Debit, Credit, or Neither?

You may have been to a restaurant or a local business before that doesn’t accept card transactions. Cash only, no questions, ATM is in the back. Why would an owner potentially drive away customers by taking away the convenience of plastic?

The driving factor is the sheer volume of fees associated with purchasing card readers and paying processing fees to card vendors. If you’re interested in catering to more customers or just don’t want to ditch the consumer convenience of accepting card transactions, check out our financial tips for controlling the cost.

The Great Debate: Debit Versus Credit

Don’t just settle for the first card processing service you encounter. While it can be tempting to take the first offer you find as a new business owner because it seems convenient at the time, you may not realize that other vendors would offer different interest rates or cost-per-swipe charges. Shopping around can save you real money if you take the time to negotiate with companies and look around for what other businesses have to offer.

Benefits of Credit

Using credit instead of debit does still offer several key benefits, particularly when it comes to financial flexibility and protection. Credit cards can help build your credit history, improving your credit score when used responsibly, which can be crucial for securing loans or better interest rates in the future. They also offer stronger fraud protection compared to debit cards, as many credit card issuers provide zero-liability policies, meaning you’re not held responsible for unauthorized transactions.

Additionally, credit cards often come with rewards programs, cash back, and travel benefits, making everyday purchases more rewarding. Unlike debit cards, which draw directly from your bank account, credit cards provide a buffer for unexpected expenses, giving you more time to manage cash flow. When used wisely, credit can be a valuable financial tool for both short-term convenience and long-term financial health.

Benefits of Debit

Using debit over credit offers several advantages, especially for those looking to manage their finances responsibly and avoid debt. Since debit cards pull funds directly from your bank account, they help you stay within your budget and prevent overspending, unlike credit cards, which can lead to accumulating debt if balances aren’t paid off in full. Debit cards also don’t charge interest, making them a cost-effective choice for everyday transactions. Additionally, there are typically fewer fees associated with debit cards, as they don’t come with annual fees or high late payment penalties.

Additionally, there is a way to get around the variable rates and deal with a more stable form of transaction. Thanks to regulations imposed by the Federal Reserve, fees on debit transactions are now capped at 21 cents per transaction. Some retailers feel more comfortable, anyway, because a debit transaction draws directly on the customer’s available balance at the bank. This means no bounced payments if a credit is declined later due to overcharges on the consumer’s account.

Benefits of Avoiding Card Transactions

There is always the option of staying away from card transactions altogether. This will save on regular fees, won’t scalp the top from every sale, and can make bookkeeping somewhat easier for small businesses handling everything internally. Owners need to be aware, however, that refusing to take a debit or credit payment may deter customers. If they can get a similar product somewhere else with the convenience of a card swipe or without having to pay ATM fees, it could hurt business more than paying the 2 percent or less most vendors charge.

Debit or Credit? Let First United Bank & Trust Help You Decide