Credit cards have fast become America's payment method of choice.
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From ease of use to online integration and account management, seemingly every business on the planet is now accepting credit cards as a valid form of payment.
As a new business owner, you can tap into the power of credit card processing to bring in a larger customer base. Credit card processing is achieved through a variety of software, hardware, and relationships.
For online businesses, credit card processing software is generally included with your basic e-commerce software package. These software packages allow you to set up online store with shopping cart ability and customer information databanks.
Once a sale in complete, the credit card information inputted by customers is sent electronically to a credit card processor who makes funds available in your linked bank account while taking a small percentage fee for services rendered.
For online businesses, credit card processing and, to a lesser extent, online check processing are the method of choice for customers looking for convenience and security in their internet transactions. Cash transactions are of course not an option for online purchases!
For businesses with physical locations, it is also possible to use a software-based credit card processing system. However, in most locations you will most likely see electronic processing terminals such as the AS400 systems and even some completely mobile terminals that allow for wireless transmission of credit card data.
Once a card is swiped through one of these terminals, account information for the processed card is transmitted to the processing institution and once again, funds are later made available while debiting the customer's credit account.
The fees paid to processing institutions are generally not a significant amount and typically range from 1% - 3% of the total transaction amount, depending on the processor and the type of transaction.
It is important as a small business owner to shop around different vendors to hand over your credit card processing to. Not only is it important to obtain the lowest rate possible, but keep in mind that this processor will have access to your corporate banking account information, so security is also of the utmost importance in this case.
There are several different types of financial institutions that handle the majority of credit card processing. As a small business owner, your bank should be your first stop when seeking credit card processing. While banks mainly outsource processing, the relationship you have established with your bank will most likely secure the best rate. Third party processors and independent sales organizations deal exclusively in credit card processing and are generally less selective about which clients they work with, but many times this leniency comes with an inflated price tag for services rendered.
Additionally, many small business associations are able to process credit cards at a discounted rate, and certain financial service providers such as American Express may offer direct processing services for your business.