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Why some businesses still don't take credit cards

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Credit cards are accepted nearly everywhere and for payments of all sorts.  The majority of midsized and large companies accept credit card payments, with fast food restaurants such as McDonald's even allowing customers to charge orders of as little as $2.  But there are still those businesses where you simply cannot pay by plastic.

Compare Low Interest Credit CardsFor many of these places, credit cards represent processing fees, equipment costs and additional time to complete transactions that they just don't want to take on.  

Some of the businesses offering merchandise or services that are relatively inexpensive would have to raise costs if they accepted credit card payments.  These merchants explain that they are trying to keep from passing on the cost of credit cards to their customers.

But other businesses acknowledge that they themselves do not want to pay credit card processing fees, especially when business is tough.  Businesses are charged between a quarter of a percent and 5 percent on each credit card transaction in what are known as interchange fees.  Merchant banks pay those fees to card issuing banks, and merchants pay the fees as part of the fees charged by their banks.

Certain businesses note that the cost of renting and repairing credit card terminals, in addition to processing fees, mean they do not do enough transactions to make accepting credit cards worthwhile.

Another reason businesses may opt not to take plastic is because credit cards create a paper trail that makes it more difficult to hide income.  These businesses may be trying to keep earnings from the eyes of the Internal Revenue Service.

Less dubiously, the merchant may simply find taking credit cards to be a hassle or impractical. 

Whatever their reason, there is intense pressure for businesses to take credit cards.  Merchants may allow you to pay by credit card even when they would prefer not to because of their fear of alienating or losing customers, according to a survey conducted by the Association for Financial Professionals.

To reduce interchange fees, some business owners only take credit cards with the lowest fees and will not take reward credit cards, which have incentives that the merchants help fund.  Other merchants may require a minimum credit card purchase amount to offset some of the cost of the fees -- although MasterCard and Visa forbid such minimum charge requirements.

Experts note that some businesses have greater leverage in requiring cash payments, with the sale of more unique services or goods giving the business owner more power to only accept cash.  Meanwhile, the credit card companies have worked to appeal to less distinctive businesses by lowering interchange fees for those merchants that have small fraud risk, like grocery stores, fast food restaurants, movie theaters, and dry cleaners.

Published: November 14, 2006


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Updated: 12-05-2016


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