How a “We Only Accept Cash” Policy Lowers Your Profits

As some businesses fight over a ban on card-only payment policies, others hold firm to their belief that cash is king. Sometimes, this means refusing to take any form of payment besides cash. The truth is, restricting how your customers can pay you almost always means you’re restricting how much they will pay you.

The Reasons Behind Cash-Only Policies

There are three main reasons businesses adopt cash-only policies.

Transaction Fees

The primary reason behind cash-only policies is usually the credit card fees. The average credit card processing fee approaches 3% depending on the network. You may also need to pay a separate monthly fee to the processor or have to purchase credit card readers. When you see this line-item expense each month, especially on low-margin sales, banning cards can look like an easy way to cut costs.

In the past, many credit card processors also had a fixed fee per item. For example, each transaction might cost $0.30 plus a percentage with the $0.30 putting you in the red on small-dollar sales. These fees still exist, but many processors now offer a simple percentage without a fixed fee, so switching to a new pricing plan can alleviate this concern.

Tax Avoidance

Some businesses only take cash to try to hide income from the IRS. Obviously, this is illegal and could lead to hefty fines and interest plus potential criminal tax evasion charges if you’re caught.

You should also know that underreporting your income could make it harder to qualify for a loan as you won’t have proof of your true income. This could either be a business loan or a personal mortgage application that relies on your business income.

Chargeback Risk

Other businesses have concerns about credit card chargebacks. If you follow best practices, this really shouldn’t be a concern as chargebacks will only be a tiny fraction of your total sales. Yes, you might get scammed once in a while, but like with shoplifting, going too far to eliminate every possible theft may hurt other parts of your business.

How Taking Cards Helps You

Even with the costs and risks of taking cards, there are still major benefits to taking cards.

Increased Sales

Credit card sales are an average of 18% higher than cash sales. This is due to a combination of factors including the psychology of it being harder to part with physical cash, not losing sales when customers don’t have enough cash on them, and customers being willing to go into debt for certain large purchases.

Customer Convenience

People simply don’t use cash anymore.

  • Less than a third of Americans make a cash purchase in a given week, and under half always have cash on them.
  • Less than a quarter of all people use cash for all of their purchases.
  • Of the people that carry cash, 76% carry less than $50, and half carry $20 or less.

Simply put, if you require cash when your customers don’t have it, there’s a good chance they’ll keep walking to the next store rather than to the ATM.

Reduce Cash Handling Costs and Risks

While cash doesn’t have an obvious transaction fee like a credit card sale, it isn’t free. Your bank may charge you deposit fees or other ancillary charges like for rolled coins. The time your staff spends counting cash and bringing it to the bank adds to your labor costs. Finally, there’s the risk of staff not counting money properly or even stealing it.

Should You Go No Cash?

If credit cards are so good, should you go card only? The answer is no, especially if you’re in a restaurant or retail environment where a lot of people are still used to using cash.

Remember that even if a lot of people prefer cards, the people that still use cash are in the tens of millions. Like with turning away cards, turning away cash could cost you a large percentage of your sales.


Credit cards increase your sales in a way that means banning them directly lowers your profits. To maximize your earnings, you should always give your customers as many popular payment options as possible.

If your concern with cards isn’t the cost or risk but the time it takes for your credit card receipts to hit your bank account, talk to Merchant Capital Source about a merchant cash advance backed by your credit card sales.

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