Royal carpet cleaning provided $90,000 of services during 2011, its first year of operations. All customers paid for the services with major credit cards. Royal submitted the credit card receipts to the credit card company immediately. The credit card company paid Royal cash in the amount of face value less a 3 percent service charge.
Why would Royal carpet cleaning accept credit cards instead of providing credit directly to its customers? In other words, why would Royal be willing to pay 3 percent of sales to have the credit card company handle its sales on account?