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How Accepting Credit Cards Can Increase Sales And Revenue

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 credit cards are the key to e-commerce:

* Credit card online - 85%
* Check mailed - 10%
* Credit card via phone - 2%
* Credit card via mail - 1%

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.

It all adds 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.

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