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Oct 18, 2008 05:54 PM

How bad does accepting credit cards hurt small restaurants?

I've noticed that some of my very favorite small restaurants are cash only. This policy can be slightly inconvenient for me at times, but I always figure cash keeps the quality high. Now tonight I went to one of my all time favorites (Ray's Pizza in Lansdale Pa) and was floored to see that after all these years they finally accept credit cards for over 10.00. I thought I would be delighted but I love this place so much that I am concerned. My friend and I think that they might have adopted this new policy to add some flexibility for their customers during these harsh economic times, but only they know for sure why the change in policy. I sure hope it works out for them. I used to go to a gaming shop where the owner reluctantly accepted credit cards but made me feel really guilty every time I used one. Do businesses have to wait for their money once a month or is it the three percent fee (or more) the credit company charges them? Anyone know?

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  1. I'm only guessing, but would think yes and yes to your reason's, plus add that the IRS has a lot more visibility to your cash flow.

    1. pretty much everything gets taxed and there is the fee. all in all cash is always favored. ALWAYS!!!!!! if i don't have enough cash on me when i go out i sure do have enough for at least tipping.

      1. My fiance owns a small business and is counting the days until he can take credit cards. Yes, you are making the government aware of your income (thus you have to pay taxes on it) and yes, the credit card company takes your fee. However, there is HUGE benefit for a small business. Having talked to many small business owners about this over the last year, on average they see at least a 25-20% increase in proftits. Yes, credit when abused can lead to tragedy but at the same time, for small businesses, it can be a blessing. Quite frankly, I am floored when I find a small business, especially a restaurant that does not accept credit cards. They may see it as a cut into the profit, but that is only a short term consequence. With this horrible economy and people eating out less, small restaurants need to do as much as possible to encourage customers to eat their food. Credit is not always a bad thing.

        6 Replies
        1. re: NicoleFriedman

          Amex deposits take 7 days to hit the merchant's account, Visa/Mastercard is 24 hours except on weekends, a saturday sale may be credited as late as tuesday noon.
          Accepting "cash only" removes a lot of headaches and paperwork for the merchant but in this day and age, not realistic for the consumer.

          1. re: superbossmom

            And AMEX and Discover charge more per transaction (at least in my state).

            1. re: Sal Vanilla

              This is true; I was assistant manager of a family-owned bookstore for a couple of years in the late '80s, and the family resisted AmEx and Discover for a long time for exactly that reason. AmEx charges more than Discover; Discover takes longer to transfer funds.

              1. re: jmckee

                They make most of their money from the "float." The fees and interest charges are just bonus.

          2. re: NicoleFriedman

            The benefit depends on location. For a place that has a lot of foot/slow traffic in their area, accepting cards can be a benefit. The benefit also depends on the processing company, some are good, others commit legal robbery.

            For small out of the way places, accepting plastic can be an overall loss in income. In my former restaurant we took a hit in income when we started accepting credit/debit cards as the only thing that changed was our regular customers began using plastic. We put up the signs showing that we accepted cards with the expectation that business would increase - what we didn't realize was that with zero foot traffic in our area, only those customers who already patronized our place saw the change. It took several years to build up enough new business to offset the fees.

            1. re: NicoleFriedman

              As a small business owner I am trying trying to understand how it is short term consequence. I built a "small business" and working on paying off that bank loan. I just stopped taking credit cards last year (after 5 yrs of business), we have not lost any business when I tell them we do not take credit cards then don't mind. Looking back, I could have applied the $25,000 paid over 5 yrs in fees to my loan. That is what people have to realize, that it adds up over time. Most people don't mind and pay by check, and yes, I do report all cash that comes thru this business. By us not paying out people's reward dollars on their credit cards, we get to keep our pricing the same without going up. So many customers did not know that the business accepting the credit cards pays for their rewards. It just depends what they get used to. Some of my fave restaurants in NYC, and here in Louisiana don't take cards. I am more prone to supporting them these days.

            2. In part it's the fee, same reason gas stations give a discount to those who pay cash.

              1 Reply
              1. re: lgss

                oddly, it's the opposite at the station near my workplace...2 cents less a litre if you use your debit card.

              2. It hurts them like any small business. You have to give up some income in fees
                No doubt that a cash business can allow the owner to hide income from taxes.

                2 Replies
                1. re: scubadoo97

                  This thread just reminded me of a funny incident when I was in Amsterdam last year. It was New Year's Eve and none of the ATMs had been working for the last 2 days; myself and my now-fiance were out of Euros. We went to a restaurant on a busy main street. No sign that said cash only- and granted, we should have asked. At the end of a relly good meal, the manager tells us they do not accept credit cards. We had no cash! It took about 30 mins of back and forth for the manager to finally go next door to another restaurant to get their credit card machine- either that or he would just take our word and we would've mailed him a check. (Which we would've done) While funny now at the time it was a huge nuisance!

                  1. re: NicoleFriedman

                    When I travel, I always look for the visa sticker in the front window and I still ask if a credit card is ok before I order. I have found it very common in europe for businesses to not accept credit cards on small amounts, under 10 or 20 euros.