Credit Card Processing

By Dylan Mazeika

While it is true you will have to pay a small percentage for every transaction on a card (and a smaller per-transaction fee) to a processing company to accept credit cards, many if not most of the consumers today use debit or credit cards as their primary means of purchasing. The additional volume of business coming your way by accepting cards will outweigh those obligations by leaps and bounds.

Start-up costs

Getting started will involve buying a credit card terminal (for swiping cards and letting customers enter a PIN). These devices cost between $150 and $300. Transaction fees begin at 1.5% to 3% of the transaction, and there is a per-transaction fee that ranges between 30 cents and 50 cents.

The lowest fees are for swiping cards in debit card transactions, as those carry less opportunity for fraud. The volume of transactions and the cost of each have an impact on what you pay a merchant processor, so calculate exactly the amount of business you are doing on a weekly basis to get the most exact quote.

Benefits

While there are negatives in any choice you make for your business, the benefits of accepting cards are too great to ignore:

Increased revenue. More customers use cards than cash. By opening your door to this clientele, you'll see your investment in credit card processing pay off in a big way. The fees will be a small nuisance in the grander scheme of increased revenue.

Higher transaction amounts. In addition to having more people shop at your business, you will find that your customers will spend more per transaction. It has been proven that people spend more when they are not thinking about the cash in their wallets.

Easier accounting. Credit card transactions are documented immediately, so you can print out reports every day to simplify accounting procedures. This gives you real time visibility on your bottom line, what is working for your and what is not in terms of customer transactions.

Less check fraud and worry about theft. People will not be paying with check, so you can forget about check fraud when you accept cards. You will also deal with less cash, which lessens the chance of free money going out in the door in incorrect change. It can also lessen your concern about store robberies as it will be evident to anyone frequenting the establishment that it is not a heavy cash-and-carry business.

Security with a proper ID. You will not be on the hook for credit card fraud when you check an ID and get a signature on credit card transactions. It is a very safe way to process payments and protects both you and your customer.

Disadvantages

Many businesses accept credit cards to provide a quick and easy way for customers to pay for products and services. Not only do customers get proof of the transaction, they can also dispute or cancel the charge if they are charged the wrong amount or dissatisfied with the purchase. Unfortunately, this is a nightmare for your business since you have to pay chargeback fees and you lose the revenue from the transaction.

When you accept credit cards payments, you do have ways to protect yourself from unnecessary chargebacks. Make sure you know what the chargeback policies are for each of the major credit card processors you investigate. They should outline your rights and how to respond to claims against you. It helps to display your company's policy at the point of purchase to easily explain to customers how they can return merchandise or request credits. You can also print the policy on receipts and billing contracts to strengthen your case if charges are reversed.

Businesses rely heavily on accepting payments online from credit cards when doing business over the Internet. You don't have the option of examining the signature or requesting additional information, but you can confirm the transaction by requiring customers to send proof via mail or fax that they made the purchase. You can also eliminate the confusion of accepting payments online. If the customer sees your web site address on the bill rather than just the company name, they'll know the origin of the charges.

Still the way to go

For business owners who still do not accept credit and debit card payments, it is helpful to look at the statistics. Recent studies show that less than 27 percent of all purchases made at point-of-sale (POS) machines were made with cash, and the numbers are declining every year. By 2017, analysts predict that number will be less than 25 percent. Those are powerful trends to pay attention to and for which to prepare.

Clearly, accepting credit cards is the way of the future. The inconvenience of cash payments - not to mention the rewards and consumer protection available to card users - has pushed the number of card purchases to over 65 percent of all POS transactions and growing. It is easier to pay with a card, and customers spend more (and buy more often) when they have the option to use plastic.