[caption id="attachment_8237" align="alignleft" width="300" caption="Ring in the new year by ringing up more sales on your website when you offer credit card processing."][/caption]
By now, you've no doubt heard all about this little thing called the Internet and how people are losing hours and hours of their lives to things like the worst celebrity fashion, Fantasy Football, videos of kittens getting baths (it's just so adorably pathetic!) and online shopping.
The online sales opportunities for small business are endless, especially if you offer credit card processing.
Research shows that businesses that do not offer online credit card processing could be losing 60 to 80 percent of potential orders, according to Score.org. What's more, offering credit card payments means you'll likely see an increase in both the number of orders you receive, as well as the size of each order.
Whether you're just starting a business or looking to expand, here's what you need to know about accepting credit cards on your website:
In-store vs. Online Credit Card Processing
The biggest difference between processing a credit card in a bricks-and-mortar store and doing so online is having the physical card on hand to swipe. In-store credit card processing requires a credit card reader attached to a modem and (in most cases) a point of sales system. For in-store purchases, the merchant is responsible for verifying the card and cardholder by asking for ID or comparing the signature on the back of the card to the sales slip. Typically, the fees for processing in-person credit card transactions are lower than those for transactions when neither the card or cardholder are present (this is because the risk of fraud is higher for such transactions).
If you don't already have one for your bricks-and-mortar store, the first step to accepting credit or debit cards online is to apply for a Merchant Account. According to the Small Business Administration (SBA), if your business has a reliable sales record, you should be able to get a Merchant Account through your personal bank or a financial institution that specializes in e-commerce.
If your business is a startup and/or doesn't have a sales history, you might have to go through a third-party "independent sales organization" (ISO) that acts as a middleman between your business and the merchant processor. When working with an ISO, the SBA advices business owners to be wary of scams and overcharging -- most do charge businesses extra fees in exchange for taking on the risk of working with someone with an unproven track record.
You'll obviously also want to check that your Merchant Account Provider will process transactions that originate from the internet (not all do) and that transaction data is safe from credit card fraud.
To help figure out whether a third-party "gateway payment" service or Merchant Account Provider would be more suitable for your business, estimate what your average total purchase price will be and your monthly volume. While setting up a Merchant Account might be more costly at the outset, you could save money down the road as the service fees add up for gateway payments.
According to Inc magazine, the most important things to look for when shopping around for online credit card processing is a service provider that's:
- consistent, so that customers feel comfortable using your site
- secure (for obvious reasons)
- able to accept all forms of payment from anywhere at anytime
Here are five more useful things you need to know about online credit card processing:
1. Fees: Obviously, all service providers have different fee structures, but some here are some fees you can expect to see regardless:
- a one-time set-up fee
- a monthly statement fee
- a monthly gateway fee
- per-transaction fees
In addition, many also have a monthly minimum for sales. To figure out what sort of fee structure would be the most cost effective for your business, Score advises that you consider the nature of your products. If they are large and expensive, it might be smarter to look for a Merchant Account Provider that offers a higher flat-rate transaction fee, but minimizes the discount rate (a $1 transaction fee on a high-cost item would likely be less than a 2.5 percent deduction from your charge). If you have a high volume of low-dollar sales, then you'd want to look for the lowest transaction fee (or look for a flat monthly rate) because those charges will add up quickly.
2. Checkout: Service providers will either route your customers from the shopping cart on your site to a secure-payment system on their site, or embed a payment button directly on your site. The cost of embedding it on your site may be greater, but it may also improve the user experience.
3. Security: In addition to using a provider that has a history of preventing credit card fraud, there are additional steps you can take to help prevent fraudulent purchases, including asking for the three- or four-digit verification code on the back of the credit card and using an address verification system (which could result in small fees or lower rates from the credit card processor).
4. Mobile: According to e-commerce shopping is done on a mobile device ... and that number is expected to double or triple each year. For websites not optimized for mobile shopping, the number of shopping sessions that end up in a sale actually drops 75 percent. Given the proliferation of mobile technology, it would be wise to invest early in smartphone and tablet-friendly credit card processing.
5. Other services: Help broaden your customer base by also offering traditional forms of online payment -- like PayPal -- which is more familiar to customers and will help them feel more comfortable using your site. Credit cards aren't as pervasive in other countries, so if you anticipate a lot of international sales, offering alternative methods of payment is useful. Plus, online payment services generally have lower fees than Merchant Accounts, which is especially useful for small businesses that process a high number of small transactions.
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