Sunday, July 29, 2001

Credit cards


Accepting plastic can be useful

By Rhonda Abrams
Gannett News Service

        I'm about to leave on a trip, flying courtesy of the company that prints the books I publish. They didn't pay for my ticket, but because they let me pay with a credit card, I have enough mileage to fly around the globe.

        Credit cards! We like using them and so do our customers. But many smaller companies, especially those that deal mostly with other businesses, haven't thought about accepting credit cards or find it intimidating or costly. There are some new options to make accepting credit cards less expensive.

Benefits at a price

        Accepting credit cards benefits you as well as your customers:

        • You receive payment right away. If you bill your customers yourself, they may take 30 days or more.

        • The credit card company assumes the risk of nonpaying customers.

        • You have less paperwork because you don't have to send invoices.

        • It increases the number of customers who do business with you.

        These benefits come at a cost, however. Some fees:

        • “Discount” fee. The credit card issuer (typically a bank) takes a small percentage (2 percent to 4 percent) of every charge.

        • Transaction charge. This is a small set amount (25 cents to 50 cents) on each transaction regardless of amount.

        • Monthly minimums.

        • Set-up fees.

        • Equipment purchase or leasing.

        • Chargebacks. This is the amount the issuer will charge any time a customer refuses payment on a charge of yours stating dissatisfaction with the product.

Web saves cash

        The manner in which you accept credit cards affects your costs. If a customer presents the card to you in person, and you can physically see and swipe the card, that's a lower cost than if you're accepting phone, fax, mail or Internet orders because there is less fraud when a customer has to present the card.

        Deciding which provider to use depends on how you'll deal with credit cards. If you'll have few credit card charges, look for a low monthly minimum, even if the discount or transaction fee is somewhat higher. If you expect large transactions, shop for a low discount rate.

        Once your customers know you accept credit cards, will more of them take advantage of that? If you're not ever going to see or “swipe” cards, you theoretically shouldn't have to pay for the credit card equipment. Many companies make you lease the equipment anyway.

        If you and your customers are both comfortable with the Internet, one less expensive alternative is using an online credit card payment service. A big advantage is there's no set-up fees, monthly minimums or equipment rentals. As more and more customers — even business customers — depend on credit cards, you, too, may find yourself saying, “May I charge that?”
       Rhonda Abrams is the author of The Successful Business Plan Secrets and Strategies. Her newest book, The Successful Business Organizer, has just been published. For free business tips, write her at 555 Bryant St, No. 180, Palo Alto, CA 94301.

       

       



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