How to Accept Credit Cards for Your Home Business

Four years ago I started my first home business. It was a personalized children's book business and I could just smell success. Not having a clue about marketing, I just knew I'd sell a ton of books. I started my business in the spring and soon had my sights set on Christmas, the time of year when everyone spends money on their kids.

I knew I had to promptly acquire a merchant account, which basically is an account that would allow me to accept credit cards. Since I had been in business for only a few months, I knew no bank would sign me up with a merchant account. Thinking with my wallet instead of my brain, I found a less-than-reputable company that charged me $1000 dollars for the account and machine. I didn't have a clue about all the different percentages and costs when I opened the account. I just knew that because I now had this little credit card machine, I would make a lot of money. I'd read the ads: "Double your profits by accepting credit cards." And I believed them.

I used that machine twice -- maybe!

What did I do wrong? I didn't look at my track record. I was only selling a few books a month, and never had I been asked by my customers if I accepted credit cards. I didn't listen to the legitimate banks that said no to me. I figured they didn't know what they were talking about. The most costly mistake of all? I went with a less-than-reputable company because I was desperate for that little miracle money machine.

I dare you -- go to your favorite search engine on the 'Net and type in "Merchant Accounts." You'll get a list a mile long of hundreds of companies that offer these machines. You can go with a lease option, or you can buy outright. Even if you have the worst credit in the world, you can get a merchant account -- for a fee. But do you really need one?

You've got to spend money to make money and merchant accounts are no exception. Yes, you might make the sale if you offer credit cards, but you will also lose a part of your profits. Between set-up fees and equipment charges, a merchant account can become one expensive little guy.

When Does Your Home Business Need a Merchant Account?

* When you've been in business for at least a year and you're selling your goods and service on a regular basis.

* When your customers, on a regular basis, ask you if you accept credit cards.

* When you're selling a product in a catalog or on the Web which people would buy much faster if you accepted credit cards.

What to Look For in a Good Merchant Account:

* An application fee of $125-$200 -- and it should be refundable.

* Discount rates for Visa/MasterCard/Discover Novus should be between 1.65 percent and 2.5 percent. If it's higher, hide your checkbook and run. (American Express, however, charges around 3.4 percent.)

* Transaction fees: The standard rate is 20-30 cents per transaction.

* Statement fees range from $7.50-$15 a month.

* Terminal equipment: You should be given the option to purchase your equipment, or lease through the company or through another leasing company. A typical lease is $40 a month for 48 months for both a terminal and a printer. You should not be required to pay any leasing down payments before your merchant status has been approved and you've been given a merchant number.

* "Charge back reserves" and fees are used if there is a unanswered or unresolved consumer complaint. Try to stay clear of companies who require you a charge back reserve. You should have to pay a fee only when it happens. It will cost between $25 and $50.

* Batch fees should be around 30 cents a day or $8 dollars a month.

* Voice authorization: Sometimes your machine will instruct you to get a voice authorization. Your provider should not charge you for this and should provide you with an 800 number to call.

* Minimum sales: The better merchant accounts will not put a limit on how big or small a transaction should be.


* Your local bank, with whom you already have a business account.

* The Small Office Home Office Association via Bankcard systems of Irvine. Call 800-363-2202 and ask for the SOHO Credit Card program.

*Costco Wholesale, a discount retail store, is now offering a credit card program through their executive membership program. The membership costs $65 a year. Right now, that fee is waived. There's a $25 application fee, and 1.59 percent rates with a 15 cent transaction fee. Call 1-800-220-6000.

* Directory of Credit Card Merchant Processors. Contact Publisher PM Financial Services, PO Box 1406, Hoboken, NJ 07030, or call 201-714-4953.

* Other organizations:
American Association of Home-Based Businesses

American Business Women's Association

American Home Business Association

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