Charge It: Why Accepting Credit Cards is Key to Business Survival in 2011

Charge It!!!! Although the phrase "Cash is King" is the predominate mindset of the business world. But when compared to cash, accepting credit cards as a form of payment for the products and services provided proven to be the most popular medium of exchange in today's global economy. Credit cards give its holder the ability to buy products and services now based on the promise that the holder will pay for these products and services in the future. The card issuing bank creates an account for the card holder that provides a line of credit the card holder can use to borrow money for payment to a business or organization accepting credit cards. In the US, credit cards as a system of payment was first made available in the 1920's and was primarily used to sell fuel to a small and emerging automobile market. As of 2009 there are at least 473 million Visa and MasterCard credit cards in circulation in the US.

One convenience credit card users have is that the cards quickly gives them a short term financing instrument (a loan) to make purchases of items that do not exceed the maximum credit limit placed on the card. If cash is not available the cardholder can simply make their purchases with the credit card and then pay off the charge balance on the card over time by making regular monthly payment (with interest) until the balance is paid off. With this understanding, businesses that are accepting credit cards will most likely increase their opportunities to make the sale now versus waiting for the consumer to have the cash in the future to make that purchase. Businesses realize that there is an element impulsiveness consumers have when making purchases. If a sharp business owner or salesperson can smooth over the completion of a sale by reminding their customer or prospect that they can charge it (on their credit card), get the desired product now (instant gratification), and do not have to pay for it now (delay the payment until a future point in time) then it stands to reason that the sale or transaction will occur now. Another convenience credit card users have is more fraud protection compared to other forms of payment. In some countries, both the card issuing bank and the merchant is held responsible for purchases of defective products over a certain dollar value.

Businesses accepting credit cards will not only benefit from the immediate completion of the sale but they will also benefit from a customer's willingness to repeatedly use their credit cards due to the rewards and benefits packages they earn each time they use their credit cards. Some of these rewards include airline miles used to redeem plane tickets, card points that can be converted into cash, ECT. Other benefits businesses gain by accepting credit cards is that credit cards deter an employee's desire or willingness to skim or steal cash. In the past, businesses that choose to issue store credit must evaluate the costumer's personal credit history on a case by case basis before they extended credit. But now credit risk assumption occurs with the credit card issuing banks that also perform the credit risk evaluation of the customer.

Although accepting credit cards has a few drawbacks such as charge backs (where the card holder disputes charges on the card due to fraud or product dissatisfaction) and potential fines for violating rules Visa and MasterCard have in place for conducting credit card transactions, there are more benefits gain by including credit cards as a payment type.