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Don’t Take Credit Cards? Could be a Case of “Penny-Wise and Pound Foolish”

The quote “penny-wise and pound-foolish” is often credited to Philadelphian Benjamin Franklin, though Franklin never actually coined the phrase, (it was English Scholar Robert Burton). However Franklin did say, “Why should I give my readers bad lines of my own, when good ones of other people are so plenty.” Franklin was indeed very wise. His lasting effects on America, from newspapers to the post office were truly great, even though most of his ideas and innovations where manifestations of others’ great ideas written by his alter-ego in Poor Richard’s Almanac.

About 20 years ago I heard about a club in California had started to take credit cards for payments and that they were doing very well. At the time The Union League of Philadelphia was just embarking on a major master plan and funds were a bit tight, sort of our own version of Poor Richard’s Almanac, filled with great promises and forecasts. However over time, just like Franklin’s Almanac, The League has prospered greatly. One small innovation caveat of the plan was to begin taking personal credit cards for all payments. Looking back over 20 years, as I begin now to sell wisdom and experience over hustle, I can safely say that taking personal credit cards was one of the best ideas The League has ever made.

Over the last 20 years our membership has doubled. The average length of time a member stays a member also doubled. Attrition decreased by a remarkable two-thirds, and our allowance for doubtful accounts has all but evaporated. On top of this, our monthly cash flow is steady and predictable and our members are extremely happy with the ability to get points and to make sure they are never posted for missing a payment (if anyone still does that). So why aren’t more clubs adopting credit cards? Mostly it comes down to the unwillingness to innovate and change and pay for the couple of percentage points it costs to collect club funds though a credit card processing. I can safely say that clubs who do not accept credit cards payments are penny-wise and pound foolish.     

If you have to look for a reason to accept credit cards, and there are many great reasons, our experience with increased length of membership is probably the most resounding reason. Our research and focus group studies have confirmed that members really enjoy the convenience of having a “set it and forget it” mentality when it comes to paying their club fees. Members do not have to make a “value decision” every month when they write a check out to their club. Did they use it enough? Did they get enough value? What if the spouse or partner writing the check is not the frequent user? Is there more pressure to make a value decision and cut off the club? Of course there is no substitute for high quality and great service, but the dynamics of credit card payments are important to understand. Our data shows that members who pay by credit card stay longer as a member.

Members also value the convenience of time and the reward points associated with using a credit card. Today many younger members have checking accounts but never write checks. Members will also put all their social spending on one card and look forward to an annual vacation “on points.” We are so convinced of this, we start all new members on credit cards. As Yogi Berri says, “the future ain’t what is used to be.”

Finally a disclosure, it is always important to check with your accountants and tax advisors before making any major changes, including the decision to take credit card payments at your club. Remember, after all, I’m just a club manager.

Jeff McFadden, CCM, CCE, ECM, is general manager/COO of The Union League of Philadelphia. He also serves as the chairman of the NCA Foundation. He can be reached at [email protected].

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