Accepting Credit Cards: The Good, The Bad, and The Expensive

Accepting Credit Cards: The Good, The Bad, and The Expensive

Millions of American businesses accept credit cards.  Should you?  As always the answer is it depends.  The better answer is it depends on if it improves your business in some way, shape or form.  If you do decide to take credit cards as a form of payment you then get to decide which ones to take, who your processor will be and who your gateway should be.  After that you need to shop around and see if pass through or tiered pricing makes more sense for you and try to get the best deal with the lowest transaction fees, lowest basis points and a reasonable statement fee.  You might also need to decide if you need mobile processing or an online gateway of sorts.  You got all that?  Please don’t get the Advil out yet.  It really isn’t that complicated.

Step 1: Would accepting credit cards encourage more sales? Would accepting credit cards limit uncollected accounts? Would accepting credit cards increase cash flow at a lower rate than a line of credit?  These are all great reasons to accept credit cards in your business and if you said yes to any or all of these you may want to consider accepting some credit cards as a form of payment.  If none of this resonated as true for you then you probably don’t need to give up a percentage of sales to a credit card company.

Step 2: Is the margin on your product or service large enough to support an average fee of 1.5-3.5% of sales?  If your industry standard margin is 5% it probably doesn’t make sense for you to accept credit cards.

Step 3: Choosing a processor is an important choice.  In my personal experience I prefer a processor that is also the gateway.  One less vendor to deal with.  One less fee to pay.  One less headache.  You should pick one with a knowledgeable sales person who is local to your area and accessible to you after the sale.  Don’t settle for a cowboy that rides off into the sunset.  Good customer service will start with the sales person.  If they suck so will the overall service of that company.  Asking fellow business owners can get you some great feed back about who they use and there experiences good and bad.

Step 4: Look for a processor that supports your needs.  Will you need mobile payment processing?  Will you need to integrate with your website?  Do you want it to integrate with your Quickbooks?  Not all processors can do all that you need.  Ask around.

Step 5: Review their pricing. The sales person has a fair bit of control over the pricing offered.  Remember this is how they make a living and it is a business to them so free isn’t an option, but they can often times give fair pricing and be competitive.  Your sales volume with determine a great deal of what pricing they can offer.  15 basis points on one million dollars is better than 30 basis points on one thousand dollars a year.  The greater your sales the lower your rate.  So don’t go asking your friend what rate they get without asking what sales volume they do.  You could be comparing apples and mangoes.


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