Today, many people simply prefer the convenience of paying by credit card. If you want your business, you must be able to accept your credit card payments.
In the first part of this series, we will discuss why you must accept credit cards and the basics to obtain merchant status. The second part will address any objections you may have, which credit cards to accept, and the option to pay by check.
Obtaining merchant status, which allows you to accept credit card payments, can seem like an unnecessary hassle, especially for those in businesses where most of your customers pay by cash or check. But by not accepting credit card payments, you lose sales. This is especially true if yours is a mail order business or a consulting business. Just look at most businesses today, they all accept credit cards, and debit cards are becoming more and more popular.
As many companies have found, up to 70 percent of people never mail their check, so accepting credit cards is critical. When the customer places an order, they are excited and eager to buy. At the prospect of mailing a check, waiting for it to clear, and then waiting for delivery, your interest is likely to wane. Meanwhile, you lose sales.
The basics of merchant status
To accept credit cards, you must work with a bank that will transfer the money to your account within a day or two of the sale and then collect the money from the customer. In return, you pay the bank a commission of 1.5 to 5 percent for each credit card transaction; a fixed fee per transaction; and an installation fee. You’ll also have to pay monthly support or equipment rental fees for a point-of-sale terminal, the machine used to swipe the card, depending on the contract.
The fee is based on two things, the average amount per transaction and the total volume for the year.
When you apply for merchant status, banks evaluate your business based on your sales history, the type of business it is, your credit history, the credit history of the business, and your overall financial picture.
Apply for merchant status when you get your initial financing. This accomplishes several things. First, it shows that you have thought ahead. And you will likely have clients that you would not otherwise have. In fact, some people only pay with credit cards.
Second, it shows that you are taking steps to minimize the time and expense of bad debt recovery. If someone writes a bad check, for example, it will cost them time and money to recover the loss. If you swipe a customer’s credit card through a point of sale terminal, you can be sure that they will pay you. The machine contacts the issuing bank to authorize the transaction and executes the account numbers through a variety of fraud protection procedures.
In the second part of this series, we will discuss any objections you may have, which credit cards to accept, and the option to pay by check.
Copyright 2004 DeFiore Enterprises
