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Credit Card Disadvantages for Business

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedJun 20222 min read

Credit card payments have long been ubiquitous in business. They’re convenient, secure, and trusted by the public. However, there are also a few downsides to this payment method from a business vantagepoint, starting with high transaction fees. Here’s a guide to help you break down each advantage and disadvantage of credit card payments, along with some suggestions to help you find the right payment solution.

Advantages of credit cards

Card payments – both debit and credit – were used in over half of all UK transactions in 2020. So, what makes this payment method so popular with consumers? Familiarity and ease of use, as well as consumer protections from card issuers are all relevant factors.

There are some advantages of credit cards for businesses as well:

Credit cards open the doors to online sales from anywhere in the world. Global card networks allow businesses to accept payments regardless of geographic location and physical presence. This translates to increased sales.
In comparison to some lengthier payment methods, credit card payments improve cash flow because they only require a couple of days for processing. For example, sending an invoice requires that you wait for the customer to receive it, process it, and pay you.
Because they’re so popular among consumers, accepting card payments levels the playing field and makes you more competitive. Any business, great or small, can get set up with credit card processors. A business that doesn’t accept this type of payment at all might fall behind comparatively.

Disadvantages of credit cards

However, there’s a price to pay for accepting credit cards as a business, namely in the form of fees. Here are credit card disadvantages to consider at the same time:

In order to accept card payments, you’ll need to pay a credit card processing company. You’ll be charged a fee for every transaction, potentially in addition to monthly fees and added costs for equipment hire like card processing terminals. All these little costs really add up over time.
Another issue to consider is payment failure. Cards have high failure rates due to measures beyond the merchant’s control. For example, if a card’s expired or numbers are entered incorrectly, the payment fails, and you might lose the sale completely.
Customer disputes are another credit card disadvantage. If the customer disputes their charges, the business often not only has to issue a refund but also pay a chargeback fee.
As a push-based payment, it’s up to the customer to complete a sale and trigger a payment. Cards give customers full control over the transaction in comparison to other payment methods.

Weighing the advantage and disadvantage of a credit card

There are pros and cons to accepting credit cards as a business. The benefits outweigh the disadvantages of credit cards for most businesses in the UK. However, as we increasingly move towards a cashless society it opens the possibility of using additional payment methods like Direct Debit, instant bank transfers and digital wallets. If you’re on the fence, it’s worth surveying your customer base to find out their preferred payment methods.

GoCardless makes it easy to accept Direct Debit. Automate payment collection. Reduce manual admin. Get paid on time, every time.

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Alternatives to credit cards

When looking at advantages and disadvantages of a credit card, it’s clear that cards have their well-deserved place. However, you should also consider the alternative payments out there. Card payments are push-based, giving the customer control over payment amounts and timings. This can lead to delays and trouble with cash flow, particularly if your business depends on invoices or recurring subscription payments.

GoCardless provides a pull-based Direct Debit solution that puts the merchant in charge of incoming payments instead. With direct transfers between bank accounts, you pay lower transaction fees. Merchants can also reduce the incidence of payment failure with Success+, a tool that automatically retries the transaction should a payment fail the first time. With alternative methods like these, you can avoid the main disadvantages of credit cards like those mentioned above.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.