way to spread the cost of things. They use their credit card, but don’t have to pay their credit card bill for at least another month. It offers them more time to manage their finances – and they can always pay their bill in instalments to make it even more manageable. It’s like you’re offering monthly payments, but all the money still goes to you instantly! 

Con: Higher Processing Fees

The other downside of credit card payments is the excessive processing fees. According to NerdWallet, you could pay anywhere between 1.5% to 3.5% in fees on every transaction. By contrast, debit card transactions average cost around 0.73%, which is significantly lower than credit cards. As a consequence, you must take these fees into account when accepting this payment option. Will it still let you enjoy a profit? Could you possibly incorporate the fees into the customer’s payment? 

When all’s said and done, credit card payments have their pros and cons. Most businesses tend to accept them as a payment because they’re so widespread and not accepting them could alienate a large portion of your customer base. If you go down this route, be sure you have good protection against credit card payments and adjust your pricing to reflect the increased processing fees. Also, if you don’t accept credit cards, then it won’t be the end of the world. As long as you allow many other payment options – debit cards, e-wallets, crypto, etc. – then most customers will still be happy.