Great Ideas for your Small Business: Be Prepared to Accept Credit Cards
Many big and small clients prefer to pay their bills with credit cards. If you run a retail business, restaurant, or offer professional services, such as consulting, production, or design, you will need to enable your business to accept credit cards. A plus for your business: Credit card payments can substantially boost your cash flow by encouraging customers to pay you right away for products and services, rather than waiting the customary thirty days to pay. And, your customers will appreciate this payment option because they can charge purchases to rack up airline mileage or enjoy some breathing space by financing their purchase for thirty days.
A few months ago, one of our best clients, a financial services giant, wanted to pay a big invoice due within days of receipt via a corporate credit card. Unfortunately, at the time, we didn’t have a merchant account set up. Although the company agreed to transfer the money electronically to our bank account as an alternative, setting that up required a pile of paperwork and two weeks to accomplish.
A simple and cost-effective way to accept credit card payments is to set up a merchant account. A merchant account is a bank account that enables credit card networks to route funds to you. How it works: You approve the sale and take the customer’s credit card details, the card is verified and approved (a service your merchant account company can provide), your merchant account provider passes the details to their credit card processor, and the credit card processor then debits the customer’s credit card and deposits the money into your business bank account.
Applying for a merchant account is easier than you may think. Every commercial bank offers credit card processing services, but initial set up and per-transaction processing fees vary considerably, so shop around. If you are home- based, you may have a tougher time being approved for a merchant account, but if you provide financial statements and tax returns showing you are a solid business, you will most likely be approved.
Costco’s Executive membership program has an excellent merchant card service. There is a modest set-up fee (usually under $50), and you can apply to accept Visa, MasterCard, Discover, and American Express cards with one application. You’ll pay a fee ranging from 1.5 percent to 3.5 percent per transaction. Although, the processing fees are based on the volume charged and if you are a big customer, may be negotiable.
A merchant credit card account can be linked to your business checking account, so all fees are automatically with- drawn and all monies are deposited directly into your business account. You can process charges over the phone, online, or by mail. If you sell products or services outside of your office, consider ordering the portable “swiper” (about $30 each), which allows you to accept credit cards anywhere.
If you are processing dozens of charges a week, it makes sense to have the electronic processor that automatically approves and records charges via a telephone line in your office. The electronic processors cost around $200 each.
When selecting a merchant account provider, it’s important to consider the options they offer. Make sure you research the following:
- What kind of security do they offer your customers? Do they use encryption technology? This is especially important for Internet transactions. Your customers will want to feel secure when sending their personal credit card information.
- Credit card fraud protection. Will they check if the card has been stolen or has expired? Accepting invalid card transactions can cost your company a lot of money.
- What other services do they provide? Will they verify a customer’s address? Can they enable other non-cash payments such as ATM or debit cards?
- What kind of customer service do they provide? Will you be able to reach them twenty-four hours a day, seven days a week?
- Are fees refundable on returns? What is their policy if a transaction dispute arises?
- What’s the average wait time for money to reach your account? Is there a way for you to easily access your deposit history?