Advantages Of Using Cash Payments In Small Businesses

by | Dec 5, 2023 | News

Card Charges That Hit Small Businesses’ Pockets

Did you know that every time you swipe your card you are chipping away at your local businesses’ profits?

Local shopkeepers and members of the Honley Business Association (HBA) have highlighted the financial rationale behind their advocacy for customers to use cash payments on smaller transactions.

It follows an increase in fees linked to credit card charges, leading many businesses to regard cash as the preferred payment method for smaller purchases.

HBA understands that selecting the right payment is far from a ‘one-size-fits-all’ approach, but that embracing cash can help generate local prosperity.

‘Cash is King’

Jason McCartney MP for Colne Valley (Con) said the ability to transact in cash remains important to millions of people across the UK, and that the UK Government has committed to legislating to protect access to cash.

“The Financial Conduct Authority has published research on cash acceptance by small and medium-sized enterprises (SME), which found that the primary motivation for accepting cash is to provide customers with choice.

“While it remains the individual retailer’s choice as to whether to accept or decline any form of payment, including cash or card, nearly all (98%) of surveyed businesses stated they would never turn away a customer if they needed to pay by cash.”

The Cost of Convenience

Today, relying on cards and smartphone digital wallets is an easy payment method.

After all, credit cards offer convenience and fraud protection. Transactions are automatically recorded; they enable businesses to reach a broader customer base and are essential for online sales.

The drawback, however, lies in the processing fees, which can significantly affect a business’s profit margins, particularly when used for smaller transactions.

David Proud who owns Holme Valley News in Honley, with wife, Alison, said: “We had initially been informed our charges were going up 8%, but after querying the price hike we have now been informed they will remain at current levels.

“Like most businesses, we are taking more and more card transactions so it’s important as a small business owner to ensure we are still on the best deal.”

Why Carrying Cash is Still a Smart Choice

June McLean, Secretary of HBA and owner of Honley’s Zebra Jewellery and Gifts, said: “With each £1.50 card transaction, these supplementary fees can accumulate making a noticeable difference for us as a small business.

“We value cash for small transactions, especially under £5 because it’s a cost-effective option, unlike card payments that often incur fees that can seriously reduce the profit margin. After all, our running costs must be paid from profit, so without that our businesses cannot survive.

“In these tough times, we all need to help one another to ensure our businesses are here for the long term. Now is the time we should come together to look after our small local businesses.”


Challenges and Considerations for Small Businesses

Card payments tend to come with processing fees, which can come at a significant cost for small businesses, particularly in smaller transactions with tight profit margins.

Acquiring and maintaining card payment processing equipment also comes at a cost. Businesses must invest in security measures to protect customer card data and comply with payment card industry (PCI) standards.

Technical issues can lead to failed transactions, and in some industries where tipping is common, small businesses may need to manage cash for tips separately.

Debt Free Transactions

One customer benefit of using cash payments is that you don’t have interest payments building up. Your personal information is protected, and while most shops now accept credit cards, not every business does. When you pay with cash, you are limited to spending only what you have to hand, promoting responsible spending and helping you avoid the cycle of debt often associated with credit usage.

Lynne Green of Honley’s Creating Memories has concerns that a cashless society could mean zero cash.

“Imagine a world where piggy banks and tooth fairy money no longer exist, where restaurant tipping and private purchases are a thing of the past.

“The concern many have is every penny you receive is recorded and each transaction is tracked.”

A Reliable Cash Backup

Carrying cash doesn’t rely on technology and can prove invaluable during an emergency. Some businesses may offer discounts or cashback rewards with cash payments, which can translate into savings over time.

In other situations, having cash for higher-priced items can make the seller more inclined to provide a better deal for cash payments.

June said: “It’s not about abandoning digital payment methods but rather finding a balanced approach.

“By carrying a reasonable amount of cash, you can enjoy its benefits without sacrificing the convenience of cards and digital wallets.”

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