The Risk of Taking Credit Cards in Your Business

Taking credit cards usually boosts a business's profits.

Credit cards are convenient for the customer and the business, but the ubiquity of credit cards does not mean all businesses should accept them. Sometimes the credit cards' cost to the business outweighs the benefits to the customer.

Interchange Fees

Banks charge merchants to use their payment network, which is called an interchange fee. Each credit card transaction costs a business between 2.5 and 5.5 percent of the total sale price, according to the Business Owner's Toolkit.

Time Frame

Even after a credit card transaction receives approval, it takes a few days for the issuers to post a credit to the merchant's account, according to the U.S. Small Business Administration.

Considerations

Anyone accepting credit cards must be aware of chargebacks, according to the U.S. Small Business Administration. A consumer can dispute a credit card charge for up to six months after the purchase. If the consumer wins the dispute, the merchant must absorb the loss.

Tips

Small businesses should consider medium or small banks when searching for a merchant account. The Business Owner's Toolkit states that larger banks may consider small businesses too much of a fraud risk.

References

• Gaebler: Accepting Credit Cards
• Business Owner's Toolkit: Accepting Credit Cards
• U.S. Small Business Administration: Accepting Credit Cards and Debit Cards