Business benefits of accepting credit cards for payments and how they can impact your bottom line
You may still believe “cash is king,” but studies show that today’s consumers are more profitable to your business if you accept credit cards — despite the processing fees you’ll incur as a result. According to data compiled by the nonprofit Community Merchants USA, only 23 percent of transactions will be made in cash by 2017.
If you’re not convinced that accepting credit cards is cost-justified compared to revenue potential, it may be time to consider some of the latest research around consumers, and how they shop with credit cards.
It can help you face off against larger competitors
If your business competes with larger retailers who can offer similar items at lower prices, you may find that customers view your products with less scrutiny when given the option to pay with plastic. In one study published in the April 2012 issue of the Journal of Consumer Research, researchers found that consumers tend to focus more on a product’s benefits than the price when they can use a credit card to purchase. Post-purchase, they also tend to recall the benefits of products they bought with credit more clearly than they do the price, which can reduce “buyer’s remorse.”
You may be able to boost your average order value
While it’s valid to worry about the additional transaction costs you’ll incur by accepting credit cards, consider that impulse buying and average order sizes increase when customers can pay with credit, because they’re not parting with a tangible amount, as they are when paying with cash, according to cognitive scientist Art Markman.
You can boost your customer reach
Not accepting credit cards limits the potential universe of customers you can attract to those in your geographic retail “footprint.” Credit card acceptance doesn’t just mean you can open your potential market to consumers across the country. Because many credit card processors can facilitate the nuances of international sales, including currency conversion and automatic translation of form fields (if the customer is shopping online), you can even serve global markets.
You can boost credibility
Particularly if your business is smaller, locally owned, and/or has low brand awareness, accepting credit cards can push consumers past the hesitancy they encounter when shopping from a retailer they haven’t bought from previously. In fact, one study by Javelin Strategy & Research found that, for example, they are most influenced when a vendor shows a Visa logo compared to other payment methods, like PayPal. Including logos of the major credit cards you accept on your website can boost your online credibility, too.
It improves your customer service
Without customers, you don’t have revenue, and part of being customer-friendly is giving customers what they want. Based on the data compiled by Community Merchants USA, nearly 70 percent of consumers ages 18-34, and nearly 60 percent of consumers between 35-44 years of age, say they will only shop at businesses that accept multiple forms of payment. Aside from the fact that many customers use credit cards that reward them with cash back for their purchases, accepting credit cards can also give your customers peace of mind about their own level of purchase protection when they know they can turn to their credit card’s dispute resolution services in the case of a product issue or defect.
There are ways to offset costs
The amount you’ll pay in processing fees to accept credit cards varies based on the provider you choose, but it’s generally less than 4 percent of the transaction’s value. As such, you can absorb those costs into your business model so you don’t feel the “pinch” of processing costs — or alienate your customers. Aside from posting a payment policy that your business does not accept credit cards for smaller purchases of a stated amount, there’s also the option to increase your prices slightly across the board — which the customer will likely never notice, particularly for the increased convenience that the option to pay with credit offers them.
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