Cash Only vs. Credit Cards: Pros and Cons

Cash Only vs. Credit Cards: Pros & Cons

It’s easy for businesses to accept credit and debit cards, but “cash only” businesses still are still common.  Use this guide to decide the right mix of payment options for your business.

Accepting Cash Only

Cash is the most commonly accepted and reliable form of payment for a business. Many small businesses operate as “cash only” merchants. Years ago this wouldn’t have been uncommon, but with advances in technology, business owners must ask themselves if they’re hurting their bottom line by limiting payment options.

If you’re thinking about starting a cash only business or if you’re considering expanding your current payment options, be aware of the pros and cons of only accepting cash.

Pro: Cash payments ensure that businesses receive funds immediately. With each transaction, your business immediately receives the appropriate payment amount without the worry of waiting periods or not getting paid at all.

Pro: Cash is the simplest form of payment and therefore involves less bookkeeping. For a business, that not only means less stress and hassle, but it also may save money in the time and labor it would take for a bookkeeper to record other payments methods.

Pro: There is limited risk of fraud when accepting cash only. There are cases of counterfeit cash payments, but compared to other payment methods, fraud is much less common in cash transactions.

Pro: Cash only businesses don’t have to worry about third-parties or fees associated with other payment options.

Con: Customers who do not have enough cash on them will have to walk away from a purchase they would otherwise make.

Con: Your business may lose customers by only accepting cash. As card payments become more and more popular, many consumers expect this to be an option when making purchases. If they find that a particular business only accepts cash, they may feel inconvenienced and shop elsewhere.

Con: Keeping large sums of cash on your business’s premises increases the amount of time you’ll spend managing finances and also creates an added security risk.

Con: The IRS requires that you file a Form 8300 if your business receives more than $10,000 in cash from one buyer as a result of a single transaction or two or more related transactions.  The same rule applies to cash equivalents such as traveler’s checks, bank drafts, cashier’s checks, and money orders.  The form requires the name, address, and social security number of the buyer.

Accepting Card Payments

Credit and debit cards are popular, convenient, flexible, and have become increasingly important in business commerce. If your business is considering what forms of payment to accept, or if you’d like to expand the payment options of your cash only business, be sure to go over the pros and cons of accepting card payments.

Pro: Card payments are evolving into the most common method of customer payment.

Pro: Businesses can easily accept card payments.

Pro: The convenience of using credit cards generally increases the likelihood of consumer “impulse purchases,” which ultimately contributes to an increase in a business’s average sale. Customers are more likely to make these purchases if they have access to credit or their available bank account funds.

Con: Card payments come with an increased risk of fraud. Although there are laws and security measures that help protect and secure customer information, card payments are inherently more susceptible to foul play than cash. Read more about your responsibilities to protect your customers’ privacy and secure their personal information.

Con: Businesses that accept card payments encounter small processing fees for purchase transactions. These fees seem insignificant but they can certainly add up, especially if your business accepts a lot of small purchases on credit cards.  Setting up the necessary equipment to accept cards also carries additional costs.

Con: Card transactions add another layer of detail to your business’s bookkeeping practices.  Your business will have to take into account the additional time and resources it takes to maintain these books.

The Bottom Line

Accepting card payments will, at least initially, cost your business money and add extra processes in your daily operations. Many small business owners look at this as a necessary operating expense. As card payments become more popular, customers will likely begin to expect a plastic option as a rule, rather than a courtesy.

On the other hand, the nature of some small businesses may make it smarter to stay cash only. Flea markets, street vendors, and lawn service providers are just a few examples of common cash only small businesses. At the end of the day, you will have to decide which payment options will create the most success for your business. Our professionals can help you determine what payments you should be accepting and help you implement payment systems, contact Gordon Advisors, P.C. at 248-952-0200 or on the web at


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s