Cash is king, but it
isn't easy to get greenbacks from a customer who lives 3,000 miles
away.
A check might bounce,
and after a gift basket has been shipped, it may be tough to
retrieve money from a local or out-of-town client. What's the
alternative to this nonstop nightmare?
Companies that do not
accept credit cards are missing out on a lot of sales. Accepting
credit cards will not only alleviate the above scenario, it will
also allow you to increase your business income.
The good news is that
credit card accounts are becoming easier to install, especially
because home-based businesses have grown in numbers.
Before you make your
first telephone call to a facility that offers credit card accounts,
there is one thing that you cannot get around or overlook:
no one
is going to give you this service for free.
You either accept
credit cards, taking the good and bad that comes with it, or you
don’t.
There’s no "best time" to open an account. If you accept
credit cards and no one charges a purchase, you’ll still pay monthly
fees. Consider this as part of the cost of doing business. Here’s
how to start.
Look for the easiest
option to install a system, and that will be through the bank that
processes your business checking account. Call or go to your bank
and ask them if they offer merchant accounts. Merchant account means
"the ability to accept credit cards."
To be clear, banks work with
companies that do the actual processing. The bank provides a
streamlined way for money to be placed into your account. This is
what makes a bank the best way to set up an account.
If your bank offers
this service, let a bank officer explain the procedure and fees.
Most banks with
merchant accounts process Visa and MasterCard transactions. Ask if
the account also includes American Express and Discover processing
(if not, you may have to apply for this on your own).
After discussing your
options with the officer, ask for a merchant account application.
Complete and return it to the bank with the proper documentation,
which is usually a copy of your business license.
If your bank does not
offer merchant accounts, call other area banks to ask about merchant
account availability. You may have to change banks to set up an
account, because most merchant accounts are tied to your business
checking account.
When you process a
credit card sale, the proceeds (sales minus transaction fees) are
deposited into your checking account within two to three business
days.
Here’s an example:
March 1 - Customer
buys a $50 basket using a Visa card. You process the transaction.
March 1 - Visa processes the charge and deducts 2.5% ($1.25) as a
transaction fee.
March 3 - $48.75 ($50.00 - 1.25) is deposited into your checking
account.
The 2.5% transaction
fee is an example and may be higher or lower than what your
processing company will charge. There are other fees, which the bank
officer should explain to you. These include:
Terminal fee
- you must have a terminal in your office in which to process credit
card sales. This is a small, square box that some retail stores use
to process your personal credit card purchases. The terminal, which
is connected to and works through your business telephone line, has
a key pad to enter data such as the credit card number, expiration
date, and sale amount, as well as other transactions (voids,
credits, other adjustments, etc.).
Statement fee
- you receive a statement every month with a breakdown of all
transactions and charges.
Miscellaneous fees
- these run the gamut, depending on the processing company, but the
fees are quite low. For example, in January, I was charged 60 cents
for authorization fees (45 cents for American Express and 15 cents
for Discover).
Once your merchant
application is approved, the bank or processing company will call
you for an appointment to install a terminal at your place of
business. You will be given a lesson on terminal basics, printed
literature, and a toll-free number in case you have questions. You
are now ready to accept some or all of the major credit cards from
buyers who wish to charge their purchases.
Where do you go if
local banks don't offer merchant accounts?
How do you accept American Express and Discover cards?
Are prices adjusted for people who don’t charge their order?
Is there a way to process a credit card when you’re selling baskets
at another location?
These and other questions are answered in Part 2
