Credit cards can hurt small businesses

Some merchants are asking customers to pay cash instead

The sign at Royalicious Bagel Bakery is polite, but to the point: Customers are asked to please pay cash whenever they can because the fees charged for credit card transactions take such a bite from the business’s profits.

Picking up sandwiches at the New York-style bakery in the Walmart plaza at 126 Patrick Henry Way in Charles Town on a recent afternoon, I take heed of the notice but discover only a lone buck in my wallet.

I point to the handwritten sign taped to the till as I sheepishly hand over my Visa, then assure the clerk that I’ll come armed with cash next time.

“Aw, it’s OK, honey,” she tells me, giving me an understanding shrug. “We’re a cashless society. Anytime you can pay cash, that’s great. We really appreciate it.”

Jessica Gibson, the customer next to me in line, didn’t have cash either, but she did have a plan: Instead of charging just the day’s coffee and jalapeno bagel sandwich, she also pays for a Royalicious a $20 gift card.

“That way,” the Harpers Ferry resident says, “next time I don’t have cash, I can use this.”

Since discovering Royalicious after moving to the Panhandle this fall, the Ohio native says she makes an effort to have cash on hand whenever she visits. “I understand why they’re asking customers not to use credit cards,” she said. “I’m happy to help when I can. This is a business I want to continue to succeed.”

Customers at Royalicious Bagel Bakery in Charles Town are encouraged to pay for purchases, especially smaller transactions, with cash, not plastic.

Customers at Royalicious Bagel Bakery in Charles Town are encouraged to pay for purchases, especially smaller transactions, with cash, not plastic.

Small businesses such as the family-owned Royalicious say they’re grateful to Gibson and other patrons who extend such thoughtfulness.

It’s a strategy that makes sense from the consumers’ standpoint, too: If small retailers can keep more of their profits, maybe they’ll keep prices as is.

The sting now associated with customers use of plastic is a turnaround from a decade or so back when many small businesses got into the credit card game thinking it would allow them to offer their patrons better customer service. National surveys show most of us prefer to pay not with cash or check, but with a credit or debit card.

Also no doubt looming large: the conventional wisdom that by accepting credit and debit cards, any business could take in more moolah.

One study, by the global accountancy firm Price Waterhouse Coopers, for example, found that the size of an average credit card order is three or more times larger than the average one paid for with check or cash. The gap has become known as the “credit card premium.”

Nonetheless, some businesses always have just said no to credit cards and continue to hold firm. A prime example is Martinsburg’s Berkeley Plaza Theatre 7, where credit cards aren’t an option (nor are debit cards or checks).

The theater’s website and ads make note of the cash-only policy, but for customers caught unaware, the family-owned business established in 1965 maintains an ATM in the theater’s lobby.

Of course, many consumers have their reasons for preferring plastic. Some say they don’t like carrying around bills and change that can get heavy and/or disorganized in pockets or pocketbooks.

By paying with a card, a consumer also has a paper trail where it’s easy to look back at the money going out. At month’s end, a look over the credit card bill lets a customer see at a glance how much is going for bagels, coffee, gasoline or other categories of spending.

Cards also can offer protection in case of a dispute with a merchant.

But while consumers have their rationales, plastic clearly is a double-edged undertaking for businesses.

The exact fees charged for a transaction varies based on factors including the card brand, the region of the country where the business operates, whether the card is a credit or debit, and the size and type of the business accepting the card.

Making things more complicated: Interchange fees typically involve a flat fee plus a percentage of the total price of the purchase. In the United States, the fee averages about 2 percent of the entire transaction cost.

Banks contend such fees are needed to keep computer networks running properly and to cover efforts aimed at reducing fraud, but many businesses owners and financial experts complain that credit card companies’ fees exceed any of the actual costs involved in handling such transactions.

For Charles Town’s chief bagel haven and many other small businesses, the bottom line is this: With the annual fees charged to merchants totaling tens of thousands of dollars even for a small, privately owned business, that’s a lot of bread going out the door.

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