Q: I'm opening a gift shop and want to be able to accept credit cards. I talked to the branch manager at my bank, but he didn't seem to know much about how it all worked. He did say that I would need something called "a merchant account" and something else called "a credit card processor." Beyond that he seemed as clueless as I am. I'm thinking about going to another bank. Can you explain how that all works?
-- Mary Ann G.
A: Mary Ann, I'm going to give your banker the benefit of the doubt and say that a lack of knowledge regarding the specifics of credit card processing is not necessarily a reflection of the banker's competence. I have found over the years that most bankers, no matter how experienced or knowledgeable about the banking business they my be, don't really know much about how credit card processing and acceptance really works. That's because the task of accepting and verifying credit card purchases is handled by third party service companies who process and deposit (or settle) the funds into a bank merchant account.
The decision to accept credit cards is a wise one for any retailer. I agree with financial guru Dave Ramsey's teachings regarding the use and abuse of credit cards. Many people dig deep holes with credit cards that are hard to climb out of.
But, from a practical business point of view, any retail business that does not accept credit cards is leaving money on the table. Research has shown that accepting credit cards increases revenue and helps with cash flow since you receive the money within a couple of days instead of waiting up to a week for a check to clear.
Credit cards don't bounce, as some checks have a tendency to do. Credit card users are also more likely to buy on impulse and spend more when they do. Bad news for them, but good news for you. If you have a social conscience concerning the use of consumer credit cards, a retail operation probably isn't the business for you.
To accept credit cards at a brick and mortar location you typically need four things. The requirements may vary a little, but the following applies in most cases.
You will need: (1) A way to enter the customer's credit card information into a verification and processing system. This can be done with a swipe terminal, point of sale system, or by calling the credit card in by phone
