Time to Ditch Cash? Why Credit Cards Only Might Make Sense at Your Restaurant

Pros and cons of accepting credit cards only

Lou Alfieri, merchant services consultant for Shift4, noted that cashless setups typically benefit restaurants, but this payment situation isn’t ideal for every eatery. “Going cashless is ideal for fast-casual restaurants, coffee shops and other environments where speed and efficiency are crucial,” Alfieri explained. “However, restaurants in areas with lower credit card adoption or regulations requiring cash acceptance may need to evaluate their options carefully.”

Consider the following pros and cons of going cashless:

Pros of accepting credit cards only

The cashless movement may make sense for your restaurant for the following reasons: 

• Going cashless saves time: A cashless system eliminates cash management tasks from your daily to-do list. For example, you wouldn’t have to count the cash in the till at the beginning and end of each shift. When accepting payments, you wouldn’t have to count the cash you receive or the change you give back — you only need a receipt signature. You also wouldn’t have to visit the bank regularly to order small denominations and make deposits.
• Going cashless speeds up checkout: Cashless transactions speed up checkout lines, helping create a great customer experience. With no exchange of bills, there’s no need to count out change for customers.
• Going cashless reduces theft and increases security: Accepting cash requires a traditional cash register or point-of-sale (POS) system with a cash drawer — both of which increase the risk of employee or criminal theft. Going cashless eliminates this threat and helps keep your establishment safer, especially if you’re in a high-crime area or operate late hours. You don’t need to make after-hours bank deposits and the risk of money laundering decreases due to careful transaction tracking.
• Going cashless makes foreign exchange easier: Accepting only card and digital payments eliminates concerns about currency exchanges. You and your international customers can complete transactions seamlessly without dealing with manual currency conversion issues.
• Going cashless improves accounting accuracy: Accepting card payments only means you don’t have to deal with cash shortages. Additionally, all tips are recorded, so you don’t have to worry about unreported tips or potential tax audits. Alfieri noted that Shift4 clients appreciate the accounting accuracy benefits of going cashless. “[Going cashless] simplified reporting and management, reducing time spent reconciling cash,” Alfieri explained.

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Cons of accepting credit cards only

Although the advantages of a cashless system are attractive, carefully consider potential downsides before deciding if card-only payments are right for your restaurant:

• Going cashless may alienate some customers: Some consumers prefer paying in cash for smaller purchases. Before going cashless, carefully consider your restaurant’s clientele and whether this move might alienate some regulars. Will your traditionally cash-paying customers be willing to pay with a card or will they take their business elsewhere? Analyze your books to determine what percentage of your clientele you risk losing by switching to cashless payments.
• Going cashless may be illegal: Rejecting cash payments is illegal in some states (see the list below). Before moving to a cashless system, check your state’s laws to ensure compliance.
• Going cashless can be expensive: Credit card payment processing incurs fees. If your margins are tight and average sales tickets are small, you may prefer cash payments. You’ll get to keep the percentage of each sale you’d otherwise pay the credit card processing company.
• Going cashless could hurt your brand: Accepting only card and digital payments might damage your brand’s reputation, consumer trust and customer loyalty, especially if you serve specific populations that primarily use cash. For example, elderly customers or low-income families with limited payment options may feel excluded, harming your relationship with the community and creating a negative public perception.

What to consider before going cashless

Michael Seaman, co-founder and CEO of Swipesum, cautioned that restaurants should carefully evaluate their customer demographics and operational costs before going cashless. “The goal is to accept all the payment methods your customers want to use,” Seaman explained. 

Conduct detailed market research and consider the following before converting to a cash-only model.

Do your customers have a credit card?

According to Bankrate data, 75 percent of American adults have at least one personal credit card. While this is a significant portion of potential customers, consider your unique clientele before going cashless. Here’s a breakdown of credit card ownership by age: 

• 83 percent of baby boomers
• 74 percent of millennials 
• 72 percent of Gen Xers
• 68 percent of Gen Zers

The Federal Reserve’s economic well-being report highlights additional disparities in credit card ownership based on race, ethnicity and disability status (percentages reflect ownership of at least one credit card):

• 90 percent of Asian Americans 
• 86 percent of white Americans 
• 74 percent of Hispanic Americans 
• 70 percent of Black Americans 
• 69 percent of Americans with a disability

Income also plays a significant role in credit card ownership (percentages reflect ownership of at least one credit card):

• Earning $100,000 or more annually: 97 percent
• Earning $50,000 to $99,999: 89 percent
• Earning $25,000 to $49,999: 75 percent
• Less than $25,000: 46 percent

Cash usage also varies by age group. The Fed’s 2024 Diary of Consumer Payment Choice provides the following insights into the frequency of cash payments:

• 18 to 24-year-olds pay with cash 14 percent of the time
• 25 to 54-year-olds pay with cash 12 percent of the time
• Those 55 and older pay with cash 22 percent of the time

Additionally, Experian data highlights credit card ownership in the LGBTQ+ community:

• 47 percent of respondents had one or two credit cards
• 33 percent had three or more credit cards
• 21 percent had no credit cards

How much is your average ticket? 

It seems obvious that customers are more likely to use cash for smaller purchases. Small-value payments (under $25) have traditionally been dominated by cash. However, the latest data from the Diary of Consumer Payment Choice (cited above) shows a shift: For payments of $25 or less, cash and debit cards are now tied, each used an average of 5.2 times per month. In other words, debit cards are now just as common as cash for in-person payments under $25.

That said, some consumer segments still prefer cash, especially for smaller purchases. If you stop accepting cash, you may risk losing those customers, so it’s essential to understand your clientele before making the switch.

Are you willing to pay processing fees on 100 percent of your revenue?

Cash payments don’t incur transaction fees from a payment processor. Therefore, restaurant owners must understand the implications of eliminating cash from customer payment options: You’ll pay processing fees on every transaction. This is a crucial consideration in often low-margin industries like restaurants. 

Seaman cautioned that newer transaction types, such as mobile ordering, often incur even higher fees. “Card-not-present transactions typically come with higher processing fees, a new problem for QSRs [quick-service restaurants] as mobile ordering has significantly increased,” Seaman explained.

Finding the right payment processor is crucial to maximizing profits. Some credit card processors charge only a percentage of each sale, while others charge both a percentage and a small flat fee (known as interchange-plus pricing). Processors with a flat-rate pricing model might also charge a monthly subscription fee. Calculate your estimated costs with each pricing structure and eliminate platforms that exceed your budget.

Maricel Gentile, chef and owner of Maricel’s Kitchen, uses Square for credit card processing. This vendor has a plan with no monthly costs and simple, transparent processing fees. “In food, more than any other business, every percent counts,” Gentile explained. “That’s why we use Square — if they were to change, I would drop them.” Gentile appreciates not being stuck in a contract and the ability to continue accepting cash alongside other payment types to accommodate the most customers possible. (For more information, read our comprehensive Square review.)

Seaman offered additional advice for restauranteurs: “It’s essential to optimize your payment processor to minimize interchange fees. Use tools like Staitment for merchant services statement auditing or hire a payment processing consultant,” Seaman suggested, noting that modern payment methods like Venmo for Business and Apple Pay can help your business stand out from the competition. 

How important is security to your business? 

If your business has experienced frequent cash theft or been robbed en route to the bank, it may be worth shifting to a cashless business model. Still, the risk of credit card fraud exists and robust security measures are still crucial.

Do you have long wait times to pay? 

If customers have to wait too long to purchase their food or settle a bill, some will likely leave and others will have a negative customer experience. Accepting cash and making change takes time (and is prone to errors). Becoming cashless speeds checkout lines and can improve customer satisfaction. 

Which states have cashless bans in effect?

Some states prohibit businesses from accepting only cards as payment. The rationale is that not everyone qualifies for a credit card and some people are unbanked or underbanked, meaning they lack access to traditional banking services and debit cards. Here are the states and cities that currently have cashless bans (note that bans have been proposed in other areas):

States:

• Colorado
• Connecticut
• Delaware
• Massachusetts
• Montana
• New Jersey
• Oregon
• Rhode Island
• Tennessee

Cities and districts:

• New York
• Philadelphia
• San Francisco
• Washington, D.C.

Should your restaurant accept credit cards only? 

Even though more customers prefer credit and debit cards as their primary payment method, deciding to move your restaurant to a cashless system depends primarily on your business model and customer preferences. While some restaurant owners may enjoy the convenience of a cashless system, others may decide that catering to their clientele outweighs the rewards. Ultimately, weighing the benefits of convenience and security against potential customer loss is essential to making the right decision for your business.