Exploring the Overall Cost of Accepting Credit
When you only accept cash or debit based transactions for your products or services, you reduce the chance of building up bad debt over the course of the year. Unfortunately, you also run the chance of losing out on higher volume sales figures. Clients expect to be able to whip out their credit card and make a purchase on a whim. When the attempt is blocked by a lack of credit support, they may take their dollars elsewhere. You must weigh the overall costs of accepting credit, however, to see if this payment method will work for your company.
Set Up Expenses
You will likely need to obtain equipment and service from
your bank to prepare your business to accept credit card payments. In addition to the point of sale equipment upgrades, you will have to acquire the merchant account service setup, which can run you up to $200.
After covering your one-time setup expenses in Missouri, you will face the prospect of paying processing fees on every credit transaction you run through your system. The processing fee totals can hit up to 4 percent, depending on the sales figures, buyer location and processing method. Higher fees are charged to companies processing credit payments without the physical card present due to the increase of perceived risk.
Chargebacks and Fraud
Although it does not happen commonly, your company may end up on the line for chargebacks or fraud, if the bank deems you accountable. If subject to these charges, you will need to absorb the related expenses, though they may be potentially used as a tax deduction at the end of the year. You can attempt to dispute the chargebacks or fraud charges, but the bank may still hold you accountable after completing the review process.
As you weigh the overall expenses related to accepting credit card payments, you may determine whether this change is financially viable for your company. If you need support from an accounting professional during this decision-making process and beyond, contact the team at accountRely in St. Louis, MO for a consultation appointment.