Accepting credit cards, the pros, and cons

Person processing a card payment at a card processorAs businesses continue to evolve and move to a more digital platform, some are having to decide whether to accept credit cards and how to accept credit cards. Unlike with cash, accepting credit cards typically comes with a processing fee from the provider that processes the electronic transactions. Due to this many small businesses are hesitant to accept credit cards because in the state of Massachusetts the state law (Part I, Title XX, Chapter 140D, Section 28A) dictates that the processing surcharge cannot be passed onto the buyer.

So why might a business decide not to accept credit cards? A business that accepts credit cards is now open to the possibility of credit card fraud. If you accept credit cards payment, there is the chance that you may accept a payment from a stolen credit card or credit card information. If the credit card company identifies the transaction as fraud someone will be liable for the purchase. In most instances the card owner (customer) is typically not held responsible for the charge, even if their card company does not offer fraud protection. In the situation where the card company does not offer fraud protection the Fair Credit Billing Act limits their liability to $50. In most cases the card company or the merchant is liable for the expense. Determining this depends on the card company policy and transaction type. When the card is used in the store as a “card-present” transactions and there is fraud, the processor is normally held liable; when the card is used online as a “card-not-present” transaction and there is fraud, the merchant is normally the one held liable for the expense. Merchants can mitigate this risk by asking for an ID when a card is used in store and using extra layers of security and verification when accepting payments online.

The other con to accepting credit cards at your business is the cost of the service fees, especially for high volume transactions. If most of your transactions begin to take place with credit cards, the cost of the fees, though small in percent, can add up and become a larger monthly expense for smaller businesses.

Even with these cons, there are many pros that may outweigh the risks for merchants. According to the 2019 study done by the federal reserve, credit card payments account for 34.1% of all card transactions or 44.7 billion transactions at a value of $3.98 trillion. This opens over a third of the card payment market of consumers who might otherwise not use your products and services. Businesses that accept and displaying the signs that state that credit cards are accepted, not only notifies customers that they have multiple payment options, but it also helps give a perception of legitimacy to your business. This is because people trust their credit card companies and can transfer some of that trust to your business.

Another reason to accept them is if your competitors are accepting credit cards, which might begin to hurt your sales. Whether your competitors are accepting credit cards or not, it can either give you a competitive edge and boost sales, or it can keep you from falling behind. Allowing customers to use credit cards increases their purchasing power by making them no longer reliant on ATMs nor restricted by what is in their wallet. It also allows them to make impulse purchases. This helps to increase your sales and cash flow on the day to day. Another benefit is that credit cards are processed, verified, and settled typically within a day or two, unlike waiting for a check to clear with the possibility it might bounce. Having less cash on hand by accepting credit cards and going more digital can reduce theft concern for yourself and staff.

Credit card purchases also allows your company to utilize its website to the fullest. The only way to accept payment on an online format is through a card payment. Without accepting card payments, you limit how your customers can interact with you. Accepting card payments and credit card payments on your website requires you to use a processing company. If you decide to accept in on your website, it is a good practice to accept it in the store as well.

If your business does decide to accept credit card payments from customers, it is important to find a good processing company. Ensuring that you partner with a reputable processing company can help protect you from a data breach and fraudulent purchases. It is also good to ensure that they give you a clear fee and rate structure so you can plan for the costs of accepting credit cards and you do not receive any surprise fees.

Hopefully, this can help you decide whether to accept credit cards for your business or hold off for now.

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