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Credit vs debit. What’s a retailer / restaurant owner to do?

Glacier National Park

Northwest Montana is a tourist haven.

Just for starters, there’s Glacier National Park, Flathead Lake, the Bob Marshall Wilderness, Big Mountain and Blacktail Mountain Ski resorts. Fishing, hunting, hiking, camping, and heck, we’ve even got some culture and shopping here too.

You meet lots of people from out of town, carrying something that they cant use: Out of state revenue for a state that can use all it can get. But there’s an obstacle preventing them from using their money.

Retailers and restaurants that are missing something that costs them money every single day – and it prevents that out of state revenue from staying here in Montana (and probably where you are too).

A credit card machine with a pinpad.

When I find a restaurant or a store that doesn’t take credit/debit, I’ll usually ask why that is.

Almost every time I hear “Those fees cost too much”.

What they mean is merchant account discount fees. Typically, these fees are between 1.7% and 2.5% of the transaction value.

So if you have a $50 bill in your restaurant, taking a credit card will mean you get about $2 to $4 deducted from your bill.

What many people don’t know is that debit fees are substantially smaller than credit card fees. Part of the reason is risk. A customer has to use their PIN number with a debit card in order to get the smaller debit card fees, otherwise the transaction is run as a charge and you pay the 1.7 to 2.5% fee.

For debit cards, it can be as low as 35 CENTS to run that $50 card, vs $2-$4 as a credit card. This is what makes the pinpad critical, because that’s the ingredient required if you are going to accept debit cards. By now, it should be obvious that you should do so.

When I ask about debit cards, usually the reason is that they don’t want to give cash back. I don’t know if that’s a tax thing (cash receipts that can magically disappear…) or if it’s a misguided concern about handing out cash. I think some of it might be the “you are not your customer” thing – ie: people thinking “Well, I never use my debit card, so no one else will want to either.”

In any business, for any reason, thinking you are your customer – and forming everything based on that opinion can be really dangerous.

This weekend is a holiday. Banks are closed. People run out of cash. Regardless of how dumb you think that is – your inability or unwillingness to accept credit and debit cards is costing you hard cash. Revenue. Sales. Possibly long term local customers who just prefer to pay that way, or traveling business people on expense accounts with business credit cards from their company.

The same sort of thing goes for businesses that don’t accept American Express or Discover. Never forget that you want to make it EASY to do business with you – not hard. I still hear the rumors from the 70’s that Amex’s discount rate is 6%. No, it isn’t. It is slightly higher than MC/Visa, but not much. It is the preferred card for many business travelers and it also tends to indicate a “better” client in business-to-business and restaurant transactions. Discover is simply a big player in this field and it’s silly to leave one out.

If you already have a merchant account, adding Amex and Discover is almost mindlessly simple. Call your merchant people and get this going. You’re leaving $ on the table.

3 replies on “Credit vs debit. What’s a retailer / restaurant owner to do?”

We never know for sure what the best kind of payment is: a debit or a credit card or just cash. It depends on the situation and on a person’s spending habits.


Absolutely. That is why, whenever possible, offering every possible option gives you the most opportunities to make a sale.

When transaction sizes are low, obviously cash and debit are best due to the fees that come with taking a credit card. Still, making the sale is better than not making the sale.

its important for merchants to try to make every payment option available to customers. if it means that having the debit card option means lower merchant fees, why not get it?

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