How does the extensive use of credit cards by their customers affect small businesses?
The extensive use of credit cards by their customers affect small businesses in the increased chances of fraud by the customer, the increased fees in credit card processing, and the increased chances of credit card theft.
Fraud by Customer:
If protocols are not in place to protect from credit card fraud then a small business can be a victim of fraud. A fraudulent credit card could be used for purchases in a storefront or online store. If used in a storefront then the product or service will have been given to the customer right away, if in a online store then the product would be shipped to the customer. The small business owner might not discover the fraud until a month or two later, when the appropriate person opens their credit card statement to see the fraudulent charge. Once victim of credit card theft disputes the charges then the credit card company takes the appropriate money from the small businesses account. The small business will lose the income from the sale as wells as have already lost the product or service with no way to recover the loss.
Increase Credit Card Processing Expense:
For a small business there are no fees involved when accepting cash for products or services. If a small business accepts credit cards then there are fees involved. These fees include monthly statement fees, percentage fees per dollar amount of transaction, and fee per transaction. These fees are an added expense for the small business as well as reducing the profits of the small business.
Increase Chance of Credit Card Theft:
When taking credit cards from customers to process there is a chance that your customers could obtain those credit card numbers for fraudulent purposes thus exposing your small business to risk.
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