Homepreneurs appreciates our guests and attempts to answer questions related to starting and running a business. A recent question on our Twitter page – @homepreneurs – is from LCWL: For a home business is it possible to get payments through a credit card service like a store?
The simple answer is yes, but costs, setup charges, and transaction fees may apply. Low margin home businesses, the charges may be more expensive than the convenience. For higher end home businesses, there are advantages of accepting credit cards:
- A business gains credibility and appears established when taking credit transactions
- Cash flow is better because the purchase money is directly deposited into an account
- Tracking and recourse are easier with credit transactions
- Customers that pay with credit tend to spend more than non-credit clients
How a business sets up credit payments
- Open a business checking account or savings account or both
- Establish a merchant account. A bank, credit card company or other provider can grant you merchant status or allow a merchant account. This is not always easy and depends in part on the business you have. Risky businesses (adult sites, online casinos, ticket brokers) generally need to be established and have a good credit history.
- Your business credit rating may not be the same as your personal credit history. Buy credit reports for business from Dun & Bradstreet or Credit.net. Personal credit reports – for you or customers – are available through Equifax, TransUnion, and Experian.
Typical costs involved
- Setup charges: Including application fees (from free to $300 or more)
- Software and hardware fees: For point-of-sale terminals and software licenses
- Transaction fees: Flat fee for each transaction, from $.20 to $.50
- Monthly charges: Statement fees, monthly minimums, leasing fees for equipment
A decision to accept credit payments must be compared to the costs incurred. It also pays to shop around for the best deal from a bank or merchant service.
The PayPal alternative
PayPal started from the popularity of eBay auction services and similar concerns and has definite advantages over the major credit cards:
- No long application is required. Go to PayPal’s website and establish an account in minutes
- PayPal does not charge monthly fees for software and does not charge per transaction
- PayPal isn’t fee, but the cost is likely much less than traditional merchant accounts
We recommend seriously considering PayPal as an option for a start up business, especially one that sells via a website. My personal photography site – SteppingStoneStudios – uses PayPal to save cost. Easily set up, maintained, and secure, PayPal is definitely worth a look.
By Dion Shaw
Dion D. Shaw is the founder and owner of Homepreneurs.
Homepreneurs. New Day. New Opportunity.
Homepreneurs does not endorse nor have any relationships with any of the services listed. Homepreneurs receives no compensation or consideration for its suggestions. Homepreneurs strongly urges all interested parties to conduct research and accepts no responsibility for any losses or damage incurred.
© Homepreneurs 2011