How do you stop extending credit and still keep your customers?

How can a traditional small-town store get out of the credit business without losing customers? Photo by Becky McCray.

Reader Scott Shipley wrote in with a question that I bet lots of people can identify with: a small town store that would like to get out of the business of extending credit to customers.

“My mom runs a general store in a small town of about 350 people in Southern Alberta Canada,” Scott said. “For as long as I can remember, there has been a big box of bill books sitting by the till that when customers come in, they have the option of putting their purchase on their bill or tab. Some of these get paid off regularly and others do not. Just wondering what ideas you have or some of the followers here might have on how to phase out bill books but still keep the customers….The store has a debit machine and an ATM machine so there are lots of options available to pay by.”

Two steps occurred to me.

1. Let them know.

Let customers know before making any changes:

When this is changing
How they’ll pay and close their accounts
Why it matters to the business
What is going to replace credit

You may be tempted to skip telling people why it matters to the business, or to be defensive about it. Just be honest and explain in a friendly way that managing credit is hard on the business. And point out that modern credit and debit cards have more than replaced the need for store credit.

2. Take credit and debit cards.

Sounds like Scott’s mom has this covered already, so it should be a slightly easier transition.

If you are looking at starting to take credit cards in your business, I would not advise anyone to sign a long-term contract for a merchant account, and definitely not a lease for a credit card terminal.

I would recommend one of the modern alternatives to a merchant account or a no-long-term-contract merchant account like Payment Revolution. This is the merchant service I use in my store.

Specifically for Canada, there are several modern alternatives available, including Intuit GoPayment, Square and Wave Payments.

I’d love to hear your experiences in closing credit in your own small town business in the comments below, or if you are reading this in your email, you can just hit reply and share.

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About Becky McCray

Becky started Small Biz Survival in 2006 to share rural business and community building stories and ideas with other small town business people. She and her husband have a small cattle ranch and are lifelong entrepreneurs. Becky is an international speaker on small business and rural topics.