News
9/23/2009
06:38 PM

Credit-Card Processing Options For SMBs

It's a fact that adding payment options boosts sales, whether online, in brick-and-mortar stores, or even remote locations. Resource Nation helps small businesses understand how to leverage their credit-card processing options to increase revenue and speed payment.



Resource Nation provides how-to purchasing guides, tips for selecting business service providers, and a free quote-comparison service that allows business owners to compare price and service offerings in over 100 categories from credit-card processing to point-of-sale (POS) systems.

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.

Mobile Processing
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.



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Online Invoicing And Billing
Medical offices, freelance Web designers, consultants, and other professional service providers can make customer payments easy and fast by offering online payment options. Most consumers are already familiar with online bill payment or automatic payments -- large corporations such as banks and insurance companies use these methods to collect customer payments. Smaller businesses can use these services, too.

The "gold standard" for online bill payment is probably Intuit's widely used QuickBooks Merchant Services program. This is purchased software that let you track client orders, invoices, and payments. Many online invoicing tools (free programs like BlinkSale, Intuit's BillingManager, and others) are designed to be compatible with QuickBooks, and provide extra features like employee-hour tracking for invoicing purposes.

Purchased software isn't your only option when it comes to online invoicing. Hosted services like FreshBooks (low cost) or BambooInvoice (free, open source) not only help you keep track of client payments, but also allow you to accept credit card payments for invoice balances. If tracking and managing invoices isn't a concern, you can also use an online payment service by itself -- services like PaySimple or DepositNow let small businesses accept credit cards, electronic checks, debit cards, and bank transfers online.

E-Commerce Processing
It's a fact: more payment options increase e-commerce sales. If you have an online storefront or offer online services, accepting credit cards is a must.

Online credit card processing works a bit differently than physical card transactions: for one, you don't need a swipe machine or a signature-capture device, and you don't need to store signed customer receipt records.

E-commerce transactions consist of three components:

  1. The site infrastructure that allows the payment (the shopping cart).
  2. The "gateway" processing software.
  3. The merchant account.

Many shopping cart programs include gateway processing software (the virtual equivalent of a magnetic swipe machine) that can link to your existing merchant account.

Fees for online credit card processing are assessed the same way as those for physical processing: on a "per transaction" basis, usually with some kind of attached flat rate (for example, 20 cents plus 1% of the transaction amount) or monthly minimum charge.

Some account providers require you to use their gateway software, and some shopping cart providers sell services as a "bundle," where you're bound to a specific merchant account provider. You'll have to shop around and compare costs to make sure that bundled services are actually a good deal.

These days, even the smallest merchants can take advantage of credit cards and other electronic payment methods. Accepting credit cards or online payments can be one of the best ways to capitalize on consumers' growing reliance on fast, simple transactions -- and that's especially true for non-traditional or mobile selling locations. Whether you're accepting credit cards at a festival concert or through your Web site, it pays to offer your customers the most convenient payment options possible.

Resource Nation provides how-to purchasing guides, tips for selecting business service providers, and a free quote-comparison service that allows business owners to compare price and service offerings in over 100 categories from credit card processing to point-of-sale (POS) systems.

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