No matter what industry it’s in, many times it’s a good idea for a small business to have one or more merchant accounts to be able to accept credit cards. Whether dealing with the general public, who almost to a person prefer dealing in plastic these days, or selling to other businesses which increasingly opt to pay their vendors with credit cards, businesses that accept this form of payment can cut down on their level of accounts receivable by making it easier for customers to pay. Likewise, companies that accept credit cards also decrease their level of non-paying customers, which can save tons of money in the long run.
The first step in giving your business the ability to accept credit cards is to choose a merchant account provider. This is the company that will facilitate the communication between your business and the credit card companies, namely Visa, MasterCard, American Express, and others. And of course, this is done for a fee. Typically, there is a monthly fee associated with the account, as well as a percentage of the money transferred. As there are several different types of companies that provide these accounts to small businesses, it’s important to know about each type in order to decide on the best option.
Banks are one of these types. If your business has a bank that it does business with (and unless you’re keeping the profits under a mattress, it probably does), you should check with your local branch to see if it offers some type of merchant account. Since your bank will already know much about your most intimate credit details, opening a merchant account with this company can be more streamlined than the alternatives. In addition, transferring monies from the merchant account to your bank account would be a snap since both accounts are with the same institution. The only downside is that banks can be more selective in granting merchant accounts, so if your company’s credit history is not up to par, a bank may not be an option.
An Independent Sales Organization (ISO) is another avenue to explore. ISOs are registered brokers for credit card merchant accounts, and as such, do not do the actual processing, but service the accounts and represent the actual processing companies. It can be easier to land an account with an ISO, but the merchant account fees are higher as well to make up for this.
A third option is to sign up with some of the credit card companies themselves. American Express and Discover both allow businesses to sign up directly with them; however, Visa and Mastercard still require merchant accounts with third-party processors. Many companies choose to deal with merchant accounts for these two types of cards, and then deal directly with the credit card issuers when they are allowed to, simply to cut out the middleman and save money on fees.
With more and more consumers choosing to put their purchases on plastic, whether on credit or debit accounts, a small business that accepts credit cards will enjoy increased sales in most cases. It’s just a matter of opening a merchant account with a provider, and/or opening accounts directly with some of the credit card companies.
