Why Small Businesses Prefer Cash and Debit

I love paying with plastic. It’s just so convenient. Throw a card into your pocket and head out the door. No heavy change weighing you down and never worried that you might be short by a few cents. And don’t even get me started on how dirty money is! In this day and age, we have never been more aware of germs and viruses!

You too might love paying with plastic, but many business owners wish you’d use cash or a debit card instead. It’s awkward to come right out and say it. I don’t want to appear ‘cheap’ or give the impression we might be struggling. However, as a small business we have concerns that can typically be boiled down to cost and certainty.  

Businesses pay fees to accept card payments. Usually it’s a percentage of each transaction, and they might also face flat monthly charges or have to sign a long-term contract as part of their merchant account. Canadian merchants typically pay between 2 and 3.5 per cent of sales to accept credit cards. 

That might not seem like much, but a lot of businesses only make a small profit on goods and services, and those credit card fees eat into tight margins. Business owners face a tough choice between smaller profits or passing the cost on to customers, and many businesses would prefer to avoid both of those options.

In addition, when you pay with credit cards, it can sometimes take several days for the money to become available in a business’ merchant account. What’s more, if that card gets used fraudulently or there is a dispute, the charges might get reversed a few weeks or months later. We don’t always have a buffer to be able to handle a large withdrawal or to wait for payment. 

As the old saying goes, “Cash Is King”. When you pay with cash, businesses know that the transaction is complete, and there’s minimal risk of future complications. Debit cards are the closest plastic option to cash. They are far less expensive than credit cards to process. At Lux, we pay only $.10 per transaction with debit, versus 2.65% with credit.

The bottom line is, we will never turn away any form of payment. Ultimately we are in the service industry and want your time with us to be as efficient and convenient as possible, from greeting to departure, and that includes the way you wish for us to process your payment. But if you’ve got cash burning a hole in your pocket or you’re indifferent on whether to pull out you debit or credit card, know that for a small business, your choice to use debit or cash can mean significant savings that can keep operational costs down and be used to improve you’re already great experience at Lux!