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How a Home-Based Business Can Accept Credit Card Payments

Getting a Merchant Account and Accepting Credit Card Payments


Credit card inserted in laptop keyboard, close-up
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Advantages of Accepting Credit Cards

Being able to accept credit cards for home-based businesses makes the business more attractive to customers, who appreciate the convenience of charging their purchases. The ability to accept credit cards may also result in increased sales, because customers are better able to make impulse purchases, since they can pay for them instantly. Another benefit of accepting credit cards is that the payments don’t bounce as checks do when there are insufficient funds. You’ll know at the moment when you process the payment if your customer has a balance that can cover the cost of the transaction. Finally, justly or unjustly, the ability to accept credit cards for home-based businesses gives the entrepreneur more credibility and the appearance of being more established than those businesses that accept only cash and checks.

Some home-based business owners are intimidated by the process of accepting credit cards and/or worried about the associated fees. Indeed, fees used to be outrageous, but the growing popularity of e-commerce and the power of the Internet have created a variety of new options for home-based business owners. Today, accepting credit cards isn’t all that difficult, and the increased sales volume and other benefits almost always outweigh the fees that business owners have to pay for this capability.

Getting a Merchant Account

First, you’ll need a merchant account, which is where credit card payments will be deposited. To get a merchant account, you have three options: you can use a bank, a third-party provider like PayPal, or an independent sales organization. The question of which option is best for your business depends on your sales volume, among other factors. In general, businesses with low sales volumes will pay the least with a third-party provider because of the absence of monthly fees, but this arrangement also results in the longest waiting times to actually receive the funds. In contrast, businesses with higher sales volumes will pay the least with a bank or independent sales organization as the discount percentages per transaction are lower than those offered by third party processing companies.

It is important to note, however, that getting approval for a merchant account directly through a bank can be difficult, if not impossible, as many banks refrain from providing credit card processing capability to new or even established home-based businesses, particularly for online businesses that lack a brick-and-mortar counterpart. Consequently, most home-based business owners are best suited by working with an independent sales organization, affiliated with acquiring banks that encourage business relationships with home-based merchants, even with those who have a less-than-perfect credit history. (Many independent sales organizations allow merchants who do not have a favorable credit score to use a cosigner who possesses better credit.)

Another advantage of working through a bank or independent sales organization is that, in essence, your home-based business owns its own merchant account. The advantage of this is that when customers receive their credit card statements, your company’s name will appear beside the purchase amount. In contrast, if you work with a third-party provider, the name of that provider will appear on the statement. Customers are less likely to recognize the third-party provider’s name, and consequently often initiate chargebacks – an expensive, losing proposition for your business.

Establishing an alliance with a bank or independent sales organization offers this additional benefit: Processing limits are more generous. Many third-party processing companies place a lower cap on the monthly volume and highest ticket amount. As your business evolves and grows, you should anticipate a higher transaction volume. Lower processing limits can preclude you from accepting credit cards over a certain threshold level, constraining your business’s growth and cash flow.

In almost all cases, working through an independent sales organization is the best way to get a merchant account and be able to accept credit cards for home-based businesses, but this will depend on your specific circumstances. Many merchant account providers have special packages for home-based businesses, so take the time to shop around for the best deal.

Accepting Credit Card Payments

Once you have a merchant account, you'll need a way to actually accept the credit card payments. Here, too, you have several options. If your home-based business has its own website, then setting up an Internet gateway with a shopping cart is one option. Incorporating a shopping cart (which includes the product catalog and purchasing interface) into your website provides the most convenience for your customers. It also results in fewer lost sales, since customers won’t be redirected to other sites for payment, during which time they may change their mind about their purchase decision.

If your home-based business doesn’t have a website, you still have several options for accepting credit cards. One is to use a virtual terminal, where you log on to a third-party website and enter your customers’ credit card information for payment authorization. Similarly, you can choose to use a service like Dial Pay where you use a touch-tone phone to enter the credit card information and receive immediate notification of sufficient funds. You can also purchase or lease the equipment needed to swipe credit cards in your own home if you usually interact with your clients in person.

Comparison Shopping for Merchant Accounts and Credit Card Processors

Once you have a merchant account and a shopping cart or similar technology for processing payment, you are well on your way to being able to accept credit cards for your home-based business. Know that there are a variety of companies that cater to home-based businesses who will do everything possible to help you accept credit card payments. Take the time to shop around, being sure that you understand all the associated fees and compare deals until you find the one that is best for your specific needs.

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