Credit Card Statistics Your Small Business Needs to Know
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There’s a simple reality today: If you’re in business, you deal with credit cards—you’ll be hard pressed to find any other option. However, dealing with “credit cards” no longer entails what it did in the past. Indeed, the realm of credit cards is rapidly changing, and the needs of small businesses are evolving with them. To stay up to date on how to best take advantage of credit cards, business owners must thoroughly familiarize themselves with the latest credit card statistics and understand how to monitor and monetize ongoing credit card trends. This is even more important for high-risk businesses, which may have to pay more to access credit card services.
Thankfully, information and expertise are available to ensure you have the opportunity to use credit cards to your benefit. Check out the following credit card statistics, and examine how you can better take advantage of ongoing trends.
Are Credit Cards Being Used More?
Yes. The use of credit cards is skyrocketing. The latest credit card statistics make this very clear. As of 2021, credit card payments comprised 28% of all payments in the United States. Why is this statistic so impressive? That’s the highest rate it’s ever been. Consider how all-encompassing that is. Out of all the payments in the United States today, more than 1 in 4 are made by credit cards. Nowadays, people rely more on credit cards than other methods — such as cash or debit card payments — have been used.
Even more eye-opening? Credit card payments have risen for higher-income homes, making up 34% for households between $100,000 and $149,999 and 44% for those over $150,000. This indicates that the credit card market is growing in high-wealth and high-earning areas of the country. It implies a level of discipline in these households, too. In theory, individuals who make that much money should be relatively good at managing and controlling their finances. This change is being driven, in part, by the rise of rewards-based credit cards, which are making up an increasing amount of credit card payments, particularly among high-earning users. Credit card fees rise as these credit cards rise, placing a growing strain on small businesses that have to pay higher costs.
Another statistic supporting the idea that credit cards are being used more responsibly is that the average FICO score is now 714. This represents an improvement year-over-year, and the score has increased since 2017. The idea that average scores are improving is good news for businesses, as it helps to push forth the notion that credit cards can be used responsibly.
These credit card statistics prove one fundamental point. Every business needs to ensure it appropriately utilizes credit cards and has the latest technologies to do so. Nevertheless, this isn’t easy for every business, and high-risk companies can face real challenges when using credit cards at an affordable rate. You must find an adequately prepared credit card vendor to work with your company and integrate with your existing operations. This implies you need Zenti, which has decades of experience serving high-risk businesses like yours.
Are Alternatives to Credit Cards Being Used More?
First, it’s essential to understand that many credit card alternatives exist. These alternatives include payment methods like eChecks, ACH payments, crypto, and more. And there is no question, as these alternatives have become very popular.
Third-party processors must develop an array of options that give small businesses a top choice regarding what payment method they can work with. For example, take PayPal. The network, which started as a payment method for websites like eBay, has become wildly popular of late. According to recent credit card statistics, PayPal generated a whopping $25.3 billion in revenue in 2021. This increased 18% compared to the prior year and consisted of 19 billion transactions, representing $1.2 trillion in volume. In addition, 426 million users and merchants used PayPal during this period.
Paypal’s popularity helps to illuminate a fundamental truth. Individuals are shifting their payment methods elsewhere. Cryptocurrency is another example—2020-2022 saw a rise in crypto investing and merchants accepting digital currency. According to a survey, merchants are getting ready to buy crypto as payment. Hence, they’re starting to alter how they accept payments. This is even reflected in the changing face of ATMs, which allow individuals to buy and exchange crypto at a nearby ATM. In turn, digital currency is made even more available than it already is.
Is Cash on the Decline?
The preceding two sections would appear to draw a meaningful conclusion. Credit card use is rising, but so are alternatives to credit cards. This begs an important question. How could this be? The answer is simple. Cash is being used much, much less.
Consider the following credit card statistics. In 2019, 26% of all consumer transactions were conducted in cash. By 2020, that number dropped to 19%. In terms of value, cash transactions went from 14% to 6% of all trades. There are many reasons behind this massive and relatively abrupt switch. Chief among them is the pandemic. People became nervous about an additional physical touchpoint with others, and many customers bought off the internet, which obviously can’t accept cash payments. The continued continence and perks of credit cards — combined with the ease in which a smartphone can be used to make credit card payments — pushed consumers to use these devices more and more, typically at the expense of cash.
The pandemic isn’t the only cause for the decline in cash payments; it typically exaggerated already existing trends. While cash usage has declined since 2017, the pandemic unquestionably accelerated this trend. It’s also worth noting that this trend wasn’t uniform. People who used cash tended to do so as a “cost savings” method. In other words, those worried about overspending limited the money they used by resorting to cash.
So, individuals in these businesses will want to keep an eye on cash payments and make these methods as convenient as possible. Strangely enough, in some circumstances, it may be worth marketing a business as one that still accepts cash. This is necessary because many merchants stopped taking cash payments, resulting in some states requiring retailers to accept cash. What does this mean for the future? In the long run, the government may shift to a digital form of cash, known as central bank digital currencies. This type of payment would still be cash, just in digital format. It’s worth keeping an eye on, especially for retailers who may need another payment method added to their repertoire.
Card Devices Are No Longer Enough
A typical point-of-sale device will accept credit card payments by allowing the card to be inserted or swiped into the machine. This relatively standard method of payments has been around for decades, long since replacing the older, manual form of credit card payments. As the use of credit cards continues to evolve, these devices are no longer enough.
More and more people are using Apple Pay or Google Pay to complete transactions. These devices allow individuals to skip their wallets and physical cards entirely, enabling them to take advantage of Bluetooth features within their phones, store credit cards, and use those credit cards to make a payment. As a result, mobile payments are increasing in the payment market, with Apple Pay and Google Pay leading the way. In the United States, Apple Pay has roughly a 44% market share of all mobile devices, while Google Pay is a close second with 34% of the same market.
What’s essential to note is that both payment methods are making an increasing form of payments on the entire market. As these devices become widely accepted, consumers will expect that their favorite stores will have these devices available. Consider an individual who enters a store to make a payment but leaves their wallet behind. That store doesn’t accept payment with Google Pay or Apple Pay. As a result, the transaction is lost. These scenarios aren’t just hypothetical; they’re becoming frequent among small businesses that don’t carry the most up-to-date point-of-sale devices.
This shifting consumer demand indicates credit card companies need point-of-sale devices that accept Apple Pay and Google Pay. Older devices may not, but newer appliances will. Your small business needs to work with a merchant account provider that offers these services. You need a merchant account provider with experience in providing you with tech support and can keep fees low, even if you’re a high-risk business. Companies aren’t only challenged with finding a merchant account provider who can offer these services and keep POS devices up to date but also one who can provide the necessary technical support while maintaining low fees. Fortunately, Zenti can work with high-risk businesses to ensure they can process credit cards in a retail setting.
The Shift From Brick and Mortar to the Internet
The past few years have accelerated a dramatic shift. More and more people moved from buying items in brick-and-mortar stores to purchasing them over the internet. Consider the change in buying patterns where retail sales are still rising, jumping from $1.38 trillion in the fourth quarter of 2019 to $1.47 trillion in the fourth quarter of 2020, an increase of 6.9%. Online sales are outpacing these numbers, rising from $156.39 billion to $206.66 billion over the same period—an increase of 32.1%. Moreover, these trends are the sharpest among younger generations. As younger generations make up more of the world’s purchasing power, online shopping will continue to accelerate, and this will happen at the expense of traditional markets.
Is this to say that your business no longer needs a physical footprint? It’s hard to say, as buying patterns are unquestionably different, depending on the specific type of industry you work in. There will always be a space for brick-and-mortar shops, particularly in specific industries. Changing technology simply means it’s easier than ever for some types of business to be conducted with only an internet presence. This will dramatically impact a slew of business operations, including the need to take payments over the internet. Payments must be secure, robust, and convenient. They must have no downtime and easily integrate with your marketing and sales operations.
However, this can be challenging, as taking payments over the internet presents potentially high fees and security problems. These are challenging enough for even the most low-risk merchants, but this shift can be hugely problematic for high-risk merchants. High-risk merchants will need to find specialized high-risk payment gateways that can be safe, secure, and affordable. These gateways need to not only accept credit card payments but also look at alternative payment acceptance methods. Finally, the staff that manages these gateways has to keep an eye on changes to credit card statistics and ensure that a business will be prepared to meet future challenges and adapt to new technology.
What do all of these credit card statistics suggest for your business? First, you need the best services possible, particularly if you have a high-risk business that requires specific services customized to your industry. At Zenti, we understand, and we’re here to help. We have years of experience helping high-risk businesses navigate the increasingly confusing and complex waters of the credit card business. We also have the industry experience to help you know how to manage these rapidly changing trends and the technical understanding to ensure your business can grow and thrive.
Want more information? Contact us today, and learn more about how Zenti can help your business.