Accepting Credit Cards vs. Debit Cards

Accepting credit cards and debit cards are convenient and flexible payment methods that have become increasingly important in business commerce. In addition to the demand for card services in a traditional business environment, accepting credit card payments is necessary for telephone and online sales. Fortunately for business owners, it’s easy to accept both forms of card payment.

Accepting Credit Cards

Credit cards allow customers to make payments or purchases by drawing from a reserved line of approved credit. Credit cards are considered the preferred and most popular purchasing power, especially for people with limited funds or those who often make large purchases.

If you're thinking about accepting credit cards, be sure to understand the pros and cons of adding this form of payment:

Pro:  Credit cards are easy to use and make store purchases hassle-free for customers.

Pro:  Credit cards allow customers to make purchases that they may not otherwise be able to make, such as when they don't have enough cash on hand, or if they need time to pay off a purchase. 

Pro:  The convenience of using credit generally increases the likelihood of consumer "impulse purchases."

Pro:  Many customers have come to expect a credit option at checkout.  A business that accepts credit cards provides customers with another payment option.

Con:  Compared to other forms of payment, credit cards come with an increased risk of fraud. Nevertheless, the Fair Credit Billing Act and similar laws offer additional protection and flexibility for businesses dealing with fraudulent charges or defaulted payments.

Con:  Businesses that accept credit card payments encounter small processing fees for purchase transactions. These fees seem insignificant but they can certainly add up, especially if your business accepts a lot of small purchases on credit cards.  Setting up the necessary equipment to accept cards also carries additional costs.

Con:  Credit card transactions add another layer of detail to your business's bookkeeping practices.

Accepting Debit Cards

Debit cards let customers make payments to your business by withdrawing funds directly from their personal checking account. This allows customers to pull from their expendable income, not a line of credit.

If you're thinking about accepting debit cards, be sure to understand the pros and cons adding this form of payment:

Pro:  Debit cards give customers a sense of security that they are not spending above their means. Eliminating the hassle of monthly bills and added interest may prompt customers to spend more than they generally might with a credit card.

Pro:  Compared to credit cards, debit cards payments generally have a faster approval time, which means faster access to revenue.

Pro:  Accepting debit cards gives your business access to consumers that do not have credit cards.

Pro:  A business can help minimize fraud risks by requiring a pin number to complete transactions.

Pro:  The fees that a business pays on debit transaction are smaller than credit card or check fees. This is because the debit process is similar to a cash transaction:  when a customer is sure they have the available funds to make purchase.

Con:  While debit fees are usually less expensive than credit or check fees, they can still add up.

Con:  Choosing to accept debit cards requires the minor but additional step of adding a pin pad to your credit card terminal.

Want to Accept Debit and Credit Card Purchases?

To accept debit and credit card purchases, you will need to learn about getting a Merchant Account. A Merchant Account sets up your business to receive card payments in a designated "bank account."

For more information see Business.gov's Steps for Accepting Credit Cards and Debit Cards and basics on setting up a Merchant Account.

Already Accepting Credit Cards and Debit Cards?

Read more about your responsibilities to protect your customers' privacy and secure their personal information.