Why do some businesses not accept all types of credit card?

Credit cards are the height of convenience. Rather than carry cash around, we can buy what we want, when and where we want, often with just a tap. Not only that, if you use them correctly, they can boost your credit score, protect your purchases and form part of a sensible financial strategy.

So, with all the benefits to the consumer, why don’t some merchants accept all types of card?

Let’s explore why.

Money talks

Why won’t certain stores accept my card? It’s a common question. The answer is simple. Very often, it comes down to money.

Merchants are subject to charges when you use your credit card at their shop or for their services. This is usually known as an interchange or a merchant fee and is typically paid to credit card issuers. However, some charge more than others.  

A business may be less inclined to cover high fees. And so, they’ll choose not to accept payments made on certain credit cards.

Which cards are less likely to be accepted?

American Express users will likely know that their card is considered a pariah at many venues. This is mostly because of its high interchange fee. It usually charges a higher fee than other credit card companies like Visa and Mastercard. This is because American Express earns less income from card user interest and so is more reliant on merchant fees. Although these fees aren’t significantly higher than their rivals, for most small businesses, these fees quickly add up and so it isn’t financially prudent for them to accept Amex.

However, things are changing, with Lidl, Tesco and Asda amongst some of the retailers now accepting Amex.

What if this happens to me?

“I’m sorry, we can’t accept your card,” is not a sentence you want to hear when you’re at a shop. So how can you prepare for this situation?

A lot of the time, it requires simple research. Identify which kind of merchant you plan to buy from. If it’s a small retailer, it’s more likely that they may not be able to offer specific credit card services. Likewise, SMEs and start-ups could also struggle to cover high merchant fees. So, you may need to come prepared with cash or a debit card to make these purchases.For many retailers however, the benefits outweigh the disadvantages. It’s good customer service to offer credit card payment and consumers are more likely to spend more if they’re using their cards. But, when it comes to merchant fees, a lot of stores simply raise the prices of their goods to cover them. So, unfortunately again, the consumer is the loser.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.