The Risks and Benefits to Accepting Credit Cards

As a business owner, you need to decide how you want to get paid for your merchandise or services. Are you willing to pay the fee so your customers can use a credit card to pay you - or would you rather try to strike out on your own as a cash-on-demand business?

You need to evaluate the pros and cons - or the risks and benefits - of accepting credit card payments. And then, if you decide to accept c.c., you need to decide where you draw the line - or if you draw it at all. Which credit cards will you accept? Will you accept debit cards? Do you take credit card orders online and over the phone?

You also need to ask yourself what is best for your customer. Do customers in your line of work expect to be able to charge their payment? Are you willing to give up the extra purchases your customers are likely to make when they can use a c.c.?

One way to find the answer that is right for your business is to go through the pros and cons of accepting credit cards.

Pros:
Customers find credit cards easy to use and they make it easy to make purchases. The customers walk in, find what they need and then lay down the plastic card to take care of it. You, the business owner, will pay a transaction fee, but you will be paid promptly.
Credit cards extend a customer's buying power. If payday is not until the end of the month, a credit card allows customers to make the purchases earlier in the month - maybe to take advantage of a sale or because they need the product or service immediately. They are not tied to payday.
Customers will generally make impulse purchases when they are shopping with a credit card. If customers can only spend cash at your place of business, they will only spend what is in their wallets. With credit cards, they are able to charge a purchase that is more than the funds they have on hand.
Many customers have come to expect to be able to pay for their purchases with a credit card. In fact, there were expected to be more than 181 million credit cardholders in 2010 in the United States, with the average credit cardholder having 3.5 credit cards.
Cons:

As a business owner, you are more likely to experience a fraudulent payments with a credit card compared to cash. Still, you are not left alone to resolve the problem. The Fair Credit Billing Act and other related laws give you additional protection and flexibility when you are forced to deal with a fraudulent payment or a defaulted payment.
You need to pay a processing fee for each c. c. transaction. While these fees can add up, there are ways to cut the overall cost - such as free processing equipment. The business owner also needs to balance the benefits of credit card transactions against the fee. Will you make more money by accepting credit cards than you will spend in fees?
Credit card transactions are just one more set of details to be recorded by the already burdened bookkeeper. On the other hand, the right recording practices allow you to measure sales more accurately.
Debit Cards

Debit cards differ from credit cards in that they allow customers to pay for products or services directly from their checking account. They are paying with funds already in hand, not borrowing from the credit card company to make a purchase. Debit cards come with their own pros and cons as a form of payment.

Pros:
Some customers really like debit cards because they know they are not spending more than they have. They can only spend what is in their bank account. They know they will not receive a bill each month that they may or may not be able to pay down. With this financial freedom, customers may be more likely to keep shopping.
You will probably get paid quicker with a debit card payment than a c. c. payment. Debit cards are generally approved faster, which means the money is in your hands sooner.
Customers who generally avoid c.c. have debit cards. By accepting debit cards, you are welcoming customers you might not otherwise have.
Debit cards generally require a PIN (personal identification number) in order to complete the transaction. This will help cut down on fraudulent purchases.
Fees paid on a debit card are smaller than those paid on purchases. This is because a purchase with a debit card is virtually the same as a cash transaction.
Con:

You will need additional equipment - a PIN pad - in order to accept debit cards. While the fees can add up, some companies offer free equipment, which can reduce the sting of fees.
While a certain amount of risk is involved in processing credit and debit cards, the benefits outweigh them by far. Take your business into the future with the right merchant account today.