Not every customer with whom you do business is going to pay using cash. On the contrary, most consumers today now prefer credit cards over cash payments, and for good reason: credit cards are safer, more secure, more convenient, and often come with other perks like cash back rewards. But if you’re a business owner who’s thinking about accepting cash payments, there are a few things you should know.
For starters, you’ll typically have to pay discount fees when accepting credit card payments as a merchant. A discount fee is essentially a basic fee that’s incurred on the merchant each time a customer makes a purchase using his or her credit card. The fee will vary depending on several factors, however, including whether or not you swiped the card or entered the number manually, the type of credit card being used, and the industry in which your business operates.
According to Intuit, maker of the Quickbooks accounting software, there are 3 tiers of discount fees: qualified, mid-qualified and non-qualified. Qualified discount fees are the lowest, whereas non-qualified are the highest — and mid-qualified falls somewhere in the middle. It’s important to note, however, that discount fees can be downgraded, which basically means that some of the info was submitted later; thus, lowering the amount the merchant is charged.
In addition to discount fees, merchants must also pay a transaction fee. As the name suggests, this is a small fee for each credit card transaction. The purpose of the transaction fee is to cover the electronic authorization service cost.
But those aren’t the only fees you’ll have to pay as a merchant. Assuming you want to offer credit card payments to your customers, you may also have to pay other fees, such as chargebacks for instances. A chargeback occurs when a customer cancels his or her credit card payment, essentially reversing the charge. Other, large accounts, may have to pay a minimum fee is they don’t meet the necessary requirements.
These are a few of the most common fees associated with credit card payments. Merchants who choose to accept credit card payments will have to pay these fees. At the same time, however, it’s usually a smart investment that ultimately leads to more sales and more revenue. When customers are allowed to pay using credit cards, they’ll spend more money. It’s just that simple.
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