If you're a retailer, chances are you've thought about accepting credit cards as a form of payment. Credit card processing can be a great way to increase sales and attract new customers. But it's also important to understand the ins and outs of retail credit card processing before you make the plunge.
In this article, we'll cover everything you need to know about retail credit card processing, including the benefits and drawbacks, the different types of processors, and the costs involved.
Benefits of Retail Credit Card Processing
There are several benefits of retail credit card processing, including:
1. Increased Sales: One of the most obvious benefits of accepting credit cards is that it can lead to increased sales. Customers are more likely to make impulse purchases when they can use a credit card, and they're also more likely to spend more money when they have a credit card than when they're paying with cash.
2. Attracts New Customers: Credit card processing can also help you attract new customers. If you're the only retailer in your area that accepts credit cards, you're likely to get business from customers who don't carry cash or who prefer to use a credit card for all of their purchases.
3. Builds Customer Loyalty: Credit card processing can also help you build customer loyalty. When customers have a positive experience using their credit card at your store, they're more likely to come back and shop with you again.
4. Helps With Cash Flow: Credit card processing can also help with cash flow. When you process credit cards, you'll get paid immediately, which can be helpful if you're a small business with limited resources.
Drawbacks of Retail Credit Card Processing
There are also some potential drawbacks to retail credit card processing, including:
1. Costs: One of the biggest potential drawbacks of credit card processing is the cost. There are several fees involved in processing credit cards, including merchant account fees, transaction fees, and sometimes even monthly fees. These costs can add up, and they may cut into your profits.
2. Security Risks: Another potential drawback of credit card processing is the security risks. When you accept credit cards, you're responsible for keeping your customers' information safe. If there's a data breach or if your customers' information is stolen, you could be liable for damages.
3. Chargebacks: Another potential drawback of retail credit card processing is chargebacks. A chargeback occurs when a customer disputes a charge on their credit card statement. If a customer disagrees with a charge, they can contact their credit card issuer and ask for a refund. If the issuer agrees, you'll be responsible for refunding the customer's money, and you may also be charged a fee.
Types of Retail Credit Card Processors
There are two main types of retail credit card processors: direct processors and indirect processors.
Direct processors are the simplest type of processor. They're typically banks or other financial institutions that have their own merchant accounts. When you use a direct processor, you'll work directly with the processor to set up your account and process transactions.
Indirect processors are a bit more complicated. They're usually third-party companies that don't have their own merchant accounts. Instead, they act as middlemen between you and the credit card issuer. When you use an indirect processor, you'll typically work with a sales representative to set up your account and process transactions.
How Much Does Retail Credit Card Processing Cost?
The cost of retail credit card processing varies depending on the type of processor you use, the type of card you accept, and the fees your processor charges.
Direct processors typically charge lower fees than indirect processors. They may also offer lower rates for processing transactions.
Indirect processors typically charge higher fees than direct processors. They may also charge higher rates for processing transactions.
Some processors charge monthly fees, while others charge per-transaction fees. Some processors also charge both types of fees.
When you're shopping for a retail credit card processor, it's important to compare the fees charged by different processors. You should also consider the type of cards you want to accept and the volume of transactions you process.
To get the best deal on credit card processing, it's often a good idea to shop around and compare rates from multiple processors.
How Do I Choose a Retail Credit Card Processor?
There are several things to consider when choosing a retail credit card processor, including:
1. Fees: One of the most important things to consider when choosing a credit card processor is the fees charged. You should compare the fees charged by different processors and choose the one that offers the best deal.
2. Types of Cards Accepted: Another thing to consider is the types of cards you want to accept. Some processors only allow certain types of cards, such as Visa or Mastercard. Others allow all major credit cards.
3. Credit Card Brands: You should also consider the credit card brands you want to accept. Some processors only allow certain brands, such as Visa or Mastercard. Others allow all major credit card brands.
4. Transaction Limits: Some processors have limits on the number of transactions you can process. If you process a large volume of transactions, you may want to choose a processor with no transaction limits.
5. Processing Time: You should also consider the processing time for transactions. Some processors take longer to process transactions than others.
6. Customer Service: Another thing to consider is customer service. You should choose a processor with excellent customer service in case you have any problems.
7. Security: You should also consider the security of your transactions. Some processors offer more security than others.
8. Reputation: You should also consider the reputation of the processor. You can research the processor online to see what other people are saying about them.
9. References: Finally, you should ask for references from the processor. A reputable processor will be happy to provide you with references from satisfied customers.
When you're comparing different processors, it's important to consider all of these factors. You should also read the processor's terms and conditions carefully before you sign up.
How Do I Process Credit Card Transactions?
Once you've chosen a credit card processor, you'll need to set up an account with them. Once your account is set up, you can start processing transactions.
To process a credit card transaction, you'll need to enter the credit card number, expiration date, and security code into the processor's system. You'll also need to enter the amount of the purchase.
Once you've entered all of the required information, you'll submit the transaction for approval. The processor will then either approve or decline the transaction.
If the transaction is approved, you'll receive a confirmation number. You'll then need to provide the confirmation number to the customer.
If the transaction is declined, you'll need to ask the customer for another form of payment.
How Do I Keep My Credit Card Processing Secure?
It's important to keep your credit card processing secure to protect your customers' information. You should never store credit card numbers in plain text.
Instead, you should encrypt the credit card numbers. You can encrypt credit card numbers using a service like SSL.
You should also never email credit card numbers. If you need to send a customer their credit card number, you should do so over the phone or through a secure messaging system.
Finally, you should always keep your software up to date. You should install security updates as soon as they're available.
By following these tips, you can keep your credit card processing secure and protect your customers' information.
