Accepting Payment By Credit Card

      More insight into taking credit cards as payment. May 21, 2007

We are a full service woodworking company. But for the last 8-9 months, we've thought about focusing on the building of entertainment centers. We figured we can build, finish and install a very nice unit that can range from 2,500 to 8,500. To open this up to a larger sector of people, we thought about accepting credit cards. What are the pros and cons of a move like this?

Forum Responses
(Business and Management Forum)
From contributor J:
I got set up to accept plastic through Quickbooks. I kept the service for 18 months and never used it once. On a different note, I recently got the process rolling to offer customers a "12 months same as cash" option. This won't cost me anything, but will enable the customer to spread the purchase over 12 months with no interest, or 24 months at 18%.

From contributor M:
I ended up setting up an account through Paypal. The big advantage to me was no initial or monthly charge, just the 2.9% transaction fee (I think it can go down to 2.5% if you have enough volume). It was pretty painless to set up online - took just a few days to be ready to use. I entered the transaction on a Friday evening, and the money was in my bank account on Monday.

Contributor J, how do you do 12 months same as cash that doesn't cost you anything?

From contributor B:
We do a lot of our business long distance with customers who find us through the web or print ads in several magazines. As such, credit cards are an invaluable tool. They are well worth the percentage fees involved.

I even occasionally take them from slow paying customers. They will often pay a past due invoice if they can get their air miles. For me, the fees are a small price to pay for not having to chase the money.

When I researched credit card systems several years ago, I found the online systems much more expensive than going through the phone lines to one of the large national level banks.

I use Bank North and have the following arrangement:
1. $9.00 per month service fee.
2. 25 cents per transaction.
3. 2.4 percent of amount charged.

Those are the only costs. The equipment can be picked up on Ebay for about $50 for a swiper and printer. No need to give the credit card companies $150 plus for this. When I call for support (during normal business hours) they always answer the phone!

Also, just under a year ago, I took advantage of an American Express program where they would give a merchant a 1% account for 12 months if they had an American Express card (any variety) of their own. That program is going to end in December, so I'll have to see what they are going to do. I don't believe taking the card has brought in a sale that I wouldn't have gotten otherwise, so will only continue with AE if they will be competitive with Visa and MC... not likely, I suspect.

From contributor D:
Contributor B, is it legal in your state to charge a fee for accepting CC? I don't believe that it is…

From the original questioner:
Thanks for the info. Do you think that by accepting credit cards, you've increased your volume of business? If you bid 10 jobs and you normally get 3, now by accepting credit cards, you may get 5? Or do you bid 10, still get 3, but now two want to pay by credit card? My biggest concern is that if the customer has the choice, they may opt to pay with a credit card rather than cash. In other words, the volume of business doesn't change, but the volume that you might normally have as cash now goes to credit card.

From contributor J:
I stopped by a Wells Fargo office to see how much it would cost me to offer the same as cash plans. I was shocked by what they told me. Wells Fargo and others offer these "same as cash" finance plans free to merchants because a huge number of the borrowers don't pay off the balance within the 12 month interest free period. Instead they go the full term of the loan, and the lender makes money. Many of these lenders will actually pay the merchants if they generate enough business for the finance company. Most of these lenders (Wells Fargo for sure) require you to have a walk-in, store front type business in order for them to work with you. I'm working with a local lender who doesn't require that. My shop is located at my home, so I don't have customers coming and going.

From contributor T:
I'm personally a big fan of using credit card acceptance to help increase business. However, in your case, I am wondering if the price point (up to $8500) is a little steep for the credit card option. I think some of the other ideas expressed here warrant more consideration.

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