Why Stores don’t Take Credit Cards

Cash Only
ministryofstories/Flickr/CC BY 2.0

You might love paying with your credit card, but many business owners wish you wouldn't. If you’ve ever had a hard time using plastic, you might wonder why some stores and restaurants don’t take credit cards (or even debit cards). The dreaded phrase “sorry, we don’t accept cards” or a less subtle “CASH ONLY” sign suggest that the business owner has certain concerns.

You can usually boil those concerns down to cost, certainty, and complexity.

Cost

In order to accept cards, businesses typically pay a percentage of each transaction, and they might also pay flat monthly fees to keep a merchant account. For credit card transactions, fees are often around 2% to 3% of your purchase (and some cards are more expensive than others). That might not seem like much, but some businesses only make a small profit, and those fees eat into tight margins.

Business owners are faced with smaller profits or passing the cost on to customers, and many would rather not do either.

Debit card payments are less expensive than credit cards to process, but some business owners either don’t realize that, or they throw the baby out with the bathwater and simply require everybody to pay with cash or check. Other stores take cards but limit the damage from swipe fees: they either impose minimums on credit card purchases or charge customers extra for using credit cards (they’re not supposed to set minimums or charge fees for debit card purchases, but the line often gets blurred).

Why are credit cards so expensive? Credit cards offer several benefits that you don’t get with debit cards (cards with rewards, such as cash back and travel cards, are especially costly). Those benefits go only to certain card users, but the store owner pays for those benefits (or all of the other customers subsidize the benefits by paying higher prices).

You could also argue that taxes are another type of cost, and some businesses use cash in an attempt to minimize taxes. Without an electronic record of every transaction, it’s hard for the IRS to prove that you’re underreporting. This is probably the exception and not the rule, but it happens.

Certainty

Cash is king. When you pay with cash, the business owner knows that the transaction is complete, and there’s very little risk of future complications (the money could be counterfeit, but that’s relatively unlikely). The money is available immediately for the business owner to use or deposit.

When you pay with plastic, it can take several days for the money to become available in a business’ merchant account (especially with a credit card). What’s more, the charges might get reversed in a few months: if the card was used fraudulently or a customer is unhappy with a product or service, card companies are quick to issue a chargeback.

In some ways, checks are safer for merchants because it’s harder for customers to take their money back. Of course, anybody can write bad checks or stop payment on a check, but once the customer’s bank pays on the check (which might take several weeks) it’s hard for the customer to unilaterally pull the money back.

Businesses can sometimes get a heads up on bogus accounts or people who frequently bounce checks with a check verification service.

Complexity

Given the issues above, some businesses decide to avoid cards altogether. They might actually benefit from accepting cards, but they don’t feel like figuring out how to overcome the challenges and find the right payment solution. The work required to pick a vendor and choose the best pricing model is just too much.

In many cases, these businesses don’t need to accept cards – they’ve got enough business already. This is generally only an option for businesses that offer a unique product that customers love. For example, imagine a taco stand with a line out the front door: customers are already spending enough so there’s no need to take on the problems that come with cards.

Why Stores Don’t Accept AmEx and Discover

Some stores accept plastic, but they’re selective. Most merchants accept Visa and MasterCard, but occasionally they’ll decide not to accept American Express and Discover. In general, this is because of the same problems described above – but those issues are even greater with AmEx and Discover.

Customers love their AmEx and Discover cards. However, fees for accepting those cards tend to be higher than plain-old Visa and MasterCard. What’s more, it might be easier for customers to dispute and reverse charges with those issuers. Most people with an AmEx card also have a Visa or MasterCard, so they could pay with another card if they wanted (although some cardholders are so loyal they claim they’ll avoid doing business with merchants that don’t accept their favorite cards).