Does your company accept credit and debit cards for payment? If you own a retail, mail order, or online business, the answer is probably yes. Most businesses in these industries must accept plastic or else face a serious competitive disadvantage.
Today, however, more and more nonretail businesses are accepting credit and debit cards as payment vehicles, including B2B businesses and even self-employed individuals. Doing so helps streamline procurement of small-dollar goods and services and also sets your company apart from your competitors with a value-added service.
Perhaps most important, accepting cards can dramatically accelerate cash flow — a significant benefit in these tight economic times. You’ll usually receive funds in two to three business days, compared with 30 days or longer if you offer payment terms to your vendors and customers, and there’s no risk of checks bouncing.
Accepting cards may also lower payment processing costs because it eliminates the need for payment requisitions, approvals, purchase orders, and invoice processing.
There’s a cost to accepting plastic for payment, however. The fees charged by merchant card processing companies can eat into your profit margins, potentially impacting your bottom line. So be sure to research the various options available for merchant card processing before diving in headfirst.
Let’s start with a brief overview of how merchant card processing works. The first step is to sign a contract with a payment processor, commonly referred to as an acquirer. Talk to your business bank first, but also investigate other options, such as discount warehouses like Costco and Sam’s Club and payment processing companies. A quick Internet search of “payment processing companies” will yield dozens of possibilities to investigate.
Price is an important consideration, of course, and this may vary considerably from one acquirer to the next. Acquirers set their fees in a variety of ways. Almost all charge a discount rate, which is the percentage of each sale they collect.
In addition, acquirers may charge a flat per-item or transaction fee, a minimum monthly statement fee, and fees for handling charge amounts that are disputed by customers (called chargebacks). Also find out if there are extra fees for the supplies you need to accept cards and for your card processing (or point of sale) equipment, which can be purchased, rented, or leased.
To make a true apples-to-apples comparison between different acquirers’ costs, ask them for their fully loaded discount rate, which bundles all their fees together into a single price per transaction. Also be sure to ask about rates for the specific brands (Visa, MasterCard, American Express) you plan to accept, as well as for different kinds of cards and card acceptance. For example, the rates are usually different for cards that are presented at the point of sale and cards that are used to make purchases over the Internet or phone. Credit and debit card rates are also different, and so are rates for business and consumer cards and signature and PIN debit card transactions.
Service is also important, especially if you’re new to the merchant card world. Ask acquirers if they provide on-site technical support or if you’ll receive help over the phone. Also find out how quickly they credit funds. Most payment processors credit funds in two to three business days, but this can vary.
And don’t hesitate to ask acquirers for references from other companies (preferably local) in the same industry as yours — you can ask them about their experiences working with your potential acquirer. Your merchant processor will become a key partner in your business, so be sure to choose one wisely.
Don Sadler is a freelance writer specializing in business and finance. Reach him at email@example.com.