Accepting Credit Cards 101: What Your Business Needs to Know

Accepting Credit Cards 101: What Your Business Needs to Know

In a marketplace that is becoming increasingly competitive, accepting credit and debit cards is no longer a luxury for business owners. It’s a necessity.

Credit and debit cards are so convenient, flexible, and popular among your customers that if you don’t accept plastic you may be losing out a sale. Additionally, accepting credit cards can boost the consumer’s buying power and encourage impulse purchasing. Plus, it makes accounting less complicated since they can keep your accounting streamlined when creating budgets and filing your taxes

However, accepting credit cards also means that you have to deal with fees, regulations, and requirements, which can be frustrating and expensive. To avoid any potential hiccups, here is everything that you need to know about accepting credit cards for your business.

Know the Industry Jargon

The first step that business owners should take is knowing the terms commonly used in the credit card industry. Being aware of the lingo will assist you selecting a credit card processing system, as well as making more informed decisions and preventing any future headaches.

The first set of terms that you should become familiar are the four key players involved with credit card processing. These players are;

Other terms

Here some other terms, courtesy of Quickbooks, that you should learn when you start to accept credit cards.

Fees and Rates

Find the Right Processor For Your Business

Finding the right processor for your business depends on the type of business you’re running, how and where you intend to conduct most of your business, and how much streamlining you’ll need to make running your business run smoother.

For brick and mortar store you’ll need a POS system, card reader, and merchant account. Online retailers will require a payment gateway and merchant account. We’d be happy to help you out at Due! If you process a lot of transaction you may also need a shopping cart. If you run a mobile business then you’ll have to use a card reader and merchant account, such as Square.

Understanding Rates and Fees

The fees involved with processing credit cards can be complex for business owners. In most cases, the three most important fees to be aware of are;

Fees are also based on the amount of transactions you process, as well as the size of those transactions.

A majority of merchant account service providers will negotiate fees if you simply speak with them.

On top of those fees, you’ll also want to inquire about:

Revenue Requirements

One of the challenges that small business owners must face is meeting vendor requirements. In other words, if your business doesn’t generate enough revenue, some credit card processing companies may turn down your application. While revenue requirements vary, it’s not uncommon for some credit card processors to require at least $10,000 a month in revenue.

Thankfully, there are a number low-revenue-friendly vendors like Due and BluePay that provide customized solutions for your specific business.

Access to Funds

Like revenue requirements, how soon you have access to funds varies and are based on factors like the type of payment (ACH or credit card), the processor, and the solution provider (a software provider, a financial institution).

Many processors today grant next-day access to your funds. However, that’s not the case for all processors. PayPal Here, for example, can take up-to-a-week, while American Express cards are processed between 3 to 5 days.

Data Security

Businesses of all-sizes are expected to meet security standards. This means that you are responsible for making sure that your vendor has the proper security standards and compliance in place, such as the Payment Card Industry (PCI) Data Security Standard, the three-digit Card Verification Value (CVV2), Secure Sockets Layer (SSL) protocol and End-to-End Encryption (E2EE).

Refunds and Disputes

If you want to improve the customer experience, then it’s probably in your best interest to offer refunds.

Some processors will charge you a small fee for refunds, however, they’ll refund the interchange fee. Other processors will keep the interchange fee intact, as well as charge you a transaction fee and a processing fee. Also keep in mind that there is a time limit on refunds, typically 60 to 120 days after the transaction.

If a customer disputes a charge because of an unauthorized transaction, you may be charged a processing and chargeback fee. You may even lose the interchange fee you paid on the original transaction as well as the sale, if you do not respond in a timely manner or did not your due diligence, like confirming the identity of the cardholder.

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