At her New York City dog-walking business, Jill Richardson can’t imagine how she would survive if she didn’t accept credit and debit cards. After all, only about one-quarter of her customers pay by check and almost none by cash. Like many merchants, Richardson realized that accepting credit and debit cards from customers is essential, not only to survive in today’s near cashless marketplace but to profitably grow her business.
All merchants want to grow their businesses profitably. Having a good merchant services partner with strong customer service and fair fees will help achieve that goal. Broadening your reach to customers, who prefer credit and debit cards over cash, can build customer loyalty, while encouraging higher transaction amounts. That’s because giving customers several options for payment enables them to have more flexibility and choice when it comes to their purchases. It also allows you to spend your time on important things, such as income-producing activities, instead of worrying about collection issues.
But when she began researching merchant service providers for her company, My Dog Walks, Richardson found offers varied. Some providers required a long-term contract. Others didn’t offer an easy way to deliver the card-transaction information to her Web-based accounting program that she uses for invoicing. Still others had spotty customer service, taking days to answer her questions.
She finally selected a responsive provider with an affordable online card-acceptance program. “Now I just send customers an invoice and they go online and pay it with their card,” she says. Having customers pay online means fewer trips to the bank and not worrying about having client checks bounce. Meanwhile cash flow for Richardson’s business has improved because she no longer has to wait 30 to 45 days to receive payment.
Even businesses that primarily sell to other businesses or governmental agencies find that accepting credit cards can help increase sales and cash flow. It is easier for purchasing agents to make small purchases with a credit card than with a purchase order.
Here are some key points to consider when selecting a merchant services provider:
Accepting charge cards is usually a three-step process, explains Tom Harnish, co-author of “Finding Money: The Small Business Guide to Financing.”
First, your business needs a merchant account where payments will be deposited. Second, you’ll need to connect with a gateway service, which will securely transmit card information from your business to the credit card company. Thirdly, credit card companies and debit card issuers will then verify your customer’s identity and check whether they have enough available credit to make the purchase.
A good merchant service provider, a bank or other financial institution, may be able to offer a one-stop service to coordinate all these steps.
You’ll also need to decide if you want to accept cards in person, over the phone, by mail, on the Internet, or all of the above.
Typical card acceptance fees:
- Gateway: This fee is for securely transmitting card information from your business to the credit card company. This fee usually ranges from $5 to $20 a month, depending on your sales volume. Some providers waive this fee in favor of a slightly higher per-transaction fee, Harnish says.
- Interchange: This fee is charged each time a company accepts a credit card transaction. It includes a flat amount (the per-transaction fee), which is usually somewhere between 20 cents and 25 cents. If you have a large volume of transactions, this fee is often reduced by 1.5 percent to 3 percent.
- Monthly minimum: Some providers charge a minimum monthly fee to cover their overhead costs of handling a small merchant account. This fee should be nominal, typically in the $25 range.
- Terminal: Unless you’re a very large merchant, providers often charge for a card-scanning terminal. Expect lease or purchase contract fees between $200 and $300 a month.
Data theft is a common retailer problem, says Nessa Feddis, vice president and senior counsel at American Bankers Association. She advises businesses to discuss with potential providers the steps they need to take to help secure the customer data the merchant has collected, and what they recommend to secure your store location. Neddis says new innovations such as the password-protection program Verified by VISA can add another layer of security to ecommerce.
If you accept cards over the phone, online, or by mail, your provider will often treat those transactions as high-risk and may charge more.
It’s critical to find a provider with good customer service. Look for one that offers live support 24 hours a day and responds promptly to your inquiries.
Customers who dispute charges and ask for their money back are the bane of every retailer’s existence. A good provider will work to resolve chargeback issues with customers before deducting the disputed amount from your account. Remember: It’s important to create a solid paper trail that documents the delivered goods or services to defend your company against chargebacks.
Internet weight-loss retailer and service provider Get Lean in 12 was hit by more than a dozen chargebacks when it first opened, says co-owner Ryan Colby. He discovered their merchant service provider immediately deducted any disputed charges, leaving the company cash-strapped while the necessary supporting documents were located. The provider then required a $5,000 reserve be set aside to cover any future chargebacks.
If he had shopped around a bit more before signing up with that provider, Colby says, he probably could have found a better deal.
“We learned these charges can really add up,” he says.
Business banks that offer a wide variety of financial services to businesses are generally more likely to have fair and reasonable fees than those banks and non-bank merchant account companies that only rely on income from processing card transactions.
All merchants want to grow their business profitably. Having a good merchant services partner with strong customer service and fair fees will help achieve that goal. Broadening their reach to customers, who prefer credit and debit cards over cash, can build customer loyalty, while encouraging higher transaction amounts. That’s because giving customers several options for payment enables them to have more flexibility and choice when it comes to their purchases. It also allows you to spend your time on important things, such as income-producing activities, instead of collecting money owed by customers and worrying about collection issues with accepting checks.
Growth is inevitable once customers feel they’ve had worthwhile experience with a retailer. Providing this experience can be as simple as offering more payment options, or be more involved, such as building a strategic online presence that will broaden the reach of your services. It can be used to create a frequent and meaningful dialogue with existing customers. Which can lead to? You guessed it, new customers.