With cash, the money is literally in hand, but it requires physical counting and storage, whereas with debit/credit the electronic records are all neatly recorded down to the penny, but it is more vulnerable to electronic issues or machine glitches. Do small businesses generally for the most part prefer plastic money?
I’m a solo lawyer. Of your options, I prefer cash. I take credit cards, but not debit. When I run a credit card, I am charged a percentage of the transaction by my bank, or more specifically, by the credit servicer the bank partners with that allows me to be able to take credit cards. The percentage is somewhere between two or three points, I believe. It’s not enormous, but it’s noticeable with larger transactions.
In addition, sometimes it can take two or three days for the credit transaction to settle, so it does not appear in my account even the next day, let alone right away. With cash I can deposit it the same day.
My wife and I run a small business, and cash and credit both have their benefits in my opinion. We use a Square reader for credit and debit transactions, so the convenience of having the money just plopped into our bank account is nice, but obviously we lose a bit on fees. Cash has to be dealt with and we have to remember to record it (in our Square account), however we get to keep more of it. I guess if push came to shove, I prefer the credit card because you don’t have to keep track of the cash and the transaction automatically is recorded.
But I hate checks. *Hate *'em.
Depends on the business. Credit cards simplify the accounting but take a piece of the action. For some businesses they increase the size of the typical sale. Many small businesses prefer cash because it’s easier to avoid reporting.
Why not?
Why? Too many bad ones?
This small business prefers cash or check because I can immediately reinvest the funds into materials. But I’m an ultra small business.
I only acept electronic transfer, but then, normally I only have one invoice per month. It varies a lot with the nature of the business and with the location: there are places where cabbies will usually only take cash, others where they’ve embraced cards, and yet others where you can pay with an app.
…it depends on the business: and it depends on where you are in the world.
My clients are primarily corporates that pay on the 20th of the month. 95% of them by by direct bank transfer: which is a very very easy and standard process here in NZ. Even people using “Trade Me” (NZ’s equivalent to Craigslist) would typically pay via bank transfer than any other method.
The last time I got paid by credit card was by a US bank a couple of years ago. The last cheque I saw was maybe three years ago? And I had to actually go to a physical bank to deposit it! (Hardly ever visit the bank any more) And cash hardly ever happens, and when it does its a pain in the butt.
Ignoring those who want cash to avoid paying tax, most businesses in the UK prefer debit cards, because they are the cheapest/simplest. It’s not to do with how they keep their accounts, but how much their bank/CC operator charge for each transaction. Cash means, not only a walk to the bank (and branches are being closed every day) but a charge as well.
Some CCs are less popular than others. We bought some chairs last week for £650. I used my American Express Card because I get more points, and the salesman visibly winced when he saw it. Many small businesses won’t take them at all.
Curiously, a local cafe I use does not allow card transactions for less than £5. Since contactless payments (which they have) are supposed to eliminate the need for cash, this seems contradictory.
Cash.
I stopped accepting checks years ago; just too many NSF checks and the percentage that were never made good was unacceptable.
Credit cards (other than American Express) are great, but there’s a fee involved. Also, charge backs, though rare, can happen.
I had someone attempt payment with a Traveler’s Cheque years ago. An employee refused it, as it wasn’t listed on our “accepted methods of payment” list. I should probably have amended the list, but it never came up again.
ETA: I’m willing to accept barter, also. I once had a client who wrote a Outdoors articles for a magazine. He had ~$1,000 worth of fishing equipment, new in box, that he’d received from manufacturers. He traded all of it for $380 he needed to pay me. We both walked away happy.
From what I’ve seen -here in Canada, a small business, say a dozen employees or less; between well established businesses, cheques is the norm. For higher-volume suppliers, electronic transfer (the commercial equivalent of “pay my bills online”) might be set up. Similarly, the vast majority of businesses use direct deposit, using a payroll service which automatically withdraws the payroll (and government taxes) and makes the necessary deposits and submits the necessary reports to governments.
I presume the OP is asking about retail type business and consumer payments? More and more, debit and credit replace cash, especially for anything large. One small business I frequent said they preferred cash because the credit cards screw over smaller businesses that don’t fight back. If you are a low-volume business, you may pay from what I’ve heard up to 4%. (One article said fees can vary depending on the type of rewards on the card) Note that Wal-Mart and Visa are currently in a game of chicken - Wally won’t take Visa at more and more stores waiting for Visa to agree to a lower commission. There have been threats over the years to put government limits on fees.
One fellow I spoke to said the Sci-Fi convention he was organizing used a local bookstore to process registrations on the day and the bookstore got a severe talking-to and threats from Visa for abuse of their service - since the Con would pay over a percent more in fees. (Apparently agreement says only for your business, not for others).
Canada uses Chip-and-PIN for the last few years, so the risk of fraud is way down. However, merchants used to have a “No debit under $5” sign posted, since originally the debit card was a flat fee (somewhere between 25 cents and 50 cents). It makes no sense to sell a cup of coffee for $1.50 if 25 cents or more goes to bank fees. Not sure how that changed with the new “Tap” option. (I have tried to cut the antenna traces on my cards to disable tap).
A few years ago the Visa card issuers were pushing an ad campaign, “Do you smallenfreuden?” suggesting the joy of using credit cards for smaller payments. The association for small businesses pushed back publicly, denouncing the fees.
I use Square almost exclusively… makes keeping records easier and cost of my product is higher than the amount of petty cash most people keep on their persona. Losing a bit of money to fees is worth the convenience of not keeping a bunch of cash on hand during craft shows, too.
Checks are okay for commissions/repeat customers, but that’s about it.
When I had my company in Japan, we only took bank transfers, the preferred method of business there.
Here in Taiwan, everyone pays cash. Probably a few people actually report all of their income.
I was mildly amused during our visit to Tibet. We checked out of our Lhasa hotel which was pre-paid to our tour company (Visa); then our guide showed up and paid the hotel from a huge wad of 100-yaun (about $16) bills. I assume in some places, the level of trust between businesses is not at the point where they simply send a bill or do bank transfers.
And incidentally, we paid for the tour by going to their office immediately after landing, and paying the full amount through a credit-card processing machine. No over-the-phone stuff for actual payments.
They require a trip to the bank to make them functional. Plus, if you happen to lose it, you look like a jackass having to ask for another one or eating it and having someone look at their bank account and seeing the check that never clears. And the fact that bad ones happen too.
I’d just rather have cash or credit/debit card.
Looks like Personal breaks that down even further, but I don’t know why yet:
Why credit and not debit?
My wife (solo attorney) briefly took credit cards. The merchant account service charged an extra flat monthly fee to be able to take debit cards. They also charged a higher per-transaction fee. We didn’t bother signing up for it so we were credit-only-no-debit.
Another possibility:
Major national rental car companies generally accept credit cards happily and debit cards grudgingly if at all. The reason is they’re trusting you not to steal / wreck / trash their car.
Many people who have debit cards have them because nobody will give flakes like them credit cards. Or banks did then got burned and now they’re black-listed for credit.
Having a major credit card is hardly proof you’re a Rockefeller. “Clout” notwithstanding. But lacking one pretty well proves you’re a deadbeat, poor, or both.
Obviously as more banks try to push debit cards as “as good as credit” from the customer’s POV (hint: they’re lying) more and more people may prefer to use a debit card even though they have, or could get, credit card(s). Places like car rentals may eventually have to adapt to that changing consumer preference. But not yet.
What did/do we prefer?
Our experience with credit cards was that for the two years we took them we didn’t generate enough extra business to be worth the cost & hassle. OTOH, we were a low volume operation where the hard part was getting customers into the shop, not closing the sale or receiving the money.
We’ve rarely been offered cash and normally are paid by check. Ether in advance or after the work is done depending on how long you’ve been a customer or how large a business you are. Small and gigantic businesses must pay up front. Also first time customers. Established medium-sized customers will get a bill at the end of the month. Which they’ll almost always pay. And do so by paper check in the snail-mail.
I was talking about this with the gf today because there is a local chain of gas stations here that gives discounts for paying by cash/debit (usually around 3cts p. liter (Canada)).
I always learned that debit and cash cost about the same for businesses because of security/having to buy change etc.
Back home in the Netherlands we haven’t used cheques since the 90’s. It’s all direct transfer or cash.
People rarely use and/or own credit cards. It’s mainly used for traveling. About 10 years ago we had to pay extra for using debit under a certain amount but those signs have vanished.
My impression is - for car rentals, credit cards have the ability to add on charges, such as damages or tickets and tolls that arrive later; the customer has already signed his consent with the rental agreement if there’s a dispute. If I understand the process, debit cards only allow an explicit transaction - “Here’s my $350”. If you need more, you need the card and you need the customer to enter his PIN - not always practical days later. So in a business where additional charges could pop up, you probably want a credit card. In one-off transactions, as I understand it, credit cards are a percentage while debit cards are usually a fixed fee. Depending on the amounts, some options are better for the bank or for the merchant than others.
Plus, whether a person is a good risk or not, the debit transaction is also limited by what’s in the account. While a credit transaction may allow you to put a “hold” amount on a card (“We may charge more in the next while”) I cannot imagine a lot of people wanting to allow a merchant to take their $350 cash out of their account with the promise “if everything is ok, we’ll give back $250 of it in a week”.
(Yes, I write about 2 cheques a year nowadays. The lawn sprinkler dude for winter blow-out, and my relative for a share of his season tickets)
Since rental car companies can charge debit cards as well as credit cards, and they typically put a large hold on funds (credit or debit) prior to your driving off the lot, I’m still at a loss as to why debit cards are so disliked. Crash the car, you get charged.
So why, as a merchant, would you care what their credit score was as long as the transaction was legitimate and approved?
But let’s talk online transactions. Since the physical card is not present (where it says “debit” on the face), can an online merchant tell if the card offered is credit or debit? I’ve used both online, and was never refused because it was a debit card. Would a different fee apply?