In 2020, the Federal Reserve conducted the Diary of Consumer Payment Choice, where 1,537 consumers were asked which forms of payment they used over a three-day period. Results show that 27% of their payments were made using a credit card. With almost a third of consumers reaching for their credit cards, why do some businesses not accept them?
Why credit cards are not accepted by all businesses
Many merchants in the U.S. do accept credit cards. However, some of them do not want to incur the associated fees required to process the transactions. These are often called “swipe fees". These fees differ among credit card issuers and networks, but generally average between 2% and 3% of each transaction.
What if a business only accepts certain credit cards?
If a business only accepts certain credit cards, it's called selective credit card acceptance. This means that business owners can decide if they only want to accept one kind of credit card network. It may be helpful to have more than one kind of credit card or payment method in your wallet in case you find yourself in a store or on a website that only accepts a certain kind.
Another reason why merchants may not offer a certain credit card as a payment option is because of a partnership with a specific network. For example, a big box store that agrees to only accept one type of credit card — like Visa.
Which credit card is accepted the least?
Technically, store cards are the least widely accepted credit cards because they can only be used at their specific family of brands.
Why is my credit card not being accepted online?
If your credit card is not being accepted online it could be because you're using a credit card that the merchant does not accept, or a payment method that's not compatible. Your card may be declined if you try to make a purchase with an external payment processor that your merchant does not allow. For example, some card issuers do not allow third-party payment apps to make mortgage or utility payments online. In this case, your card will be rejected. If this happens, try using a different type of card.
As always, it's essential to read the terms and conditions on the merchant's website to see which cards are accepted and which ones are not.
Why businesses should accept credit cards
There are several reasons why it's a good idea for businesses to accept credit cards as payment.
Consumer preference: Data shows that U.S. consumers prefer using a credit card over any other form of payment. In a 2020 study conducted by the Federal Reserve, 33% of people stated that they preferred to use a credit card for non-bill payments. Businesses that accept credit cards may find that offering this convenience to customers translates to more sales.
Cash flow: When a customer pays with a credit card, the business is usually able to receive the money within days or even hours. This is a helpful way to maintain cash flow since checks or invoices may take a long time to process and clear.
E-commerce: Likely, a portion of the business's potential customer base is online. When they allow credit cards as payment online, they may not only see higher sales, but they may also be seen as more legitimate and trustworthy to their customers. Above all, this option offers a convenient and secure way for online shoppers to do business with them.
The majority of U.S. merchants offer credit cards as a payment option because it's the method that their customers prefer to use. Still, some merchants do not want to pay the swipe fees associated with processing the credit card transactions. It's generally a good idea to keep more than one form of payment in your wallet in case you engage with a business that does not accept credit cards.