Jenny is a student who runs a high-end shoe business on the side. A friend of hers produces high-quality, made-to-order shoes, which Jenny then sells to wealthy shoppers in NYC for $1,000 each. The cost to make each pair of shoes is $300.
Jenny gets paid in cash. A friend told her that she should accept credit cards.
Another friend works in Marketing. She told her clients may not have $1,000 cash on them. By accepting credit cards, she could also take orders in advance.
One friend works in Finance. He told her that if she accepts credit cards, she will have to pay credit card fees, duties, sales tax, and income tax. There will be an electronic trace of the transaction. She doesn’t mind paying all taxes but is worried about all the paperwork she will need to fill in.
Would you recommend Jenny to accept credit cards?
Join the other discussions:
Why 79% of contractors don’t want to be full-time employees?
Should we pay severance in the US?
Small businesses and inflation
I think Jenny should take credit cards.
First of all, digital payment methods are increasingly prevalent. Like it or not, the world is becoming less dependent on cash. Young and tech-savvy consumers of all ages use credit cards and mobile wallets like Apple Pay and Google Pay. Additionally, major retailers like Starbucks and McDonald’s are offering alternative payment methods. Cash-only businesses are likely to be viewed as outdated.
Secondly, Jenny will lose important customers. High-income customers and customers under 45 use cashless payments more often. According to the Federal Reserve’s 2022 Diary of Consumer Payment Choice, cashless payments are on the rise. This trend is particularly pronounced among consumers under 45, who used cash for less than 20% of transactions. Coincidently, Jenny runs a high-end shoe business.
Overall, As customers continually expect to pay for goods and services via cashless transactions, Jenny is likely losing money by refusing to accept credit. This is especially true if she is trying to appeal to high-income people and people under 45. Additionally, small-value transactions are decreasing. The Federal Reserve report says a reduction in the number of payments under $25 – which has been on the decline since 2016 – is a significant reason for the overall decline in cash payments. While the pandemic contributed to this decline, the report notes that this trend precedes the pandemic and will continue afterward.
All in all, I think she should take credit cards.
Personally speaking, Jenny should accept credit cards.
Firstly, cash is no longer the dominant form of consumption, replaced by credit cards and electronic pay. For instance, in China, more people tend to pay by mobile phone, such as Wechat Pay and Alipay, which bring a lot of convenience to people’s daily life. So, accepting credit cards can make the purchase experience better for many customers who no longer use cash. Besides, as Jenny doesn’t worry about paying taxes and duty fees, filling out paperwork will not be a big deal. Accepting credit cards, she will maintain lots of customers and ensure customer satisfaction as well. Also, I think accepting credit cards would increase the trust from customers. Because paying by credit cards is a kind of mutual trust. Customers are willing to trust Jenny so they could pay in advance and then get shoes, which could also improves their credit levels. At the same time, it is means Jenny’s trust in customers, so as to maintain a more stable relationship between customers and sales.
Therefore, accepting credit cards could be a better choice for Jenny.
I think Jenny should accept credit cards. Credit payments have become a popular and well-established payment method worldwide, and the fees associated with them are not worth $1,000. This is a great opportunity for Jenny to expand her customer base and increase sales revenue.