Why Do Merchants Prefer Credit Cards To Debit Cards?
Why do merchants prefer credit cards to debit cards although the former are more expensive for them? I have seen many a places (esp online) where merchants even refuse to accept the debit cards.
I understand why credit cards are better for liquid customers (who enjoy the interest free loan if they pay the bills on time), networks and the banks (they get the commission) but I fail to understand what would merchants gain accepting credit cards when they have a choice of accepting a relatively inexpensive and almost equivalent medium of payment in the form of debit cards. Anticipating higher sales doesn’t sound very convincing to me!
Merchants prefer credit cards because they get paid immediately whether customers have money or not. That’s the credit card company responsibility to collect the money from customers. On the other hand, with the debit card, customers have to have money in the bank in order for the merchant to get their money. Debit card is a former of a check, if the customers don’t have the money in their checking account, the merchant will have a hard time to collect the money.
Debit card was popular in Europe way before it got to the US. It’s more convenience for the consumers because they don’t have to pay their bills (like credit cards) every month. It deducts money direct from their checking account every time they use the card.
credit cards companies pay the whole cash to the merchants and then you pay to credit
companies while other options may not be the same
It depends on where the merchant banks.
I worked at an animal hospital, and our bank charged a lot more for each credit transaction (ex: 8 cents on the dollar) than they did for each debit transaction (ex: 4-5 cents on the dollar).
Thus, we always tried to have our customers do debit instead of credit if they were using a bank card. And we allowed them to put their own PIN in, of course for their privacy.
Like I said, I think it depends on the bank they are using. I always like using my bank card as “Credit” b/c it works the same way, but my statement shows which merchant the charge came from.
A debit card is a live transaction and you cannot ad tips to a Pin Based Debit transaction. Most of the time Debit is a flat fee versus a percentage like a credit card so if the transaction is less then about $20 it cost more to accept debit cards. A business can not refuse to accept your debit card that has a Visa MasterCard logo on it if they accept those cards.