Accepting Credit Cards
Accepting credit cards can be an important source of income for your business. Even if you just want to sell something online, you will want the ability to accept credit cards. E-commerce, in particular, depends on credit cards. Any way that you look at it, you will bring additional revenue into your business by accepting credit cards.
Merchant Accounts
To accept credit cards you will need to set up a merchant account with a
bank or other financial institution. This account will process the money
from credit card transactions. To set up your merchant account, tell them
how much you expect an average credit card order to be and how much money
you think that the account will process each month. After you have
established your merchant account, the financial institution will deduct
their fees from your daily credit card sales and deposit the balance in the
account.
Payment Processing Software
Before accepting credit cards, you must have payment processing software.
Payment processing software is actually a service that allows you business
to communicate sales directly to your financial institution. If you are
doing business online, having payment processing software is crucial. If
you do business offline, you may use a credit card reader instead of a
payment processing system.
Rates and Fees Associated With Accepting Credit CardsThere are a number of fees associated with accepting credit cards. However, the increase in revenue should more than offset the fees. Some common fees include:
Application Fee
An application fee is the amount that you pay an institution to apply to
set up a merchant account.
Chargeback Fee
A chargeback fee is the amount that your business must pay if a customer
disputes a credit card charge or requests a refund.
Discount Rate
A discount rate is a small percentage that is deducted from each
transaction by the financial institution.
Reserve
Sometimes a bank or financial institution will require that you have a
minimum in your credit card processing account. This balance is called a
reserve.
Fees vary from financial institution to financial institution, so check with each one to find out the specific details.
Fraud and Other Risks
Accepting credit cards does have a certain amount of risk associated with
it. Someone could place a charge fraudulently. A customer could dispute a
charge or claim that a product or service was never delivered. To reduce
the risks, your business should take adequate security measures.
Third Party Merchants
If you do not wish to deal directly with a bank or financial institution,
then you can arrange for a third party merchant to accept your credit card
charges. PayPal is a well-known example of a third party merchant. You
should be aware that third party merchants can charge their own fees. Read
your agreement to discover the specific details.
The Bottom Line
By accepting credit cards your company can dramatically increase their
income. To begin accepting credit cards your business will need to set up a
merchant account and obtain payment processing software. An agreement with
a third party merchant, such as PayPal, can also enable your business to
accept credit cards.
