Accepting credit cards is a crucial part of profitability for businesses today. Essentially, businesses lose money when they cannot accept credit cards as a form of payment. With the widespread use of debit cards, people are using cash for their daily transactions less and less. In today’s society, most people only carry a few dollars on them for emergencies. Personal checks are becoming a thing of the past. For consumers, they are cumbersome to carry and time consuming to write at the time of check out. Fewer businesses are accepting checks now. Compared to the cost of processing credit cards, the cost of retrieving insufficient funds is staggering. The merchant services provider is able to confirm the availability of funds immediately, while a personal check takes days. The boom of online shopping, also known as e-commerce, has made having a credit card or debit card and being able to accept credit or debit cards is a necessity.
How do businesses get paid when a customer uses a debit or credit card to pay for services? The credit card is “swiped” and a merchant services company gathers the customer’s account information and confirms the amount is available. The merchant services then collects the money from the customer’s account and deposits the amount into the business’ bank account. The merchant service charges the business a small fee for each transaction. The fee may be less than 1% or as high as 3%. The amount paid to the business depends on the credit card processing company and the size of the business.
On the processing side, there is profit with a large volume of transactions or a hefty transaction fee imposed on the business. On the business side, it is best for business to decrease costs. Business will look for a merchant card services company that has the lowest rate per transaction and deposit funds a quickly as possible.
If you are looking to go into business as a credit card processor, it is important to keep in mind that your customers are going to want the lowest rates per transaction. When starting a business that will be accepting payments in exchange for products and/or services, being able to accept credit card payment will play a major role in profits because most people do not carry cash and accepting checks is a hassle. Assess the size of your business and select the best merchant services provider for your situation. Some companies may offer better transaction rates for few transactions of large amounts while others will offer better transaction rates for large number of transactions for small amounts of money.
The days of “cash is king” are over because no one really carries cash anymore. Checks, while useful, are not convenient for daily use. Merchant services is necessary for a profitable in business, so choose the service that best suits the business.