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Question: What's one of the easiest ways to get your clients to pay on time or to get your customers to spend more money?
Answer: Offer more convenient payment options.
The overwhelming majority of consumers use some form of electronic payment most of the time: one Federal Reserve Survey of Consumer Finances estimates that nearly half of U.S. households carry a credit card balance, and credit surveys by Experian place the number of households with no credit cards at a measly 13%. And some observers believe that consumers actually spend significantly more when a vendor or merchant offers a credit card payment option.
For some businesses -- e-commerce Web stores and other online-only enterprises -- accepting credit cards is a strict necessity. Professional services companies, freelancers, and traditional retailers can also benefit from the variety of credit-card processing options available.
Traditional Credit Card Processing
Traditional credit card processing -- using either a credit-card terminal or a POS (point-of-sale) system -- requires a merchant account. The merchant account is the "gateway" between your business bank account and the institution offering credit to your customers. Most physical retailers (retail stores, fixed-location service providers such as salons or gyms) with on-site POS systems choose to go this route. Merchant account providers contact the issuing institution to verify transaction funds, process the transaction, and transfer funds into your business bank account in "batches," usually at the close of each business day.
Merchant account providers charge a fee for credit-card processing transactions. Usually this is a fixed amount (99 cents, for example) plus a percentage of each transaction amount (anywhere from 1% to 4% is typical). Some merchant-account providers require a "monthly minimum" or minimum account charge if a merchant's sales volume is not sufficient to cover the costs of maintaining the account.
The hardware used to process the transactions can be as advanced as the business requires. Many use a credit-card swipe machine or a magnetic card reader. These devices transfer card information to the merchant-account provider over the Internet, often using a wireless connection. Scanning machines can be purchased (prices start at a few hundred dollars for a very basic model), leased, or even rented from a merchant-account provider.
Of course, many companies don't do all their business from a fixed location. If your company sells merchandise or accepts payments for services at farmers' markets, craft fairs, concerts, or any other venue that isn't a traditional "store," for example, you can still accept credit cards in those locations using a mobile processing option.
Mobile options range from the very simple (iPhone apps, such as those from MerchantWare or other merchant-service companies) to more advanced options like portable swipe terminals that connect remotely to your merchant account. Mobile terminals make a great option for businesses that have a fixed physical location but also sell at promotional events, because the terminals often work with an existing merchant account. Potential customers may also find vendors using a swipe machine more credible and trustworthy than those tapping credit card information into a mobile phone.
If your company already has a merchant account, you may be able to purchase mobile processing hardware directly from your provider. If your company does all its selling on a mobile basis, you can choose an account provider that specifically offers portable terminals and wireless account access. Keep in mind that the rates for "mobile only" merchant accounts can be considerably more expensive than those for traditional, store-based merchant-service options.