The vast majority of businesses today accept electronic payments. 100% of businesses must deal with payment processing in one form or another, whether that entails accepting credit cards, debit cards, EBT payments, or operating as a cash-only shop. Yet the amount of misinformation out there regarding processing fees and other minutiae is significant. Merchant service providers work hard to dispel these misconceptions, but it is nearly impossible to get out in front of everything.
With this in mind, here are some common facts and some common fictions when it comes to small business payment processing.
Understanding the Basics of Merchant Payment Processing
In order to discuss common misconceptions, we must first go over the basics of how payments are accepted, processed, and settled. The details of how payment processing works can actually be quite complex. Thankfully, a cursory understanding is often enough to get started.
Yes, You do Need a Merchant Services Account to Process Credit Card Payments
Many entrepreneurs like to do it all themselves. And why shouldn’t you? You built your business from the ground floor and nobody does it better. This can lead many small business owners to reduce their amount of partners or third party contracts to a minimum. When it comes to credit card and/or debit card payment processing, there is no way to get around signing up for a merchant account. Merchant accounts refer to the literal bank account through which electronic payments are processed. Without one, your business will not be able to accept these forms of payments.
Processing Electronic Payments Incurs Small Fees per Transaction
Yes, processing credit and debit cards will cost your business money. Credit card processing rates and fees differ depending on the credit card being accepted, your merchants service agreement, and several other factors. What is important to understand is that working with a merchant services provider to find the right rates and the right fee structure is critical to keeping your costs low.
American Express is More Expensive to Process than Other Credit Cards
This is a common rumor which is based in truth. Accepting American Express does tend to be more costly than other common credit cards. To read more, see our recent blog titled “The Risks and Rewards of Accepting American Express”.
Common Small Business Payment Processing Myths
With all of the information available online, you would hope that merchants would be more educated than ever. For the most part, this is actually true. The flip side is that anyone can post anything online, and that certainly isn’t all good information. The amount of conjecture and misinformation available today is as high as ever. Let’s cut through some of the most common myths associated with merchant payment processing.
Accepting Credit Cards and Debit Cards is Essentially the Same
Swiping one piece of plastic should be about the same as swiping another piece of plastic…right? When it comes to debit cards vs. credit cards, the similarities pretty much end there. Credit card processing carries different fees, must go through an entirely separate authentication process, and also takes longer to settle. Debit card processing is faster, less expensive, and is closer to accepting a digital check or a bank wire than it is to accepting a credit card.
Payment Processing is Prohibitively Expensive
Small business owners are understandably skeptical about taking on additional overhead and/or startup costs. Most of us started a business with the idea that we would save as much money as possible by being frugal until we were well-established. Yet the risk of not accepting credit cards and debit cards outweighs the cost savings of going cash only in nearly all situations. All business decisions are calculated risks. Choosing to eat a very small fee per electronic transaction is almost guaranteed to pay for itself when you consider customer convenience and potentially larger customer bases.
Accepting Credit Card Payments Puts my Business at Risk
There is no question that security and fraud prevention are very real issues when it comes to processing all forms of electronic payments. Yet the potential risks are very small compared to the rewards enjoyed by most small businesses. Additionally, there are fringe benefits of using high-quality payment processing software such as cleaner bookkeeping and lessened chance of being audited by the IRS. When the alternative is operating as a cash-only business, accepting credit card, debit card, and EBT payments is actually far less risky.
Payment Processing & Much More from True Merchant
True Merchant is a Better Business Bureau accredited merchant services company which focuses on helping small businesses. We understand that the details of processing debit card and credit card payments are often the last thing on business owners’ minds. That is why we offer transparent, fair pricing models for our top-notch services including CardSecure, NFC payments, online payment solutions, and much more!
To learn more about how True Merchant can help your small business, please contact us today by calling or filling out an online form. One of our qualified merchant services professionals will be happy to get you started.