Processing Credit Card Sales

      Here's a detailed thread about various ways to manage the process if you choose to accept payment by credit card. January 2, 2012

We've been considering purchasing a credit card machine so we can take payment or down payments by credit card. Problem is: I know nothing about the ins and outs of doing this. Do they come from a bank? Do they all cost the same? Can someone point me in the right direction?

Forum Responses
(Business and Management Forum)
From contributor A:
Don't rent/lease a machine or pay someone a recurring monthly fee for the privilege of accepting a credit card. Monthly fees will eat you alive until/unless you take several card transactions every day.

All you need is a PayPal or Google Checkout Account. You can send electronic invoices from either and your customer can use their credit cards with either. It's going to cost you around 3% of the gross amount of the sale to accept cards. Raise your prices across the board for everyone to accept cards. You cannot, by the agreement you'll end up signing, charge a higher rate for credit card transactions than for cash/check transactions. Get caught and you'll no longer be able to accept cards.

From contributor O:
PayPal and Google are both designed primarily for on-line web-site payments. PP also has regular merchant accounts, but that has a $30/month base charge. As far as I know Google has no off-line merchant accounts.

For an on-line web-site payment, only you need a PayPal account, your customers can use their cards to pay whether or not they have a PP account and they are not required to open a PP account if they don't have one. PP acts as your cc processor and credits your PP account with each transaction with no monthly charge.

It shouldn't be too hard to set up a PP button on your web site for your customers to use to make a deposit or other payment. Call them, it's likely they've had this sort of request before. If they can't do it, there are hundreds of outfits offering regular off-line merchant accounts.

From contributor J:
I would look at PP again. Just this weekend I did a $400 transaction and they now charge the customer (me) a fee for this service for personal transactions just like the business accounts. I wouldn't want to charge the customer even more than they were expecting to pay going this way. I have had a merchants account for ten plus years, originally through our local bank with a merchant service company. It has a monthly fee+ a % based on the amount and type of transaction.

I wouldn't be without it, if I have to run a card I do it right over my cell and end up with and accepted or declined guaranteed payment. The trick is to find a good merchants account to deal with. Good luck in whatever you choose it was a big decision in my business but one I was glad we made.

From contributor K:
If you are dealing with small repeatable transactions (i.e. - retail), the argument can be made for it. If you are talking transactions that are thousands of dollars, at an average cost of 3% in fees, which you would have to raise your prices to recoup, instead, raise your prices 3% anyway, continue not accepting credit cards and pay yourself instead of the banks.

Have you seen an increase in lost business with people not wanting to do business with you because you don't offer credit cards? If not, don't get caught up in the marketing that says you need to become an uncompensated salesperson for the bank, and then pay for their equipment for the privilege of sending the bank more fees. They should be competing for how much money they will give you to bring them business, not the other way around.

From contributor O:
Actually, at the most basic level, Contributor A is correct. If you have a PP or Google account, you can send an invoice to anyone, for anything, for any amount, if you have an e-mail address to send it to. It's not where they intended to wind up, merchant-wise, but it's where they now are.

You (and only upon receipt of payment,) and never the customer, will be charged the more-or-less standard fee of 2.9% plus 30 cents for each cc payment. No web-site needed (not that you shouldn't have one and shouldn't set it up for on-line payment,) no merchant account needed (not that you shouldn't have one,) no nothing needed other than a basic PP or Google account.

As for pricing, if a third pay by cc, raise your general pricing by 1% to cover it. If 2/3rd's pay by cc, raise your pricing by 2%, if everyone pays by cc raise your pricing by 3%. Almost everyone and their brother accepts credit cards today. If you don't, you're at an obvious disadvantage. If you can't raise your prices by 1 or 2 or 3% then perhaps it's time to consider another line of endeavor.

From contributor Y:
We process about 50K a month in credit cards through a merchant account at our local bank. In general, there are two schemes for processing charges: (1) a system of a fixed charge per transaction, and a percentage charge for each transaction, and (2) a flat percentage charge. There is also a monthly fee. These fees are divided up three ways: (A) your bank gets a percentage, (B) the processing company gets a percentage, and (C) V/M gets a percentage. Depending on how close you are to your bank, this first fee is negotiable - both initially, and over time as you show a minimum of chargebacks or complaints. We presently pay about 2.58% and a maintenance fee of $8.00 per month (more for AMEX). It would be less, but we typically process "Card Not Present" transactions.

If you respond to pitches from credit card processors, remember that they are also trying to sell you a terminal. Likewise when you rent a terminal from your bank, you'll be paying 80-90 per year. There is no need to do either; terminals are available on eBay for peanuts. We use a Tranz 330 which is available on eBay used for less than $40.00. Programming it is done automatically by your processor.

We are in a different kind of business than you are, but I do believe that you will find that accepting credit cards will increase you business as it simplifies a customer's need to pay over time. This doesn't work, of course, unless you make it obvious to customers in advance that you have a credit option. Since you're going to take a 3% hit, it's necessary to raise prices all around by 1% or 2% to compensate.

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