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Cash, cards, Venmo … don’t turn away customers who actually want to pay

By March 24, 2024No Comments

(This column originally appeared in The Guardian)

Splitting the bill with Venmo, paying with your Starbucks app, tap-and-go with your phones — how we pay for things has changed forever. But while our options have changed, and are still changing, some small business owners seem determined to either keep us counting bills or jump feet first into their idea of the future.

Case in point from my home town: the owner of the restaurant in South Philadelphia who “doesn’t accept credit cards” and instead forces their customers to use an ATM machine which — conveniently — charges a $4.50 fee to withdraw cash. Everyone has to do this because no one carries cash these days.

Or there’s the convenience store operator near Rittenhouse Square who won’t take a credit card for purchases under $5, which either requires customers to purchase additional, unwanted products or to simply (as is my case recently) turn around and walk out the door.

Or the deli in Margate, New Jersey, that has a sign warning that an additional fee will be levied on those heartless customers who deign to use a credit card instead of paying cash.

Then there’s the opposite: the army of franchise stores and other businesses that insist on operating their business “cashless”, invoking the wrath of governments from California and Wisconsin to Washington DCFlorida and yes, even Philly, in order to put a stop to a practice that clearly discriminates against those who aren’t in a position to own a credit or debit card.

Denying a customer’s preferred method of payment is insulting to the customer. And it’s harmful to the business

None of these practices are very smart. And for good reasons.

The first is simple math. Those business owners who shun credit cards don’t seem to recognize this. They say they do so because they want to avoid paying fees, which is a fair position to take because transaction costs can range anywhere from 2–4% and for a retailer or restaurateur that can take a significant bite out of their already lean margins.

I get that, but as an accountant let me point out that this is an easily solved challenge. With just a little effort (and perhaps some assistance from their accountant) they can calculate the overall annual cost of these fees and then spread this cost among all of their products by slightly increasing prices across the board. Will I be upset if my burger costs $11.60 instead of $11.15? There’s your 4% and I won’t even know the difference. But — like many other customers — I get annoyed when these costs are segregated and levied like an IRS penalty. Or when handwritten signs with exclamation points are posted on the register. Or, in some cases, just indiscriminately added to the check without my knowledge. Not smart.

Oh, and if you think you’re pulling the wool over the taxman’s eyes because you’re dealing only in cash then you better think again. Any IRS auditor with half a brain can physically observe your business over the course of a few days and pretty reasonably estimate your revenues compared with what you’re reporting. If you get audited you’re not going to fool anyone.

Nor is it smart to demand that a customer use a form of payment that is convenient for the business, regardless of the customer’s desire. This is not 1984. Today’s customer has many ways of making payment, from credit cards to mobile apps to bitcoin. And yes, these forms of payment involve fees that can be absorbed (see above). Denying a customer’s preferred method of payment is insulting to the customer. And it’s harmful to the business because either customers walk away irritated by the whole transaction or without purchasing.

Small business owners complain about higher costs and inflation. They struggle to cover their overhead. They battle for new customers in a slowing economy. All of these concerns are justified. So how then can these same business owners so blithely turn away actual customers with actual money because they don’t like their form of payment? It’s baffling to me. This is not a model for future growth.

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