Management September 10, 2014 Last updated September 18th, 2018 515 Reads share

10 Things B2Bs Need to Know About Processing Credit Card Payments

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Many B2Bs find that they can’t rely only on bank transfers and paper checks for payments anymore; more and more they look to accept credit cards. Doing so increases the complexity of accounting, adds additional vendors, and increases costs. Yet as long as there are business customers who prefer using credit cards, the companies that serve them will find it valuable to add this payment option.

So let’s look at 10 things B2Bs need to know about processing credit card payments:

  1. Credit card payments require a business to apply for a Merchant Account in order to process payments online, over the phone, and in person. You’re essentially applying for a loan, so the process can be quite extensive and will access your personal and business credit history.
  2. Approval is not guaranteed – you may be asked to provide a reserve account, equity, that would guarantee the value of the “loan.” Like most things, reserves and application fees are negotiable and if you’re concerned about being approved, ask your salesperson if the application fee is fully refundable in the event that you are declined.
  3. Merchant Banks charge a fixed percentage of every transaction, called the discount rate. This fee is determined at the beginning of your contract and varies significantly between service providers. This is by no means the only fee you can expect, so comparison shop before signing or renewing a contract.
  4. You can reduce processing fees by signing up with a bank that does the processing in-house like Wells Fargo, Chase, and US Bank. You can still keep your local bank account, but reduce the middleman markup on credit card processing fees by opening an account with one of these large banks.
  5. As small business owner Paul Downs discovered last year, simply applying for a merchant account often means you also accept their terms and conditions and may also mean that, technically, you signed up for their service as well. Understand your merchant bank application before signing to make sure you’re not agreeing to something you’d later like to change.
  6. Credit card payments accepted online or over the phone have a higher chargeback rate and are therefore deemed riskier than swiping a card in person. B2B companies who experience a higher percentage of online and over-the-phone transactions, therefore, should expect to pay a higher discount rate.
  7. You can integrate credit card payments directly into your accounting and enterprise resource planning systems to streamline the internal processing and consequently reduce the errors and complexity of a traditional manual process. This can save you and your team an estimated five minutes per transaction
  8.  PCI compliance strictly mandates storage and transmission of sensitive customer data.  While storing credit card numbers is allowed, never store the associated the digital card verification code after authorizing the payment. In addition, use strong cryptography to encrypt data and protect you and your customers from fraud.
  9. If you can accept in-person payments, you’ll need payment processing equipment, machinery and software. You have the option to buy or lease this equipment but businesses can save considerably by purchasing terminals.
  10. Responsibility for Data Security rests with YOU – Regardless of how many third-party vendors you involve to capture, verify, accept and process credit card payments, the ultimate responsibility for data security rests on your shoulders. Monitor your systems and look for unexpected changes and frequently check that the integrity of the connection/redirection is maintained.

Images: ”Woman shopping using tablet pc and credit card/Shutterstock.com

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Jaimie Yun

Jaimie Yun

Jaimie Yun has more than 15 years experience across financial sectors of public accounting, corporate finance and more. She is on the advisory board of PayDemand.com, a credit card processing marketplace that allows businesses to compare multiple credit card processing rates and get the best offer while remaining anonymous to processors. Connect with Jaimie on Google+ and follow PayDemand on Twitter.

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