Credit cards have evolved into the most common method of consumer payment, with nearly 60% of U.S. consumers using credit cards over cash, according to a recent report by the Federal Reserve. Some businesses offer credit to customers through invoices and personal checks, while retailers and other merchants generally offer credit by accepting credit card payments.Despite the growing use of plastic over cash, a GoPayment survey discovered that more than half of U.S. small businesses—a staggering 55%—don’t accept credit card payments.Although there are obvious benefits to accepting credit cards from customers, there are also some risks associated with managing credit card purchases. It’s worth taking a look at the costs and benefits of accepting credit card payments, as well as the payment systems available for your business.
Also learn about the what mobile payments could mean for your small business here.
Let’s talk about the costs:
Here are two questions you’ll want to answer before you decide to accept credit card payments:
- How much does it cost to accept credit card payments?
- What are the benefits of accepting credit card payments?
For small business owners, the biggest hurdle to moving from a cash-only system to one that accepts credit card payments is processing fees. Payment processing fees typically average between 2% – 3%, but can vary depending on how the transaction is routed from your business to the credit card company. To get around transaction fees, you can usually open up your own merchant account with your local bank. Once you’ve opened your merchant account and decided on your credit card processing method (like a point-of-sale system, virtual terminal, etc.), you’ll also want to keep the following in mind:
- Merchant account setup fees, which can range from $50 – $200.
- Credit card processing and transaction fees, which can run between 2% – 3% per transaction. You can be charged up to 4% for international transactions (and if applicable, a currency conversion fee).
- Implementation costs for setting up equipment like point-of-sale terminals.
- Customer chargeback fees if the customer decides to dispute a credit card transaction.
- Fraud accountability: Some banks and credit card issuers may hold your company accountable for fraudulent charges and ask you to reimburse those charges. In more extreme cases, banks and credit issuers may decide to close your account.
Lets’s touch on the benefits. There are many benefits to accepting credit card payments. According to a number of studies, credit card and mobile payments will only continue to rise in usage in the coming years. Small business owners who choose the cash-only route will miss out on a significant chunk of sales.Accepting credit card payments means:
- Increased sales: Accepting credit card payments has been linked to an increase in consumer “impulse buying,” which is great for you as a small business owner.
- Greater convenience for customers: More customers are paying for merchandise and services with credit and debit cards, to the tune of 66%, according to Community Merchants U.S.A.
- Safer money-handling practices: Credit cards reduce the time and expense of manually counting, sorting, and transporting cash. And holding less cash makes businesses less attractive to thieves.
- Reduced fraud through technology: For example, EMV technology makes credit transactions more secure today, reducing credit-related fraud.
Bringing it all together
Every business is different, so the risks and benefits of accepting credit card payments will vary. Don’t forget to consider the potential impact of other factors, such as your company’s size, as well as how you conduct transactions in a physical store, online, or both.Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.
Are you in the planning phase of your business? If so, check out our handy guide for starting a business.
This article originally appeared on the QuickBooks Resource Center and was syndicated by MediaFeed.org.
Featured Image Credit: DepositPhotos.com.
