What Is A Cash-Only Business?

A cash-only business is a company that only accepts and issues cash payments. For a cash-only business, checks, ACH payments, wire transfers, and other forms of payment never enter the picture. Despite the prevalence of these electronic payment methods, you’ve likely encountered plenty of cash-only businesses.

Types of cash-only businesses
The following types of companies are commonly cash-only businesses:

Food trucks and other street vendors
Babysitters, dog sitters, landscapers, and other people hired for short-term, intermittent at-home services
Vending machines
Some restaurants and coffee shops
Nail salons
Legal cannabis dispensaries
The people and companies providing these services have largely remained cash-only businesses, even as credit card and electronic payment technology has proliferated. This could be for various reasons, from practical considerations to circumstances surrounding the industry.

If your company is a cash-only business outside these sectors, though, you might want to consider accepting credit cards. We’ll break down the pros and cons after we discuss why cash-only businesses continue to exist.

Why some businesses still don’t accept credit cards
There are several reasons why some businesses do not accept credit cards. Some businesses face external constraints, such as the card networks’ decision not to support legal cannabis transactions. Others might simply prefer to deal in cash because they always have. Here are some of the most common reasons cash-only businesses don’t accept credit cards.

Cash-only businesses are extremely common in certain places in the United States, such as New York City, where locals know to keep cash on hand or else risk being unable to pay for things. Generally, very high-traffic areas (like dense urban centers with ample wealth or a large percentage of unbanked people) and remote areas (like ultra-rural areas with limited internet service) are more likely to have cash-only businesses than suburbs, towns, and midsize cities.

In urban areas with a plethora of customers in the vicinity, small business owners may be able to operate at full capacity without accepting credit cards, simply because customers are willing to pay in cash. Businesses in such areas can turn away non-cash customers without alienating their local community, because they have so many other potential customers nearby.

By contrast, if a grocery store in a small city doesn’t accept credit cards, it might quickly gain a negative reputation and go out of business. But in a dense metropolis, a cash-only deli is just one of many delis in a multi-block radius, so customers who want to pay in credit will simply go elsewhere, while customers who don’t mind paying cash will patronize the cash-only establishments without thinking twice.

Lack of internet connection
In rural areas, internet connectivity is sometimes the reason businesses do not accept credit cards. They may also choose to only accept cash because they have a lower volume of customers or a larger percentage of unbanked customers. Since it does cost a business money to accept credit cards, the interchange fees might simply not be worth it for business owners in remote areas.

Like urban dwellers, customers in rural areas are likely to carry cash for purchases, understanding that internet connectivity can be a problem. Thus, they will also be less put off by cash-only establishments than residents in most towns, midsize cities and suburbs.

Under-the-table payments
Some small business owners prefer operating on a cash-only basis for a more nefarious reason: because there’s less of a paper trail when tax season rolls around. When business owners report their profits to the IRS at the end of the year, it is up to them to track and honestly report cash purchases. Credit card purchases can be cross-checked with credit card companies, but cash is easier to conceal. Of course, not all cash-only businesses are engaging in illegal activity, but it does happen.

Hesitancy to adopt new business practices
Finally, some businesses don’t offer credit card processing simply out of habit. Small mom-and-pop shops, especially those that have been in business for a long time, are often highly resistant to change and may have put off credit card adoption so long they no longer even consider it.

Key takeaway: Reasons that cash-only businesses remain prevalent include location, poor internet access, illegal under-the-table payments, and minimal desire to change long-standing business practices.

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