Ssplit the bill with Venmo, pay with your Starbucks app, tap and go with your phones – the way we pay for things has changed forever. But while our options have changed, and continue to change, some small business owners seem determined to either keep us counting the bills or jump in first with their idea of the future.
Typical example from my hometown: the South Philadelphia restaurant owner who “doesn’t accept credit cards” and instead forces his customers to use a vending machine that – conveniently – charges a $4 fee. $50 to withdraw money. Everyone has to do it because no one carries cash these days.
Or there’s the operator of a convenience store near Rittenhouse Square that doesn’t accept credit cards for purchases under $5, forcing customers to either buy additional unwanted products or simply ( as is my case recently) to turn around and leave.
Or the deli in Margate, New Jersey, which sports a sign warning that extra fees will be charged to heartless customers who deign to use a credit card instead of paying with cash.
And then there is the opposite: the army of franchise stores and other companies that insist on running their businesses “cashless”, invoking the wrath of governments of the California And Wisconsin has Washington, D.C., Florida and yes, even Philadelphiain order to put an end to a clearly discriminatory practice against those who are unable to possess a credit or debit card.
None of these practices are very smart. And for good reasons.
The first concerns simple mathematics. Business owners who avoid credit cards don’t seem to realize this. They say they do this because they want to avoid paying fees, which is a fair position to take because transaction costs can vary between 2 and 4 percent and for a retailer or restaurateur that can significantly reduce their already thin margins.
I understand this, but as an accountant, let me point out that this is an easy challenge to solve. With just a little effort (and perhaps some help from their accountant), they can calculate the overall annual cost of these fees, then spread that cost across 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 separated and perceived as an IRS penalty. Or when handwritten signs with exclamation points are posted on the register. Or, in some cases, simply added indiscriminately to the check without my knowledge. Not smart.
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Oh, and if you think you’re cheating the taxman because you only deal in cash, you better think again. Any IRS auditor with half a brain can physically look at your business for a few days and make a pretty reasonable estimate of your income relative to what you report. If you are audited, you won’t fool anyone.
It also doesn’t make sense to require a customer to use a payment method that suits the business, regardless of their wishes. It’s not 1984. Today’s customer has many payment options, from credit cards to mobile apps to Bitcoin. And yes, these payment methods involve fees that can be absorbed (see above). Refusing a customer’s preferred payment method is an insult to the customer. And this is detrimental to the business, because customers either leave irritated by the entire transaction or without purchasing.
Small business owners complain about rising costs and inflation. They are struggling to cover their overheads. They are struggling to gain new customers in a slowing economy. All of these concerns are justified. So how can these same business owners so blithely turn away real customers with real money because they don’t like their payment method? It’s confusing to me. This is not a model for future growth.
