Credit Cards

What To Know Before Accepting Business Credit Card Payments
Doug Smith

Defined Tag: Business Credit Card.

If you run a business credit card orders are part of your daily life. Customers have been taught that credit purchases are the safest and most reliable form of payment, especially for internet purchases. The customer's card number and other information are encrypted and sent directly to the bank which issued the card. The merchant often never sees the credit card number, receiving instead an approval or disapproval from the card issuer.
Online and offline purchases made with credit also give the buyer an extra layer of protection against both fraud and when returning undesirable purchases. Any merchant not accepting Visa, MasterCard, Discover, American Express, or other forms of their credit in their business or on their website is leaving money on the table. However, you must understand that businesses accepting credit cards must deal with some risk in exchange for the convenience.

The banks that issue such cards usually put the merchant at risk for the purchase amount, plus whatever charge back fees (or other penalties) that result from a bad transaction. For an approved sale, the sale amount is put into the seller's merchant account. If that sale is reversed due to fraud, refund, or other reasons, then the bank can withdraw the original purchase amount from the vendor's account, plus any fees spelled out in the merchant account agreement. Therefore businesses taking credit payments should keep a reserve amount in their accounts to cover these fees, or an overdraft fee might be charged, adding further insult to injury.

There is a cost for the convenience of accepting business payments via credit. The banks which issue the customers' credit or cash cards normally charge a convenience fee for each purchase. It might be a fixed amount per transaction, but is more often a percentage. Who pays that convenience fee? The merchant does. The fee amount is subtracted from the purchase price by the issuing bank. This has the net effect of reducing business profits. Some merchants are refusing to accept credit payments, or are urging their patrons to pay with cash, to help themselves stay in business.

Identity theft and card fraud are rampant these days, and it is naive to think that you, as a business owner, will not be a victim. Find out before this happens what the policies are of the banks whose cards you accept for payments. Know what numbers to call in the event of a suspicious or outright fraudulent transaction, what fees are involved, how long your money will be tied up during the investigation, and what your legal rights are.

Paying with credit is a great convenience for customers. There are more risks for the merchants accepting them, but with proper planning and knowledge, the pitfalls of accepting business credit card payments can be minimized.

This article is Copyright 2009 by Doug Smith. All Rights Reserved Worldwide. Unauthorized Duplication Prohibited. For Entertainment Purposes Only. Not Intended As Financial Advice. Consult Your Own Financial Professional.