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Credit Card Costs

Most consumers choose their credit and debit cards for a reason. Some offer free airline miles, other cards add a percentage to a child’s college account or even have cash refunds. But few consumers know why the businesses they frequent accept, or don’t accept, certain credit and debit cards, what card transactions cost the merchant or why some small businesses are even choosing to take cards with the swipe of a smartphone.


Cash Only Business


Turney Postlewait, owner of Biff’s Bagels, made his decision to accept only cash about four years ago. He claims a couple of things pushed him into the decision. “I watched about $1,500 disappear from my account each month,” Postlewait said. Part of his choice was political. “I was also concerned about where the money was going. I heard about everything the big banks were doing and just decided it wasn’t worth it,” he added. “After talking to another local business owner who claimed they hadn’t lost business switching to cash only, I decided to do it.”

When asked whether Biff’s Bagels lost much business in the switch, Postlewait claimed that it helped to have a $1 ATM in the store and that most locals know Biff’s is cash only. Postlewait did say he recently ordered a Square for use with his smartphone, in order for businesses to make large purchases with cards.


Customer Satisfaction


When Flagstaff Business News took informal Facebook and Twitter polls about cash only businesses and credit card fees, many agreed that, when it comes to actual sales, convenience trumps idealism.

A few customers, like Drew McDowell, are fine with cash only policies. “I don’t mind a cash-only policy at all, so long as I have enough notice.” But many shared Gene Roberdeau’s sentiment that “cash-only is both annoying and cool and unfortunately it has lost my business… It’s a great to keep it ‘local’ but the reality of easy accessibility versus the need to go get cash will steer the majority of people away.”

“I rarely carry cash,” said Laura Camp Monroe, “so cash-only businesses will lose impulse buys from me for sure.” Beth Sabol of Stroller Strides told us “there are certain businesses I never visit because I never have cash!”

Speaking from the viewpoint of a businessperson, Kim Yuhl of Fizz Bath Shop said, “I would not want to lose a customer because they don’t have cash.”

The practice that really upset the most customers we spoke with was charging a fee for using a card. According to Kirsten Dunstan, “Surcharges are against all credit card policies. I find surcharges extremely offensive.” In our informal Twitter and Facebook polls, many agreed; almost a dozen people told us they actually avoid businesses that charge a fee for card use.


Merchant Accounts


Some very small businesses avoid credit cards because they are concerned about the hassle and cost of obtaining a merchant account. Paul Stull of Arizona State Credit Union says their bank offers merchant accounts to members and contracts with an outside company to handle card processing.

Stull explained that securing an affordable merchant account is much like securing a line of credit, with a few more considerations. “There are many factors that can influence whether a business owner is accepted for a merchant account, or what the underwriting will look like,” said Stull. “Some of these factors include experience in the type of business for which they are applying for an account, their credit history, results of a background check, the risk of their business type and the number of years they’ve been in business, among others.”


Mobile Banking


When Flagstaff Business News spoke with Square co-founder Tristan O’ Tierney, he told us his company’s data show profits go up over 10 percent on average when a business starts accepting credit cards. Square charges 2.75 percent per transaction, but there are no additional fees.

For those who don’t want to bother with merchant accounts, Square may be their best option. Square’s swiping device works with Androids, iPads and iPhones. Anne Thomas of Anne’s Alterations told us she looked into a merchant account but learned she was going to incur an extra fee for not meeting a certain dollar amount of credit card sales per month. Thomas still wanted the convenience of accepting cards, so she got herself a Square. “When a customer had trouble paying through PayPal, I realized I needed to make it really easy for people to pay me,” Thomas said, laughing. “I didn’t want customers to make extra stops at the bank and I didn’t want the risk of all those personal checks, so I went with Square, which I use on my Android. If I was doing big dollar sales all the time, I’d consider a merchant account.”

So far, only a few companies have joined an app to a card-swiping device. Other than Square, Intuit GoPayment works with iPhones, iPads, Androids and Blackberries, and ROAMpay works with all of these devices. One difference is that ROAMpay and Intuit GoPayment both necessitate merchant accounts.

Square is most popular with Flagstaff small business owners. Those with low volume sales like hairdressers, artists, fitness group owners, seamstresses and even schools, including FALA, use Square.  Becky Dagget, executive director of FALA, says signing up for Square was “ridiculously easy,” and that they plan to use it at their fundraisers.


Balancing Needs


Although the type of business and rate of sales are just a couple of factors determining which point-of-sale and card processing service a business owner chooses, many are trying to balance their customers’ desire for convenience with their own need for affordability. FBN




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