So you’ve decided to start accepting credit cards in your small business. Good move. You’ve realized the average cash sale amount is nine bucks, while the average credit card sale is $40. Plus, you’re tired of watching customers drift to your competitors who offer the convenience of credit. Bruce Keiffer, a Largo, Fla.-based card analyst, explains some of the steps you’ll need to take to start accepting the fantastic plastic:
First you will want a banking partner with demonstrated expertise and dedication to working with small business accounts. Bank One, for example, has 80,000 merchant Visa and MasterCard accounts throughout the United States, and ranks as the 10th largest processor of Visa/MasterCard transactions in the nation. Plus, with board representation on both Visa and MasterCard associations, they qualify as a “friend in a high place” for their small business partners.
It’s not a foregone conclusion that you’ll actually be able to offer Visa and MasterCard in your business. They don’t accept all types of businesses, so it’s important to check with your banking partner to make sure you qualify. Hint: If you’re anything but a retail operation, it may be a challenge to get approved.
Generally, the less risk to your bank the greater your chance of acceptance, according to Keiffer. Therefore if you have a retail store selling stationery at a traditional street business location, that’s a terrific advantage over selling stationery from home or via the Internet. It’s a greatly reduced risk to the bank, and improves your chances of being approved for a merchant account.
If you’re not a retail outlet you’ll probably need to arrange a meeting with your bank to decide what steps to take. While it’s certainly possible to secure approval for mail order, phone order and Internet-related businesses, it’s more difficult and time-consuming if you’re a small business.
So, you’ve been accepted. When figuring up how much credit transactions will cost you, again the primary factor will be how much risk you’re asking your bank to expose itself to. The greater the risk, Keiffer explains, the higher the cost: “In almost every case with non-conventional retail location sales, the cost, or discount rate, to process a transaction is going to be higher than for one completed in person with a signed sales receipt.” He explains that sales processed over the phone, through the mail and over the Internet “invite the high possibility of chargebacks” — more risk for the bank.
Expect to sink between $190 and $300 in startup costs. This should cover application, setup and equipment rental lease deposits, as well as any additional costs for poor credit and being a higher risk, should they apply. If you lease your equipment, your payments should range from $35 to $50 per month for a complete processing system, including a terminal, automatic printer and any necessary software.
