If they do not already have a means for credit cards, small business owners in particular may wonder why they should choose to accept credit cards using merchant processing.
Why? It helps to understand merchant processing. Merchant processing allows businesses to accept credit card payments through a system that typically links four participants: cardholders, merchants, issuers (the cardholders' banks) and acquirers (the merchants' banks).
Generally, a transaction involves the cardholder making a purchase from the merchant, who then submits the credit card transaction. Once the issuer authorizes the transaction using the merchant processing network, the acquirer pays the merchant the amount of the purchase, net of a discount.
By choosing to accept credit card transactions using merchant processing, merchants can lower administrative costs, increase their revenue, gain quicker access to funds, and become more efficient. Accepting credit cards helps your business appear more modern and innovative.
Additionally, by taking credit card payments, merchants will improve their relationships with customers. Customers find that paying with a credit card is easier and safer, and involves no hassles with cash or delayed payment issues as with billing.
On the other side, the more difficult it is for customers to make purchases, the more likely your business is to lose customers. If you are aware of the inconvenience customers experience due to your business not taking credit cards (and, particularly, if your competitors do take credit cards), you may decide that accepting plastic will be a positive change.
Giving your customers the convenience of paying by credit card simultaneously reduces errors in cash collection and lowers the risk of default. Meanwhile, your business will be able to increase retention by offering customers with recurring charges the opportunity to pay automatically.
In order to accept credit cards, you will first need to set up a merchant account (an account established with a payment processor for the settlement of credit card transactions). You will then need to deposit the funds from the merchant account into a checking account at the bank of your choice.
For corporations, the business checking account must be set up in the name of the business. For sole proprietorships or partnerships, the sole requirement is that the individual or partners' name(s) must appear on the check.
With merchant processing, you can choose to accept credit cards in a number of ways. Credit card transactions can be processed using traditional terminals, computers, by phone, on via the Internet. You should select the payment processing solution that is best suited to the type of business you run.
