Small Business Use of Credit Cards in the U.S. Market

December 2012
By: Susan Herbst-Murphy, quote by Frank Martien

The Federal Reserve Bank of Philadelphia, December 2012

Summary: America’s small businesses have adopted credit cards as both a payment method and a borrowing vehicle. The segment also uses other payment card products, including debit, charge, and prepaid cards. The dollar volume of spending with cards designed for small businesses increased by 230 percent over the five-year period from 2003-2008. But the recession of 2007-2009 and contemporaneous changes in the regulatory environment had effects on both the supply to and demand of small businesses with respect to credit cards. To obtain an update on these issues, the Payment Cards Center hosted a workshop facilitated by Frank Martien, a partner with First Annapolis Consulting. During the workshop, Martien presented evidence of improved supply and demand conditions for small business credit cards. In addition to these positive post-recession observations, Martien described how the symmetry between a small firm’s accounts receivable cycle and the billing cycle for a credit card may help explain why credit card use is so attractive to this segment. This summary also discusses recent developments in the small business debit card market.

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