Most merchants spend at least a small portion of their time looking at the cost of payment processing fees. These fees can be costly and add up quickly to threaten small business budgets. What many merchants may be seeing in recent years is a decline in the use of credit card transactions across the board. Whether or not this changes the way merchants view credit card transactions or how they process such transactions remain to be seen. Here we look at a few of the reasons why credit card transactions have decreased in numbers.
Change in the way we view credit
One of the most obvious reasons why people are using their credit cards less is the result of the economic downturn. With more consumers struggling to make ends meet and others realizing the dangers of excessive consumerism, credit card use has dropped sharply. The attitude of buy now and pay later has definitely shifted to one that is much more conservative, reducing the rate at which consumers use credit cards. This is especially true for the younger generation who has seen the changes in recent years. This generation of emerging consumers want to avoid the debt trap they may have witnessed in the family household. They do this by using cash and debit where they can see immediately how their finances are affected by a purchase.
Tough lending environment
When you combine the tough economy and new restrictions in place to govern banks and credit card companies, the result is a lending environment that is less forgiving to borrowers. For this reason many credit card companies have slashed credit offers that were previously handed out to most consumers regardless of their ability to repay the debt. With less access to available credit, the ability to pay for products and services has been reduced for a great number of people.
Increase in the use of checks, cash and debit
There has been a noticeable shift from credit transactions to debit transactions. In fact, many merchants are encouraging debit payments to reduce their credit card processing fees. When incentives are offered by merchants to entice customers to reach for their checkbook, debit card or cash- the number of credit card transactions will be reduced as a result. Many savvy consumers have saved a considerable amount of money by taking advantage of cash or debit preferred incentives. At the same time, merchants are finding ways to reduce their credit card processing fees by making other forms of payment more cost effective for customers.
Despite the obvious changes occurring in our society, credit cards will remain a popular method of payment for many consumers. Credit cards offer an easy and convenient way to pay for products and track your spending. When used responsibly, credit cards can help consumers establish and maintain a healthy credit history and credit score which is imperative in this day and age. The changes we are witnessing could spur changes in the credit card processing industry as well. How these change will affect merchants and in turn consumers remains to be seen.
Photo via TattooedJJ
