Advantages and Disadvantages Of Accepting Payment By Card

What Are The Advantages and Disadvantages Of Accepting Payment By Card

Many businesses accept payment by card for their goods and services and this can undoubtedly offer some distinct advantages.  However, there are potential disadvantages that should be considered.

What Are The Advantages

• Responding to customer preferences - people expect to be able to pay by credit or debit card.
• Encouraging impulse purchases - the customer doesn't need to have cash with them.
• Avoiding lost sales opportunities - if a customer leaves to get cash they may not return.
• Reaching a wider customer base - you can accept payment by phone, mail and online from customers who can't reach your premises.
• Cashflow improvements - card payments usually clear more quickly than cheques, although this depends on the arrangement you have with your merchant account.  Funds can take up to four working days to reach a business bank account.
• Improved security - you hold less cash on your premises.
• Easing your admin - a regular statement of card transactions is easier to reconcile than numerous cash transactions.
• Cards can be used internationally and currency conversions are handled automatically - they're an important payment method for tourist-sector businesses or those selling to consumers overseas.

With card payments the customer's account is checked to ensure the funds are available and that the card has not been reported as lost or stolen before the purchase is approved, and an authorisation for the payment is given.  However, even though the card payment has been authorised, this does not guarantee that the payment would not be charged back in the future.  With cheque payments there's an increased risk of payments being declined.

What Are The Disadvantages

• There are costs involved - though these aren't usually prohibitive.  See Card Merchant Transaction Fees And Charges.
• Accepting cards can increase your exposure to fraud.  See Card Chargebacks.
• To accept and process a number of major charge cards - including American Express and Diners Club - you must reach a separate agreement with the charge-card company.
• You will need to train staff, both in the technical and administrative issues, as well as in fraud prevention measures.

Take into account the expectations of your business sector.  If, for instance, you run a restaurant, hotel, hairdressing salon or shop selling higher-price goods, life will be difficult if you don't accept cards.  On the other hand, shops conducting low-value transactions are less likely to require card payments.  However, with the development of contactless cards for amounts of less than £10, this may not be the case in the future.