8/31/2004
What About Credit and Debit Cards? Part 2
by Vonelle Vanzant, Center Director, UA Fort Smith SBDC
The first article in this series discussed the need for business owners to decide whether or not to use credit and debit cards to pay for purchases. This article discusses the acceptance of credit and debit cards from customers as payment for the goods and services they buy. There are advantages to accepting credit and debit cards from customers. Accepting them may reduce the risk of loss from bad checks and make the business’s product offering available to more customers. Too, funds are electronically transferred into the business bank account within a few days of the transaction. However, there are costs. There is an upfront cost for equipment and set up followed by transaction fees. Banks and other card issuers charge the business a transaction fee which is usually a percentage of the transaction. This fee varies from provider to provider, so do your research before deciding on a provider. Many trade associations have negotiated favorable rates with providers. There is, however, a risk that the card holder will dispute the charge or default on payment to the card issuer. In that case, the funds will be electronically debited out of the business bank account. Some business owners charge an add-on or surcharge when a credit or debit card is used to help defray transaction costs and help cover losses from defaults and charge backs. Bottom line, as in all decisions you need to weigh the costs and benefits of using and accepting debit and credit cards and make the best decision for your company.
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