As we’ve previously discussed, there are several benefits to accepting a credit card for small business owners.
They give you more money, allow customers to make larger purchases, and it attracts more customers away from your competitors.
However, there are some myths surrounding credit cards that still linger in merchants minds.
The MythBusters aren’t the only ones who can disprove myths (they certainly have more explosions though). So today we’ll be dispelling the 5 most common myths merchants believe about taking credit cards.
#1 It will cost you more money
Okay this is partially true, everyone month you’ll be losing about 5% of your transactions made by card to processing fees,interchange rates, and other common fees on your statement.
But in reality, you’re missing out on more than 5% of potential revenue, by not accepting credit cards.
As our previous blog stated, people use their credit cards for food, gas, travel, and shopping roughly 64% more than other methods of payment. So you could be kissing an additional 64% of money goodbye by limiting your payment options to cash or check.
Would you rather lose 5%, or 64% of potential sales? (Psst, the answer for those who hate math is 5%!)
If you think because you’re a B2B, this doesn’t apply to your business operation, think again.
Waiting for checks and payments can cause a lot of open AR and open invoices, which is bad.
However, if you use a payment gateway, you’ll decrease your amount of open AR. Invoices will get paid faster, and you won’t be waiting 30+ days to close invoices to be paid!
#2 You think you’ll have more costs, but your sales won’t go up
Again, this is a misconception.
You’re assuming everyone will now pay with a card, or that your level of sales will stay the same. Meaning you’ll pay fees on every transaction, but receive no additional revenue.
Many people will still pay with cash or the occasional check (there are still those people out there), so you won’t have to pay those processing fees on every transaction.
But we guarantee your sales are going to go up if you start accepting credit cards.
There have been countless studies, financial and psychological, that have reached the same conclusion; people will spend more money when using a credit card.
“McDonald’s reports its average ticket is $7 when people use credit cards versus $4.50 for cash”(www.nerdwallet.com/blog/credit-cards/credit-cards-make-you-spend-more/).
Bar or Restaurant, convenience store, retail, you’ll see an increase in amount for credit card transaction over a cash transaction. People spend roughly 20% more with a card, then if they had used any other form of payment.
#3 Afraid of handling cardholder information
This is understandable, dealing with people’s personal information is intimidating notion, but it’s not as difficult as you think.
When you choose a processor, they carry the responsibility of also being PCI Compliant, along with you.
Does that mean it’s easy?
It depends.
Yes, we know that’s not answer you wanted to hear, but it’s the truth.
If you’re an E-Commerce merchant, you’ll have additional questions PCI will check when testing your compliance, rather than if you mainly do terminal face to face transactions. Does your site save cardholder information on its pages? Does it have encryption? These are some of the questions that will test your compliance.
Here’s the official site for PCI compliance, they have a test you can fill out.
Not storing your cardholder’s information is a great way to ensure you’re PCI compliant, but a fair warning. Even if you get the check mark from the test, you still may actually not be as safe as you could be.
Having a processor you trust will help you know where you stand. Call and ask your processor questions, and if they’re a good processor, they’ll be willing to help keep that information safe!
#4 You’re afraid you won’t get paid
For some reason people from the merchant side and the consumer side, have difficulty grasping how paying and receiving payment from a credit card works. As people in the industry, we tend to forget that (sorry for being know it alls), but we’ll try and break it down.
When a cardholder pays for anything by card, there is a instantaneous conversation between your processor and the cardholder’s bank, asking for authorization to bill the cardholder for the transaction.
The bank will respond by declining the card or saying “approved”. Those funds if approved are immediately transferred from the cardholder’s bank to your processor.
After you enter for transactions to your processor at the end of each day, the funds are distributed within 1-2 days, depending on your processor.
Which is a heck of a lot better than waiting 30 days for a check, that could bounce.
The cardholder’s bank is essentially granting them credit to pay for transactions, but that credit get paid to you regardless if the cardholder pays the their bank the amount due on their statement at the end of the month.
If the card is authorized, you will get paid within two days, because that money is yours.
#5 You’ll have to drop a bunch of money on equipment
In the past this was a valid concern, terminals could be well over a $1,000 to buy.
Much like other technology, time brings the price down.
Remember how expensive laptops used to be 10 years ago? Or iPads? As time goes on, technology becomes cheaper to make, and the same has been true for credit card terminals.
They’re cheap!
That’s why we recommend you buy them instead of leasing them. The high end price for a terminal is $600, but you’re business will most likely only have to drop $200 for a brand new credit card terminal.
Sometimes processors will even throw in a free one!
Busted!
Like most myths, they don’t hold any water when logic is applied to them. While you may still be resistant, I’ll leave you with a quote from the great Stevie Wonder: “Superstition ain’t the way.”
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