Industry News

23/09/2011 - The holiday season is approaching, and merchants are gearing up for the winter shopping season. Reuters notes that many retailers make as much as one-third of their annual sales during the holidays, and they may be concerned by the results of a recent study by America's Research Group. According to the survey, 82 percent of shoppers plan to spend the same or less than last year this holiday season.

"Retailers better be worried about Christmas," said Britt Beemer, America's Research Group president, as quoted by the news source. "Half of Americans believe (the economy) is going to be worse before it gets better (and) they may not be too excited about buying much this Christmas season."

However, merchants that accept credit cards are likely to earn higher revenue than their counterparts who don't have credit card machines, or whose point-of-sale terminals don't permit them to engage in credit card processing.

According to a recent infographic published by CreditDonkey, consumers who used credit cards to pay for groceries were found to rack up an average bill of $67.60, compared to $60.10 for debit purchases and $37.90 for cash purchases.

The phenomenon of spending more when paying via credit card also extends to tips. According to The New York Times, taxi drivers have reaped the benefits of allowing passengers to put their fares on their credit cards, due to the fact that riders who pay via plastic tend to tip more.

"Tips, which hovered around 10 percent when cab rides were cash only, averaged 22 percent on credit card transactions" in the fall of 2009, the news source reports. Psychology Today analyzed potential reasons for this - "Perhaps when people tip by cash they tend to round against the driver's favor, or perhaps the menu of choice options causes people to see the merits of tipping at least 15 percent."

GetRichSlowly.org cited an often-quoted snippet from The Money Answer Book by Dave Ramsey, which sets the average amount consumers spend using plastic instead of cash as 12 percent to 18 percent more. This is explained in the Journal of Experimental Psychology: Applied.

"The more transparent the payment outflow, the greater the aversion to spending," note authors Priya Raghubir and Joydeep Srivastava. "Cash is viewed as the most transparent form of payment."

Simply put, merchants that engage in processing credit card payments are likely to see better revenues this holiday season.