Q: I have a small service business installing telephones and would like to offer credit card payment options to my customers. Because I have a small volume, however, credit card companies want to charge me a very large fee. What do I do?
--Mark Wirth, Torrance
A: It sounds like you talked to a bank or "traditional" credit card processing company and were given the bad news that, because you do not have a retail store and will not be swiping the card through a credit card terminal, you would be required to make a substantial up-front deposit to qualify for service.
The good news is that there are now many independent credit card processing companies that specialize in helping non-storefront businesses such as yours get started accepting credit cards without a large up-front expense. Prices are competitive, so do your homework and check out companies such as ours, E-Commerce Exchange, at http://www.ecx.com; Total Merchant Services, http://www.cardservices.net; I-Bill, http://www.ibill.com, and the myriad others that you can find by doing an Internet search on keywords like "credit card payment services."
These companies will help you apply for a merchant bank account (required for financial processing of credit card payments) from banks that specialize in mom-and-pop and home-based businesses--and most will not require you to plunk down a hefty security deposit to get started. You can purchase the equipment or software you need to do the transactions, or finance it if you want to keep your initial investment low. Your monthly payment is likely to be around $50, plus about 3% of sales volume monthly.
You need to determine whether you'll do enough credit card volume to justify this kind of expense, of course, or whether you're better off doing business by check only--perhaps hiring a check guarantee company to help out if you've had trouble with bounced checks. However, accepting credit cards may help you build business by enhancing your credibility, giving you a competitive edge over businesses that don't accept credit cards, increasing cash flow (funds are deposited within two to three days), and increasing your customers' buying power, which can result in larger or more frequent orders.
executive vice president,
E-Commerce Exchange, Irvine
If you have a question about how to start or operate a small business, mail it to Karen E. Klein, Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia, CA 91016, or e-mail it to firstname.lastname@example.org. Include your name, address and telephone number. This column is designed to answer questions of general interest. It should not be construed as legal advice.