Small Business Credit Cards

Guidelines for Taking Credit Cards

Written by Chris Martin for Gaebler Ventures

Entrepreneurs may appreciate the importance of allowing customers to pay with credit cards. But these business owners may not be well-versed in the details of merchant services. Here are some guidelines for enabling a business to accept and process credit card payments.

There are many duties that an entrepreneur must master when running a business.

Guidelines for Taking Credit Cards

Some of these tasks, like originating product ideas or marketing to specific customer bases, may involve skill sets in which the entrepreneur has significant expertise. But he or she may not be as proficient in other areas of business, such as accepting credit card transactions, which may be just as important to the success of the enterprise.

Navigating the Application Process

Like acquiring bank loans or credit lines, entrepreneurs must complete an application process in order to receive a merchant services account which allows them to accept credit cards. This entails submitting bank account information, producing a copy of a business license or articles of incorporation, and establishing a return policy. At least two or three weeks should be allocated for the merchant account application process.

Figuring Out the Proper Merchant Account

Next, the entrepreneur should determine what type of merchant services account is needed for his or her business. A retail account would be best suited for a traditional storefront or any type of business which conducts a high volume of face-to-face transactions. If these transactions are to be completed over the Web, an Internet account will be needed to process these payments.

If credit card orders will be primarily accepted via telephone, fax, email, or traditional mail, then a Card Not Present (CNP) account is the most logical choice. Finally, if the business only operates during certain times of the year (like Christmas tree farms or beachfront umbrella rentals), then a seasonal account would be the most appropriate and cost-effective option.

Selecting a Processing Method

After the proper merchant account is secured, then an actual method of processing credit card payments must be selected and the corresponding equipment obtained. In some cases, the type of merchant account necessitates which processing system must be obtained. For example, an online business should choose a real-time processing solution to authenticate and accept credit card payments within seconds; while retail swipe terminals should be bought or leased by traditional storefronts so cashiers and clerks can "check out" customers quickly and efficiently.

But in many cases, the relationship between merchant accounts and processing systems is not so clear-cut. For example, a service provider which accepts payment on site (such as towing services or window installers) could decide to utilize either handheld wireless swipe terminals or a mobile account which allows for processing credit cards using any touch tone phone. Also, businesses with CNP accounts can choose either the touch-tone processing option or a virtual terminal arrangement, which allows credit card authentication via a landline and modem.

Processing Fees

Finally (and perhaps most importantly), the entrepreneur must fully understand the fee structure associated with their merchant services account. Most accounts employ a discount rate, which is the percentage of each credit card transaction that will be paid to the merchant services provider. In addition, there may be transaction fees, verification fees, minimum volume fees, or monthly fees which are incurred by the account holder.

Also, entrepreneurs must closely monitor chargeback rates, which is the percentage of credit card payments that are disputed by cardholders for whatever reason. Usually, a chargeback fee will be assessed by the merchant services provider on every chargeback. But if a business's chargeback rate exceeds a certain level, then the account's discount rate can often be raised on all credit card transactions.

Like many aspects of a business, merchant services accounts and credit card processing must be thoroughly researched and understood if an entrepreneur wishes to be successful. Because if a given merchant account works efficiently and cost-effectively, it can bolster a business's productivity and boost an entrepreneur's bottom line.

Chris Martin has been a professional writer for the last seven years. He is interested in franchises and equity acquisition.

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