Accepting credit cards is becoming a must for entrepreneurs and small businesses in today's
business environment. There are numerous social, demographic and technological factors combining
to make plastic the payment form of choice for increasing numbers of people.
By the Numbers
The average American cardholder has roughly four bank credit cards. Credit card purchase volume
has been expanding about 15 percent per year for the last five years, or three times faster
than the increase in overall U.S. purchases. Debit card purchases are growing even faster,
at more than 50 percent per year. Credit and debit cards are expected to account for 33 percent
of all purchases by next year and for 43 percent by 2005. According to one estimate, businesses
forfeit up to 80 percent of consumer impulse buys if they don't accept credit cards.
Why People Use Credit Cards
To understand the growth in credit card use, it's important to grasp the reasons for their popularity.
Consumers typically use cards because:
They don't want to carry cash
They want to save cash in hand
They want to gain loyalty points (such as airline miles)
They are making a large purchase
They are looking to float money in a bank account
They are making a reimbursable purchase for a company
Plastic on the Internet
Even as credit card use grows in the real world, plastic already dominates the world of Web shopping.
This breakdown of how people pay for online purchases demonstrates that accepting credit cards is
key to e-commerce:
The Business-to-Business Opportunity
It's becoming increasingly clear that credit cards are also playing a greater and greater role
in business-to-business transactions. For example, Visa is
bundling credit and cash management products for small businesses under the umbrella of the
Visa Business Card.
Larger companies are also streamlining their buying processes using so-called business cards
for indirect purchasing. Each business card transaction shaves a reported $50 to $100 in purchasing
costs. That's something to keep in mind if your company works with large companies.
The Future of Plastic
Market research indicates that consumers view credit cards as lifestyle enhancers that contribute
to other areas of interest in their lives. And credit card products now in development, such
as the "electronic purse" and online debit cards, promise to further extend the use of credit
cards and importance of accepting credit card payments.
It all ads up to bad news for checks. Paying with plastic is becoming increasingly popular for
even routine bills such as gas and electricity. And younger customers' preference for plastic
cards is even more pronounced. These trends are projected to cause check and paper credit use
to fall from 32 percent of all non-cash transactions in 1997 to just 14 percent by 2007.
