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Credit Card, Cash or Club Charge? The Best Fit for Private Clubs

During my recent travels to different private clubs, I found there was one question many clubs had in common: What is the best form of payment at a club: credit card, cash or club charge? Let’s further discuss these three very different forms of payment and their strengths and weaknesses.

Credit Cards

The most common question is whether a club can accept credit card payments from its members. Let’s be very clear here. In the majority of cases, members want to be able to pay by credit card for one reason: points, or some benefit to the member such as a loyalty program. The problem is that if you provide this option to your members, you are probably adding a $50,000-$150,000 line item expense to your club, due to the card processing fees. Not many clubs can absorb that expense in order to provide a personal benefit to their members.

Before you decide to simply pass on the cost of the processing fee to a member’s bill, check your state law as well as your agreement with the credit card processing company. This practice may be prohibited. There are now companies that will partner with your club, and that company, not your club, will charge the processing fee. In my experience, unless a member can use his or her credit card without an additional charge, then he or she won’t want to use it. The value of the points, miles or loyalty rewards wouldn’t be worth the added cost.

I am, however, in favor of a club having the ability to accept credit cards. The reason is twofold. First, it can be an effective collection tool with delinquent members or past members. Second, it is a useful option to have available for big-ticket parties like weddings, banquets, and other functions.

Some clubs have adopted the policy of having a credit card on file for all members. The theory is that it would allow the club to charge the card for any late or unpaid fees. Sounds good in theory, but I think from a practical standpoint, it is lacking in effectiveness. Credit cards expire all the time, and certainly a member could deliberately prevent the club from charging it. It is my feeling that this policy can be very time consuming, and won’t result in the desired outcome. My recommendation would be to obtain credit card information going forward from new members. This way the club has the information available while the new member builds up a financial track record and it shouldn’t be a significant administrative burden on the club.

Cash

I’m surprised we even have to discuss the use of cash, but based on the questions I am receiving, we do. A club recently asked if they could change their policy to allow members to pay cash for their cart rental in the pro shop. We are fortunate to work in an industry where there is very little cash handled. Why on earth would you want to change that and introduce or encourage cash receipts and all of the internal control nightmares that they bring?

The reason why the question was raised in the first place is obvious. The member does not want others to know how much golf is being played. This is not the club’s problem! If a club allows members to pay cash for cart rentals for this reason, guess what’s next? You guessed it, allowing cash payments from members at the bar. Clearly, cash is not a good idea.

Again, we are lucky to be involved in an industry that is virtually cash free. Let’s try to keep it that way. In spite of that, who among us has not heard of, or experienced first hand, a fraud, inappropriate use of club assets, or embezzlement? It happens all too often in our industry due to limited segregation of duties, absentee ownership, and less than stellar internal controls.  We are all aware that food and alcohol can “walk out the door” if not properly monitored. Why add cash to the list?

Club Charges

In summary, why don’t we continue the tried and true method of having all member’s fees and activities charged to their account and then have the member send in a check to pay their balance.  While I am all for process improvement and innovation, this is one area that I am a huge fan of the same old same old.

Ned McCrory is managing partner and principal at Batchelor, Frechette, McCrory, Michael & Co., one of Rhode Island’s largest privately held CPA firms. He heads up the Private Club Practice Group and is the president of the New England Chapter of Private Club Controllers. He can be reached at [email protected].

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