Closing the Sale: The Pros and Cons of Accepting Credit Cards
Should you accept credit cards? Most businesses do these days, but not all of them. Youâ€™re holding out, but why? While you shouldnâ€™t rush into a new e-POS system just yet, you also shouldnâ€™t dismiss it outright. Here are some things to think about.
Theyâ€™re Inexpensive and Easy To Run
Compared to old hardline terminal setups, e-POS and cloud-based systems are a lot cheaper. Old terminal systems cost upwards of $20,000 or more to install, plus monthly or yearly maintenance fees and licensing. However, newer iPad POS systems cost a mere $3,000 to $5,000 to set up, with a nominal monthly fee (for tech support and unlimited licensing and upgrades).
Thereâ€™s also the cost factor of running all of the cables of a traditional hardware system. Of course, since you donâ€™t accept credit cards now, it isnâ€™t as much a savings as it is a comparative analysis of old tech to new tech.
They Give You A Competitive Advantage
Your competitors are already using POS systems, and many of them are transitioning over to newer iPad POS systems that are cloud-based. What does this mean for you? Well, your competitors are now mobile, because their POS is wireless. Theyâ€™re also more flexible. They can take both cash and credit or debit.
Your competitors are also more customer-friendly because they cater to their spending behaviors and patterns instead of setting a standard that many people donâ€™t follow as much (cash only). By accepting credit cards, you also make it easier (and possible) to take your business online.
Even if youâ€™re a local business, Pew Internationalâ€™s research shows that many people use mobile to make purchases – even from local businesses.
They Can Make Your Life Easier
Right now, you probably do inventory, accounting, and payroll as separate functions. Maybe you do some of these tasks by hand. A payment processing system, especially e-POS, often integrates multiple aspects of your company into one system. So, for example, you donâ€™t just get a credit card terminal. You also get a time clock for employees, payroll integration, inventory tracking and automated sales syncing across all point-of-service terminals, and automated accounting.
Thereâ€™s An Increase Risk Of Fraud
For all of its advantages, there are some disadvantages to accepting credit cards. With cash, youâ€™re fairly protected against fraud unless someone tries paying with counterfeit money. With credit and debit cards, chargebacks and fraud are a real concern.
Unfortunately, some individuals take advantage of the consumer protections built into credit transactions by purchasing goods and services and then initiating a chargeback so that they get to keep your product or benefit from your services without paying.
Itâ€™s More Expensive Than Accepting Cash
There are fees associated with accepting credit cards, and they can get expensive. Read Authorize.net reviews. Youâ€™ll see that many companies charge a flat monthly rate, a flat per-transaction fee, plus a fee as a percentage of the sale.
You could end up losing 2 or 3 percent (sometimes more) of the purchase price to fees. For big ticket items, this ends up being a lot of money. Even on small-ticket items, the percentages add up.
Card Transactions Add To Book Keeping
Sometimes, card transactions can add to bookkeeping, especially if you donâ€™t have a newer POS system that integrates accounting and inventory tracking. That added accounting and bookkeeping could increase your labor costs by at least one employee per year.
If the additional sales donâ€™t at least pay for the additional employee hours, itâ€™s just not worth the added expense. In fact, you donâ€™t just want to â€śbreak evenâ€ť on your credit card transactions. You want to add to your net profit. So, credit card processing makes sense when youâ€™re a high volume merchant, but itâ€™s not always a good move if you have fewer, high-ticket or small ticket, transactions to process.
Jessica Bunn has a strong sense of business as an entrepreneur. Since her first job walking neighborhood dogs, she has striven to find efficient ways to improve her work experience and customer satisfaction.