Credit Card Processing – What Small Businesses Need to Know
Let’s face it, one of the first steps a small business owner needs to take when running or starting a new venture is to decide on the best approach to accept and process credit cards.
While it’s easier for small businesses to have a “cash-only” payment system, the Small Business Administration (SBA) states that if a business does not accept credit and debit cards, it is missing out on sales (nearly $7,000 per year) from customers who prefer card payments over cash.
If you’re one them, you can’t afford to miss out on that much revenue. According to research, credit and debit card purchases currently surpass their traditional counterpart by a hefty margin, and by the end of 2017, the number is expected to rise to 33 percent.
How credit cards can help small businesses succeed
There’s no denying the fact that very few people these days move around with hard cash. That’s why credit card processing is paramount to a business’ bottom line.
Both credit and debit cards provide numerous benefits not just for consumers, but for businesses as well.
Various studies have shown that when customers are provided with multiple payment options, including the option of paying via credit or debit card, they are more likely to spend more per purchase, which in turn helps a company’s cash flow as well as its overall success.
All in all, Credit Card Processing makes the purchase and checkout process easy, secure, and potentially more profitable for your business.
Cost-benefit analysis of accepting credit cards for your business
Cash is no longer king! To stay competitive and thriving, credit card processing for small business owners is no longer an option, but a necessity.
As our society is becoming more digitalized and reliant on technology, the frequency of physical money exchange has reduced significantly.
However, keeping up with the change is not the only reason to upgrade the payment system of your small business.
Here are a few benefits of accepting credit cards for your small business:
- Increased productivity and overall sales;
- Enhanced customer service;
- A wider customer base;
- Improved cash flow and bottom line;
- Increased average ticket size;
- Minimized security risks;
- Business credibility;
- Fewer trips to the bank, which saves you time and lost productivity;
- Encourages impulse buying;
- Greater convenience for customers;
- Inexpensive business expense;
- Safer money-handling practices, and more.
As you can see, there are countless benefits to accepting credit and debit cards from customers, however; there are also legal risks associated with managing card purchases. The best way to counter that risk and ascertain the feasibility of accepting credit cards is by running a cost-benefit analysis. This can help you determine the potential benefits of credit card processing as well as the type of payment system that will best suit your business.
Costs of accepting credit cards
For small business owners, one of the major concerns about making a switch from a cash-only system to one that accepts credit cards is its Processing Fees, which is typically between 2 to 3 percent on average, depending primarily on the payment gateway. However, you can cut-short some of the transaction fees by opening a merchant account through your local bank.
The merchant-account setup fees will typically be on the higher side if you decide to forgo a third-party processor, i.e., somewhere around $200. Also, you’ll be responsible for complying with PCI Security Standards and other requirements to ensure that customer purchases are processed efficiently while maintaining accuracy and security.
In a nutshell, once you’ve created a merchant account and chosen an ideal credit card processing method from the various options, including Point-of-sale (POS) Systems, Virtual Terminals, iPhone and Android Mobile Processing Solutions, etc., you’ll need to pay for the following costs:
- Merchant-account setup fees: It can fall somewhere between $50 and $200 if you decide to set one up through a local bank.
- Credit card processing and transaction fees: This typically falls between 2 and 3 percent per transaction, but can go as high as 4 percent (without including a currency-conversion fee) for international transactions.
- Implementation costs: This includes costs involved for setting up equipment, including POS terminals.
- Customer chargeback fees: The most common cause for chargebacks is disputed or fraudulent transactions. It is a form of customer protection provided by the issuing banks, which allows cardholders to file a complaint against the merchants regarding duplicitous transactions on their statement. The chargeback fees may vary from one acquirer to another and from account to account.
- Fraud accountability: Some banks and credit-card companies may hold your firm responsible for selling services and products using stolen customer data, and thus terminate your processing account.
Although the credit card processing fee is unavoidable, it can be negotiated and reduced with the right strategy and execution.
So, what are you waiting for?
The sooner you accept credit card payments, the sooner your business will flourish. If you’re looking for a reputable credit card processing services provider in Carlsbad, and its nearby areas, then look no further. Just give us a call @ (877)720-0033 or drop us an email @ [email protected]