Small Business and Credit Card Acceptance

Small business, especially new start ups, struggle with a lot of questions and decisions. Most of these decisions concern profits and financials in general and often one seemingly small decision could make or break your new business. One such decision concerns credit cards. Not so much the decision to use them for your business, but making a decision to accept credit cards could change a lot of things.

As small businesses struggle to stay afloat, it seems a necessity that they make available to their customers all forms of payment options, such as cash, personal checks, online payments, and credit card payments. Unlike cash or check, credit card transactions in turn cost businesses money. For each credit card transaction, a fee is charged back to the business. These fees are known as “interchange fees”, which are calculated based on the amount of each individual purchase. For instance, a customer uses a credit card for a $100 purchase. The credit card company then charges the business a 2% interchange fee to the business for processing the transaction. The business loses $2 in profit on that transaction. Different companies charge different fees and as a business owner, it is up to you to ensure that the contracts you sign for such processing services are not gouging your business with high or hidden fees.

One step you want to take is to research different merchant account services and find one that charge a straight-forward scale of pricing. Interchange Plus is one such program that at one time was only available to large businesses but has since been opened to small businesses as well. There is no tier-based pricing schedules, which means that all fees are the same, regardless of the purchase price of a customer interaction. Using such a program can save your business thousands of dollars over the course of a year, which translates into more profit to your business.

Hidden fees are another issue that should be considered by small business owners looking for a merchant account. Some such fees are applied for example when a credit card transaction for a customer is declined. Make sure that your business will not be charged for transactions that can not be completed. If you find you can not understand or completely follow the contracts involved in opening a merchant account, ask questions until you get the information you need. Do not be shy, as your profits are at stake. One wrong decision can cost your company a lot more than you can afford to part with. If your merchant account company does not offer a customer service department that wants to help you in every way possible, it may be time to look for someone else who is interested in helping you succeed.

In this age of technology and customer convenience, it hardly seems logical to avoid credit card acceptance all together. Small businesses especially need to remain as accessible and competitive as possible. Winning the credit card game doesn’t have to be difficult but it does require a lot of progressive action on the business owners’ part when it comes to financial decision-making and choosing the right contract for your business profitability and the convenience of your customers.

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This entry was posted on Saturday, January 31st, 2009 at 6:33 am and is filed under Choosing a Credit Card, Credit Card Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.