The Complications of Accepting Credit Cards

Accepting credit cards doesn’t have to be super complicated, but it often feels like it. From unclear credit card processing online rates to long service contracts and complex compliance subjects, it’s no surprise that accepting credit cards as a payment technique leaves some small business owners reeling. Here are six of the most confusing things about accepting credit cards online and what you can do to make things easier.

1. Credit Card Processing Quotes

The most complicated thing for a small business to accept credit cards online (and in general)  is pricing. This is because most businesses don’t certainly know what a reasonable price quote truly is and thus depend on on the honesty of sales representatives.

Most business  owners are very busy, so they do what looks like the best choice and reach out to their bank, expecting quality service. However, this isn’t always what enterprises get. In most cases, the banks, contract out merchant services, and as humorous as it appears, they really don’t know much about the firm.

Instead, companies to find sales reps with a minimum experience of two years, get two to three quotes from merchants, and ask for full disclosures of all rates and fees in writing.

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Source: Thinkstock/Purestock

2. Pricing Models

Pricing involved in credit card processing online often complicates ventures because of the many diverse models. There are numerous pricing methods, but the two most common are ‘interchange-plus’ and ‘tiered pricing’. ‘Interchange-plus’ uses rates set by the credit card brand, such as Visa and MasterCard, while ‘tiered pricing’, traders qualify for various vendor-determined rates.

Interchange-plus is a much clearer model of pricing, but it also causes more complication if the corporate owner does not understand what the pricing involves. To clear up any mix-up, companies should define which kind of pricing credit card processors offer and which type is applicable to the enterprise. They should also ask exactly what their rates are to avoid any surprises down the road.

3. Contract Terms

Nobody likes to read long contracts, but it’s a required evil of doing business. It’s also one of the most significant and complicating aspects of signing up with a credit card processor. Failure to totally understand your service contract can lead to some nasty surprises. The contracts can be very lengthy, so if the business owner fails to take the time to read through every line, they may be caught by surprise. That happens, in part, because you unfortunately can’t always believe what sales representatives say.

There is actually no rule to be an agent for a commercial service provider, so there are representatives out there telling a small enterprise owner what they want to hear rather than speaking with expertise and honesty.

By not reading through contracts themselves, companies risk the surprise of unseen fees and service disadvantages. Many small owners have no clue what they should be looking for, so they get caught in heavy termination and fees that give an industry a very bad reputation.

Therefore, companies should ask how long a contract takes and whether they are letting or outright buying the equipment. Lookout out for fees, including early contract termination, annual, setup, monthly minimum and payment card industry (PCI) compliance fees.

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Source: Thinkstock/Davizro

4. PCI compliance

Security for credit card processing online is not simple. Failure to care for customers’ information isn’t just a risk to business’ reputation, but can also cost the company considerably in banking and government fines, lawsuits, etc. One part of complication for enterprise holders is PCI compliance, which involves a set of credit card processing security principles. The challenge is that enterprise holders either belief or don’t know much about security, therefore they might not know their vendors aren’t accommodating.

Many enterprise owners don’t know their requirements; hence they may be processing cards in abuse of PCI compliance guidelines. Card statistics security is of great importance to clients, so it’s important to understand this part very well. The best way to prevent any confusion in pricing and fees is to ask questions. Commercial business owners are guided to find out from vendors if their terminal and software are actually PCI compliant.

5. Non-payments

Subscriptions and frequent charges provide a great way for enterprises to mechanize repeat business, but one major disadvantage is when payments fail. One thing that is most challenging, and is usually a cause for lost profits, is dealing with terminated or invalid credit cards for recurring charges. Many small enterprises do not have a mechanism or the technical capacity to automatically end a service until the client updates his or her credit card data.

Failed payments, then, basically become free services. Many small enterprises must physically monitor credit card activities on a daily basis, and might not notice a non-payment before some days have passed after a charge has been declined — which means giving out a service for free. Trying to retroactively recover the charges for unpaid days can be annoying.

6. E-commerce compatibility

Technology allows merchants to do business anytime and anywhere; this causes all kinds of complications for processing credit cards. This is because not all credit card processors are compatible with various merchant services. Some business holders need to understand that their merchant account will work flawlessly across all sales channels like E-commerce, retail and mobile. It can get challenging trying to make sure all channels can play well with each other. This is mostly the case with accepting credit card online payments at self-hosted stores.

Up until recently, accepting credit cards online payments has been a surprisingly complicated and painful process. It required setting up a merchant account with a bank, signing up with a payment entry and then using any number of payment software solutions to integrate with your application. This meant several applications, fees and accounts just to get set up.

As a result, some credit card processing companies have made the procedure easier for merchants. For example, web payments company Stripe takes care of payments end-to-end, removing the need for distinct merchant accounts and payment entries. Since then, other companies like Braintree and PayPal have followed Stripe’s lead by simplifying their own methods for accepting credit card payments on the web. Therefore, it is now much easier to accept credit cards for an online business than it was a few years ago.

Featured Image: Thinkstock/Ridofranz

Posted on May 5, 2023