Accepting Credit Cards
Credit and Debit Cards
Merchant Accounts

What are different ways to pass on transaction fees for accepting credit cards to customers?


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2009-08-02 04:07:02
2009-08-02 04:07:02

Many small businesses have concerns about the transaction fees associated with accepting credit card payments, and that is what initially scares small business owners away from accepting credit cards. However, before you dismiss the idea, there are some options that you need to consider with regard to credit card acceptance. The main costs of accepting credit cards are the credit card transaction fees and the cost of acquiring the equipment and software necessary to accept credit cards. Merchants always have the option of absorbing credit card transaction fees by increasing the price of their products. However, if you want your prices to remain competitive, then blatantly raising your prices could lose you customers. One way to pass on a large part of your transaction fees to the customers is by charging a convenience fee. You could only allow credit card users to use their credit cards when there is a situation in which cash or checks cannot be used, such as payment via telephone or online. Customers paying with credit cards are receiving a benefit in that they can pay from the convenience of their own home and avoid waiting in line. By charging a �convenience fee� on credit cards, you are still giving your customers the option of avoiding the fee by selecting another payment method, such as mailing in a payment or making a payment in person. Another way to pass on transaction fees is to offer your customers different payment options. By employing this method, credit card users won�t feel that they are the ones being singled out and penalized because you are not assigning fees to a means of payment, such as cash, check or credit card, but rather to different payment methods, such as phone, mail, or �walk-in� service. It would be a violation of the merchant agreement with most credit card companies to charge a "convenience fee" or any other surcharge because the customer selected this method of payment. Any retailer found violating these rules may pay heavy fines or have their credit account suspended or terminated. For example, VisaUSA, Rules for Merchants, Page 10: "Always treat Visa transactions like any other transaction; that is, you may not impose any surcharge on a Visa transaction."


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AnswerWhen looking into accepting credit cards, remember that credit card transactions and credit card processing are a business in itself. The main goal of merchant account providers and credit card companies is to make money. This is a business that you are paying for. Therefore, it is important to evaluate whether the costs you pay for accepting credit cards are worth it in relation to the benefits it provides your business.The money your business pays for accepting credit cards is called ?interchange.? Interchange is ?the clearing and settlement system in which raw data is exchanged between the acquirer and the issuing bank.? Although you may be quoted one rate for this service, everything depends on how your account is set up before the rates you pay are actually determined. To receive the best rates possible, it is important to understand how the costs will affect your revenue.Evaluating the costs is the trickier part of the equation. The benefits that your business would derive from accepting credit are easier to identify. The one thing all customers seem to desire is more options. Accepting credit cards provides your customers another option for making payments, and they will be more willing to buy something because they don?t have to worry about having the actual money for it right now. Also, accepting credit gives you unlimited ability to reach new customers. Some customers prefer not to patronize a business in which they can?t use credit, so accepting credit will open you up to a whole new customer base.Most importantly, accepting credit will add tremendous profits to your bottom line. Profits generated from credit cards will keep your employees paid, allow you to pay for better healthcare for your employees, and offer better discounts and services to your customers.Therefore, you must evaluate the total cost of accepting credit cards (including all payments and fees) and weigh that against your customer base. After evaluating your customers, including what they buy, how much they spend, and what forms of payment they use; it will be easier for you to realize whether accepting credit cards would truly benefit your

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