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Cash Vs. Credit

Convenient and reliable, credit cards are one of the most popular payment options in the retail world.  In fact, Americans love using their plastic so much that they’re responsible for nearly 25 percent of all debit and credit cards in the world.

Yet, are you ever better off using cash instead?

It depends on which side of the transaction you're on. 

As a consumer, credit is usually the preferred choice:

  • Credit card transactions create an electronic trail.  Even if both you and the merchant lose your paper receipts, the card issuer still has a record of that purchase.
  • Most consumer credit cards offer varying levels of fraud protection.  If a fake transaction occurs, you’ll likely get your money back, but it can be very difficult to recover cash after a sale has been made.
  • Many cards offer reward points that you can use for travel, dining and other services.  Paper money, by contrast, offers zero value after it leaves your wallet.

These consumer-side benefits explain why 10 percent of Americans don't carry cash at all — and 78 percent carry less than $50.  Unless you're "on the lam," there's little reason to rely exclusively on liquid money.

For the merchant, the story is a little different.

Why Vendors Might Prefer Cash over Credit

Displaying credit card logos in your window can help attract more traffic and generate more sales.  However, if you ever suspect potential credit card fraud, you may be better off insisting cash over plastic.  This is especially true if you haven't updated your payment infrastructure to accept EMV credit cards.

Though does this mean that you should live in constant fear?  Is cash always the better option?

No.

99.9 percent of shoppers are good people, and it doesn't make sense to completely remove credit options to protect against the 0.1 percent of folks who aren’t trustworthy.

However, you should take special precautions to reduce your own exposure.  If yours is a high-volume or high-ticket business, even 0.1 percent in fraudulent purchases can start to add up.

Below are a few telltale signs for when cash may be preferable to credit cards:

  • Scan for outliers.  Look for shoppers who buy unusually large amounts of your stock. Be on the lookout for those who purchase the most expensive items in your inventory.  Price insensitivity is a common warning sign of potential fraud.
  • Be wary of new customers who revisit your store several times in the same few hours or days.
  • If the back of the credit card isn't signed — or if a shopper can’t provide legitimate ID, insist on cash instead.

The above rules apply to all types of merchants, but if you sell electronics, high-end fashion, jewelry or consumer appliances, know that you may be a more likely target.

The Best Way to Manage Credit Card Risk

Rather than downgrade to a cash-only business, it’s better to upgrade your payment infrastructure for maximum protection. 

You can still accept paper money, but with EMV payment processing, tokenization, and point-to-point encryption (P2PE), you can dramatically decrease the likelihood of fraud in your store.  What’s more, in those rare instances when fraudulent charges do occur, your liability is greatly reduced.

To learn more about enhancing your store’s payment security, contact our support team today.

Topics: PCI Compliance and Fraud Prevention

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