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Accepting Credit Cards: 5 Things You Need to Know
America loves to pay by plastic. But getting set up as a merchant can come with annoying fees and big headaches. How to make your business credit card-friendly.
Posted 7/ 5 10 at 3:30 PM | 5 Things You Need to Know, Money, Sales, Management, Starting a Business, Online Business, Consumer Products & Services, Financial Services, Food & Beverage, Retail
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Sure, some businesses are cash-only and do just fine -- the local ice cream parlor, the greasy spoon diner down the street, the flea market that's been around for a century. But these days, in a nation where floating on credit is as American as apple pie, you've got to take plastic.While they require some infrastructure upgrades and come with annoying fees, it has become increasingly difficult to run a full-fledged business -- especially in retail -- without accepting credit and debit cards. But despite the drawbacks, the added convenience for customers could lead to bigger purchases at the register. "You want to be accessible, and you want to broaden your opportunity to close the sale," says Greg Hammermaster, president of Sage Payment Solutions, which helps more than 140,000 businesses and organizations accept electronic payments, including credit and debit cards, electronic checks, gift cards and automatic recurring payments.
So how can you make your business credit card-friendly? Here are five things you need to know.
1
Apply for merchant status.
What is merchant status? The term means you can be entrusted to allow customers to pay you with a MasterCard, Visa, American Express and the like. So why shouldn't they trust you? Well, maybe trust isn't the right word, but credit-card issuers like to see that their merchants are as creditworthy, or more so, than their credit-card users. If, say, an identity thief uses somebody's card to buy a lot of merchandise, your business is going to be on the receiving end of a chargeback -- a transaction that the bank is going to send back to you. So if the aforementioned identity thief makes off with $532 in merchandise, the bank is going to take that from your company's checking account. When you apply for merchant status, in many ways you're proving that you are financially stable. If you're not sure where to apply, your bank is a good place to start. And even if they don't offer credit cards to merchants, they can likely point you in the right direction.
2
Get your paperwork ready.
Exactly what documentation you need will be spelled out on any application you fill out, but generally we're talking about references from anyone you've worked with, your financials from the last couple years (if it's a brand new business, you may have to supply your own checking account information), your business plan, possibly your resume or CV (curriculum vitae) -- just about anything you can think of is likely something the lender has thought of and will want to see.
3
Expect fees.
You probably know this already. Interchange fees, also known as swipe fees, have been in the news a lot lately. In a tough economy, some business owners have voiced their objection to the high cost of interchange fees, and Congress has moved to limit how much credit-card and debit-card providers can charge. But what you may not know is that having bad credit can affect how much your interchange fees are. "Typically, you'd get 2 percent, but if you have bad credit, your interchange fee might be 2.5 percent or 3 percent of the purchase," Hammermaster says.
4
Set aside a security deposit.
Because of the possibility of the aforementioned chargebacks, you'll likely have to put down a security deposit to ensure the credit-card issuer the money is there if you can't eat the costs of these nefarious charges. If you're selling furniture or computer equipment, the deposit may be pretty significant -- like $10,000 or more, suggests Hammermaster. If you're selling baby clothing or some other item that retails for a low price, you may only be looking at several hundred dollars.
5
Remember the equipment.
The tools come with a price, and that price can vary quite a bit. If you really want to go cheap, there are some manual card printers -- where you have to place a phone call to the credit-card company and ask for an authorization number in order to accept the charge -- that go for as low as $22. But an electronic terminal can run anywhere from $150 to $600 and more, depending how sophisticated it is. For instance, do you want the transaction to be fast, so your customers aren't tapping their fingers? Can the printer print custom receipts with your logo and upcoming store promotions? One thing to keep in mind is that a card swipe is the final step in the customer experience, so it may not be the best place to pinch pennies. A higher upfront cost now could pay dividends in the long run.
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Comments (Page 1 of 1)
This article is a start, however far from realistic. If you are a brick and mortar retail business you should never buy or lease credit card terminals. These are available for free from numerous processors. Your rates should never be anywhere near 2.5 or 3% even if you have bad credit. I've been in this business for almost 10 years and love the reasons people use to justify high rates and to sell equipment. Oh, and don't be fooled by a special rate if you sign this 3 year contract. There are contracts available without early termination fees.
This guy does not have a CLUE. I have 15 years in "Processing". Bad Credit does matter to some degree. As far as "Free Terminals", another LIE from this PERSOn. NOTHING IS . As far as the articles rates, it depends on whether for example you are a "High Risk Merchant , IE : Multi Level Marketing, Direct Sales Marketing, or a Business Opportunity Merchant. NICE TRY.......
Ken in Orlando
Ken, perhaps I am obligated to return your "Nice Try" comment to you. This article addresses retail businesses. My post addresses traditional retail business. MLM and Direct Sales do not fall under this category. Unless you are in open bankruptcy or on the terminated merchant list, 99% or all retail accounts are approved regardless of credit. There are high risk merchants that are not addressed in my post or the article, which may encounter higher rates or reserve accounts.
The fact is, I have been giving away terminals for over 5 years and my merchants pay far less than those that buy or lease equipment. The needs of the merchant should come first. Honesty and integrity are vital. The majority of my new business comes from referrals, which speaks for itself. There are no cancellation fees if the merchant returns the equipment. Period. I have merchants that pay 1.13% up to 2.4% for the specialty cards. No mid or non-qual surcharges. So yes, there is such a thing as free.
Anyone looking for credit cards should call the number on the application and verify what the sales rep is telling you. I have seen people taken by acquaintances, including "friends from church." Additionally, research the company online. Look around to ensure you are getting the best deal for you and not the rep. If you don't believe me you can go to the Mastercard and VISA websites and see the interchange rates.
Ken, you sound like the last guy that tried to sell me a car....in your words....Nice Try!
Stay away from "INNOVATIVE MERCHANT SERVICES" quite often offered through Quickbooks. They are deceptive in their promotions, don't rely on what the salesman promises,rather get it in writing. Our representative, Ruben, promise a "free" Quickbooks update if we signed up for six months which later turned out to be one year and when we called to give them notice of cancellation three weeks before the due date they renigged on the Quickbooks update and we had to pay for it.
You have "only" 3 days to cancel, or to cancel "prior" to installation of "any" equipment, or software. Also, in "some cases" before a "transaction" is run/processed . I do not "Bad-Mouth" my competittion. I just "TAKE" thier clients through business decorum.....
Ken in Orlando
I found a company that seems to be working out for us. They did give us a free terminal and will not set up fees or surprises. But the requirement is that we process at least 2K a month. The fees are resonable too. If anybody is interested they can contact them at 1-888-857-9154. The lady we used to set up is named Mitzi (something)
Make sure you don't get a small processing company that operates on everyone else's money. Several companies in my town were put out of business by the one we were using for a while. If they have the codes to deposit money to your account, they can also take it out. We fired them after six weeks of charges ($20,000) didn't show up in our account and their excuse was that is was somewhere in cyberspace. Four months later when we closed for the season, this same company stole our entire business account and it took another two months to get it back but only after we found out which bank they were processing through and that bank agreed to hold their funds until the dispute was settled. It's a good thing I don't have a name and address because I still believe in Old West justice and that person would not have fingers to touch a keyboard or eyes to see a computer screen with right now!
What a great story.
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