This week (February 21-28) is the 9th Annual National Entrepreneurship Week. One thing that successful entrepreneurs do is watch trends that will have an effect on their businesses. (You can get my 2015 7 Trends Affecting Your Business Right Now list by clicking here.)
One trend I’ve watched for 3 years now is the shift in our economy from credit to cash. You might think I’m crazy, but in fact there are many things that point to businesses and consumers moving away from credit. Credit interest rates are outrageous from the consumer standpoint. From the business owner’s standpoint the merchant fees are incredibly high for small business owners and solo entrepreneurs.
While not without its problems, consider the growing use of BitCoin and other digital currencies. Business owners are increasingly accepting Bitcoin from customers because it avoids merchant account processing fees. You can learn more about Bitcoin in Elaine Allan’s excellent guide.
More businesses are offering discounts to buyers who pay with check or cash, too. The new Jet.com will offer prices about 1.5% lower when customers choose to pay using a debit card rather than credit according to an article in Bloomberg Businessweek.
Have you bought furniture or appliances lately? If not you’ll be surprised to find that often the best deals you are offered are “only if you don’t use a credit card.”
Even real estate is increasingly going to a cash only contract to purchase. Here in Florida, where we live half the year, some sellers won’t even consider an offer that isn’t cash only. This is in part because many foreign nationals buy property in Florida and come with cash in hand. But it’s also in part because waiting around trying to get a loan to work is too time-consuming. From the buyer’s side, they will get a better deal and close much faster if they have cash. Many buyers don’t want the costs associated with applying for a loan and the additional insurances that must be paid if a loan is involved. Getting a load used to be considered a convenience and a help to buying property, now it is considered a nuisance.
I believe another reason we are slowly shifting back to buying with cash is that the US population is increasingly multi-cultural. Central and South Americans are not used to paying for large purchases with credit. In all the years we spent travelling in those countries the rule of thumb was that if you didn’t have the money in hand you did not buy a washing machine, a car, or a home. There was no credit market. While that is beginning to change now, many people who come here just didn’t grow up buying on credit. It’s not their habit, and they come here bringing their cash buying habit with them.
And finally, if, like me, you often shop in open-air markets you’ll quickly find that fewer vendors are willing to accept credit cards than a few years ago. The trend has shifted from signs that announce, “We take credit cards” to signs that read, “cash only.” This is true even for expensive purchases. In fact, just this weekend we ordered outdoor furniture and paid for access to a yacht club at a vendor show. Both purchases added up to well over several thousand dollars. Both vendors wanted check only – no credit cards.
So what does this mean for small business owners like you and me? We might consider taking alternative (digital) currencies (as mentioned above, Elaine Allan’s book is a great guide). We might offer our services at a discounted rate for cash or check because we are avoiding climbing merchant account fees. While we each will make our own decisions the move back toward a cash-based culture is a trend to watch.
Did you realize that it is National Entrepreneurship Week? Are you doing something special in your business to celebrate? I’d love to hear about it below.
Mitch Tublin says
March 1, 2015 at 9:25 pmSue,
The area you cover, credit card usage, is one I have not noticed.
I will begin to ask others at networking events if this is a trend they
are noticing or not.
Mira Dessy, NE, The Ingredient Guru and author The Pantry Principle says
February 28, 2015 at 4:35 pmFascinating article. I still somehow cannot wrap my brain around the idea of a “currency” like Bitcoin. I know I’ve seen a return of the “lower price for cash” signs at gas stations in my area. I guess that’s part of the shift that you’re talking about. I wonder if it will continue or simply become part of a multi-year cycle.
And I didn’t realize it’s National Entrepreneurship Week, thanks for letting me know.
Mary Ellen Miller says
February 27, 2015 at 9:03 amSue, wow what fantastic news that it is National Entrepreneurship week, the same week as my company’s 6th anniversary. I celebrated recently with a Valentine’s Appreciation Party for clients and friends. As to your commentary on cash vs. credit, I’m thrilled! Dave Ramsey strongly urges this philosophy. You are so much more aware of your money when you’re carrying “green.”
Sue Painter says
February 28, 2015 at 2:34 pmHappy anniversary to your company!
Sue
Tandy Elisala says
February 26, 2015 at 6:39 pmI hadn’t really thought about this trend of cash over credit until I read your article, Sue. It’s so true. I, too, have seen more and more ‘cash only’ signs. As a business owner, I think it’s important to offer options and will probably always offer credit cards because sometimes this is a matter of convenience for people. However, all this raises a good point about costs, identity theft; which is a growing concern for people, and value. Great food for thought. P.S. I didn’t know it was National Entrepreneurship Week.
Sue Painter says
February 28, 2015 at 2:34 pmTandy, I will offer options, too, but I do certainly see the trend.
Sue