The first credit card was issued in 1951, though much about it wasn’t recognizable to modern-day credit card users (including the fact that it was paper, not plastic). The Diner’s Club card was accepted at only a limited number of New York restaurants, but it paved the way for a revolution in credit, the financial industry, and the way we do business. Today, most of us expect to be able to whip out our plastic at venues from farmers’ markets to airline counters to jewelry stores. So why are so many restaurants intent on refusing to accept credit cards?
First, a little history. Prior to 1951, many department stores and other businesses offered charge cards to their trustworthy customers, and before that, charge accounts that people could periodically settle. (Remember Laura Ingalls Wilder and buying on tick at the general store?) Merchants have been doing this for thousands of years; some of the earliest documentation of writing and mathematics pertains to settling up merchant accounts.
The credit card, though, represented a new era. Instead of being specific to a particular business, it could be used anywhere it was accepted—and as people began embracing credit cards and their convenience, more and more businesses realized they were a must-have. A shift away from checks for large purchases began, with customers paying on credit for big ticket items. Rewards cards created even more incentive to do that. Why walk around with a bundle of cash in your pocket when you could run your card and earn airline miles instead?
However, credit cards come at a literal cost: Every business that accepts them pays merchant fees, which vary by firm (American Express is notorious for high fees, which is why many merchants don’t accept it) and may also need to pay separate fees to their banks. There’s also the rental or purchase of acceptance equipment, as well as the maintenance of a dedicated line to run credit transactions on.
That’s starting to change both as a result of technologies like Square, which have streamlined payments and put merchants more in control of their own transactions, and shifts in federal and case law that provide merchants with more autonomy. Historically, for example, businesses were not allowed to offer differential pricing on the basis of whether customers paid cash or credit, but now they can.
That reduces one of the last remaining barriers to credit card acceptance: If you can now charge customers who prefer to use plastic a premium for accepting it, why not accept it as a convenience to them, rather than turning them away? We’re living in an increasingly cashless world, especially among young adults, who frequently (and sometimes preferentially) don’t carry cash—and will walk away from restaurants that don’t accept card (without making a pit stop at an ATM). Two-thirds of transactions worldwide are conducted cashlessly and in the U.S., 80 percent of sales take place via plastic.
That’s a lot of credit sales. One can see why there might be an expectation that restaurants might accept cards, given that food purchases are among the most ubiquitous in society. Writing for Entrepreneur, Gene Marks says on the subject. “[W]elcome to 2014. Remaining cash only may not only cost you new customers, but keeping the ones that you have. I may really like the veal parm at the little family joint in South Philly, but I’m getting tired of the ‘we only accept cash’ sign that hangs in front of the register. There are plenty of other places in South Philly that serve a good veal parm who accept credit cards.”
With the rollout of Apple Pay (a strong competitor for Google Wallet and other cashless and cardless transaction platforms), we really are facing an era when cash is seeming more and more obsolete. It’s a good time to be talking about why some restaurants are sticking, dinosaur-like, with the insistence on refusing to take plastic; usually because they don’t want to pay merchant fees or they’re trying to dodge IRS scrutiny, or simply because they don’t want to be “bothered” with the undoubtedly massive inconvenience of accepting them.
Think Apple Pay is too new to roll out? The company already has more credit card information on file than PayPal and Amazon combined, thanks to the built-in customer base from the Apple Store. Major retailers—including, yes, restaurants like McDonald’s—are preparing to accept Apple Pay in coordination with the iPhone 6 launch, and touch-based acceptance systems will help to cut down on fraud, showing that even as credit cards are a widely recognized and preferred mode of payment, they, too, will eventually be replaced.
Cash evokes obvious safety concerns, but it’s also difficult and obnoxious to handle. Consumers have to make sure they have enough, and there are constant fears about losing it, forgetting a cash-filled wallet and losing the value it contains when someone less-than-honest picks it up, and more. Credit cards offer much more security and convenience, which is precisely why most people prefer to use them for financial transactions, especially at restaurants, bars, and clubs, where people tend to make spontaneous purchases for amounts that can vary widely.
Ever been starving out on the street at 10pm and ducked in to a restaurant for a quick late-night snack? You may not be carrying cash, but you probably have a credit card handy. Been startled by a bill because you ordered one too many drinks or an extra appetizer for the table? A credit card can come to the rescue. Just want to grab some takeout on your way home from the office because you had a bad day? You might be out of cash, but you’ll have a card in your wallet.
Yet, some restaurants not only don’t accept cards, they seem to take an almost perverse pride in advertising themselves as cash-only establishments—or in some cases charging their wait staff for taking cards. Arguing that the potential loss of a few customers is nothing in comparison to their personal distaste for cards, they cling obstinately to the 20th century, rather than recognizing the cash is rapidly going the way of the dodo. Really, the only people carrying cash on a regular basis these days are kids collecting their allowance (which parents have to remember to get out of the bank every Friday because they never seem to have enough on hand).
Given that tech is everywhere in our lives, including the complex point of sale systems growing ubiquitous in even small restaurants (point of sale platforms are also getting outstandingly flexible and affordable, designed to be used on tablets and even smartphones), it seems as though it’s time to embrace a pretty fundamental aspect of the tech revolution when it comes to payments. While the Diner’s Club card may have been alien, strange, and suspect when it rolled out in 1951, we’re over that.
Everyone knows what a credit card is, at this point. It’s time to stop playing coy and start taking them.