Credit cards are progressively becoming a primary mode of payment for business owners all over the world, especially in the USA, where almost everyone, besides entrepreneurs, possesses at least one credit card. There are multiple reasons the above-mentioned practice is constantly increasing.
However, credit card payments often expose entrepreneurs to security-related risks that can eventually affect the operations and stability of an organization. To thrive in today’s competitive market and establish a firm as one of the successful players in the industry, small to medium businesses should ideally start considering credit card payments, only after equipping themselves with substantial knowledge on how to accept credit card payments safely and efficiently. Compared to cash, credit has always been a more common and convenient method of payment. Though cash-only payment mode doesn’t involve any charges, today, it is opted by only a handful of merchants all over the world due to certain inconveniences and burdens it brings to the traders. When neither the buyer nor the seller has an exact change to make the transaction balance, it gets quite difficult to trace, especially in case of discrepancies, and eventually messes up the account.
Benefits Of Accepting Credit Card Payments, For Small Businesses:
Add value to a trade
The accepted credit cards’ logos are displayed on a trader’s website or cash register. These considerably grab the cardholder’s attention, while creating a sense of dependability.
Most people these days prefer using credit cards to purchase, as they find them safe and convenient. Therefore, the cash-only payment method restricts the trade to only a certain number of customers and often misses out on a huge number of prospective customers. When a business is reaching out to all, with no hindrances or boundaries, it is quite likely to boost sales. Besides, credit cards offer benefits like cash back, travel rewards and many more, which fetch them a good number of users.
Improve the cash flow of a business
As credit card transactions are electronically processed and mostly get settled quickly, the proceeds instantly get deposited in the trader’s business account in just a few days.
Credit cards are economical for a business
Credit card processors, these days, offer multiple merchant service packages with low credit card rates, ideal for any moderately-budgeted business.
Commence impulse buys
Purchasing with a credit card is simple, and effortless and the transaction gets processed in seconds. Hence, it often initiates impulse buys.
No risk of bounced checks
Unlike cheque purchases, credit card purchases fetch you payments without fail. Cheques often bounce and bring a lot of hassle and inconveniences to the business owner.
Drawbacks of Credit Card Transactions:
Credit card processing comes with a fee. Mostly, a percentage of every transaction is charged as a fee.
Disputed transactions are often distressful for traders. Also termed as ‘chargebacks’, these take place when unhappy customers initiate transactions.
Credit Card Payment Options:
Ideal for businesses with omnichannel presences, a Merchant Account allows one to accept credit card payments online, store or on the go.
Point of sales or POS system is a combination of merchant account, software and equipment. It enables a trader to process in-person transactions.
The mobile payment processor is beneficial for businesses that process a limited number of credit card transactions.
The online payment gateway can be opted for by businesses that neither handle much credit card volume nor operate in a high-risk industry.
Credit Card Payment Processing Method:
One can use a credit card terminal for in-store purchases or online transactions through payment gateways. A trader can opt for a virtual terminal to allow credit card payments. Here, the trader’s computer can be turned into a card payment terminal, through which either a data card can be inserted manually or a card reader can be used. Post that, the data is forwarded to the payment processor, who checks with the cardholder’s issuing bank and makes sure that funds are available for the transaction to get successful. The processor checks the amount available in the cardholder’s account for debit cards and simultaneously assesses if the credit limit allows the cardholder to purchase using the credit card. After fraudulent activities are meticulously evaluated, if any, the transaction finally gets approved.
The credit card payment processing fee depends on multiple factors like the monthly transaction volume, payment processing method and the pricing model of the payment processor. Some payment processors fix their pricing based on the trader’s sales percentage and others opt for a pricing model that combines a flat rate and sales percentage.
Types Of Processing Fees:
Certain companies charge a fee for setting up payments. It is termed a set-up fee.
Interchange fees are charged in each transaction. These are often 2-3% of the entire transaction. In-person transactions are mostly charged 2%, while online and mobile transactions are charged 3%.
Some payment processing companies demand monthly minimum fees. In case a trader fails to pay the fees, he/she is liable to pay the cash difference. Also, many payment processing companies ask the merchants to pay a fee in return for their monthly statements.
Merchants who cancel their contracts early are often liable to pay early termination fees. Hence, it is always convenient to work with payment processors that provide flexible contracts.
Sometimes, payment processing equipment is offered for free and sometimes it is charged for. It solely depends on the payment processing companies, who provide the option of either renting the equipment or buying it.