Do businesses have to accept credit cards?
Businesses don’t have to accept your credit card. So when do they have a good reason not to?
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Paying with a card is great: it's flexible, fast, easy and there's nothing more convenient than simply carrying around a tiny piece of plastic in your pocket, or even just your phone with a digital wallet. And in the time of COVID-19, contactless transactions with a credit or debit card can provide a hygienic solution.
Despite all these conveniences, there are still some reasons why a business might not want to accept your credit card. Here are a few common ones.
4 reasons a business may not accept credit cards
1. Credit card processing fees
Whenever a business (merchant) accepts card payments, they have to pay fees. The two most common fees are:
- Interchange fees. An interchange fee has to be transferred from the merchant's bank to the cardholder's bank with every transaction, depending on the type of card (e.g. Mastercard or Visa). Interchange fees usually fund rewards programs for cardholders.
- EFTPOS and payment terminal costs. Payment terminals aren't free either, and businesses have to either rent or buy the terminal and associated software. Many payment terminal schemes will mean an extra fee on every transaction.
Businesses are allowed to recoup these fees through surcharges on payment types or certain cards, but it can give them an incentive to avoid some card types altogether.
Why do some businesses not accept American Express cards?
American Express cards in particular charge higher rates for payments than other cards (around 1.5-2.0% compared to 1.0-1.5% for Mastercard or Visa). These higher interchange fees mean that the merchant ends up losing more money on transactions with American Express cards than with other cards, so they may choose to not accept them.
2. Security concerns
Fraud and theft are always a concern for any business. It is possible that someone could use a fake credit card with a damaged magnetic strip, forcing the merchant to enter the details manually. A credit card like this could have been stolen and used for tap and pay, where verification isn't needed.
In these cases, the business will have to go through a chargeback process that takes time and energy. Fraud with cash isn't impossible, but it's much less of an issue for the merchant.
3. Operational reasons
Payment terminals and card transactions are usually more involved than cash, so businesses that use them have to provide extra training for their staff. Beyond that, partnering with a credit card lender to accept payments involves more administrative load, including account balancing, recording purchases and communicating with the partner, which might be considered not worth the cost for a small business.
4. Technical faults
Sometimes, things go wrong. The card reader might break or the Wi-Fi might go down, leaving the business unable to process your card payment even if it wanted to. In this case, the business might offer the alternative of a cash payment.
What can I do if my credit card is not accepted?
So what are your options if a business won't accept your credit card?
- Use a different card, or pay with cash. If the business accepts debit cards, you could offer to use one to pay. If it's cash-only and you're happy to withdraw money from an ATM first, remember that cash advance interest rates and fees will apply when you use your credit card.
- Use a third-party payment service like PayPal or Afterpay. If you use PayPal, you may still be able to pay with your credit card if you have added it to your PayPal account. The same goes for other digital wallets like Apple Pay or Google Pay, if they are accepted but your credit card isn't.
- Shop somewhere else. It may seem obvious, but this is always an option if a business doesn't offer what you want. You can try searching for other nearby stores that do accept cards, or It may seem obvious, but this is always an option if a business doesn't offer what you want. You can try searching for other nearby stores that do accept cards, or check out your shopping options with Finder.
What are my rights?
If you think a business has acted unreasonably, you can make a complaint to management. Alternatively, contact the Australian Competition and Consumer Commission (ACCC) to find out about your legal rights and/or lodge a complaint.
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