Credit cards aren't for everyone, loyalty programs are

Credit cards can be great financial tools. For consumers, they are easy to use – you can use your card to pay for just about anything. They also offer security, including fraud and purchase protection and can be a tool for managing finances and building a credit score. Many also offer rewards programs giving you points or cash back for your purchases.

According to a 2021 Federal Reserve report, 83% of Americans own at least one credit card and the average American has just under four credit cards. More recently, a Forbes Advisor survey from February 2023 found that debit and credit cards are the primary payment method used by consumers with only 9% of Americans reporting they primarily use cash to pay for purchases.

Because they are so widely used by consumers, there are advantages to accepting credit cards for businesses as well. Accepting a credit card makes it easier for customers to engage and could even encourage larger purchases. They also open the door to online sales from anywhere in the world.

At the same time, credit cards come with disadvantages. 

For a consumer, carrying a balance on your credit card comes at a cost – interest can be as high as 30% or more. Often cash back or reward programs can tempt you to spend more, creating the potential to overspend. In addition, some credit cards often come with annual fees and credit card issuers impose fees for late payments, cash advances and more. All of these cons add up to one big negative –  it’s easy to get into debt. 

For businesses, credit also comes at a cost. Processing fees can range anywhere between 1.9-5% per transaction and reward programs do not benefit the merchant. Credit card transactions also have high failure rates – unauthorized transactions, chargebacks and fraud, including friendly fraud, all wind up as a cost to the merchant. In addition, it can take up to five days for a merchant to receive payment from a traditional credit card platform, which can be painful for small businesses, especially startups struggling to manage cash flow.

For consumers, debit cards and ACH payments are a great alternative to credit cards as you can shop and pay bills online, over the phone and in store with convenience and some protections. At the same time you can’t spend more than what you have in your account. The downside is, you lose out on the rewards programs offered by credit card companies.

Many merchants have built their own branded payment solutions that allow them to bypass traditional credit card platforms while still giving their customers the convenience and security of contactless payments and access to coveted rewards. These platforms have the added benefit of increasing customer loyalty and allowing businesses to gather valuable consumer data.

For smaller businesses that don’t have the resources to invest in building a proprietary payment platform, Lynk’s Pay By Bank offers the same benefits without the upfront cost.  

Pay by Bank seamlessly integrates with existing eCommerce or app payment flows. A consumer links their bank account by selecting Pay by Bank at the checkout. In addition to lower processing fees, (0.5-1% vs. 1.9-5% for a traditional credit card), Pay by Bank utilizes a proprietary authorization method that removes the possibility of unauthorized transactions, chargebacks and fraud. Lynk also provides multiple opportunities to access revenue without a lock-up period. 

The savings from the reduced processing fees can be used to build reward programs, which drive customer loyalty. 

Click here to find out more about how Lynk or click here to book a free consultation.