In addition to credit cards and checks, more and more small
businesses are accepting ATM or debit cards. Consumers like the
cards because they allow them to avoid the hassle of writing
checks, offset the need to stock a wallet with wads of cash, and
ensure security, thanks to a customer-activated secret personal
identification number (PIN).
Many merchants, too, prefer accepting debit cards over credit
cards or checks. In fact, debit cards can even be better than
traditional cash. Debit is less expensive than a credit card or
check, and is not vulnerable to employee theft like cash is. Debit
is also a guaranteed transaction: Money is immediately debited from
the customer's account and deposited into yours-giving you
instant access to funds. Finally, debit gives you access to
consumers who don't have credit cards.
Getting Online
Installing a debit system in your business can be as easy as
walking into your local bank, filling out an application requesting
debit acceptance capabilities, and clearing some counter space next
to your cash register for a debit terminal and printer (some banks
can interface directly with your cash register).
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You can purchase equipment for as little as $200 to $500 or
check out monthly leasing options. You may find that you already
have most of the necessary equipment. Some merchants' existing
credit terminals can simply be reprogrammed to accept debit cards
as well. If your terminals don't already have printers,
however, you'll need to install them, since federal regulations
require merchants to provide receipts for debit card
transactions.
Thanks to emerging technology, more electronic devices that
accept both credit and debit cards are becoming available on the
market. Some are even integrated with the cash register. Because
the debit PIN-pad terminal needs to be within easy reach the
customer and clerk, however, smaller businesses may opt for a
stand-alone POS debit system. When you buy the service from a bank
or other payment service provider, look for a system that accepts
both credit and debit cards. A joint system takes up less counter
space and is usually less confusing for clerks and customers to
handle.
Another consideration is where your POS takes place. Restaurant
merchants, for example, may choose to collect the bill from patrons
while they are still seated at their tables. In this case,
you'll need the capability to take the PIN pad to each table
for customers to key in their PIN. Such technology is available
through most major financial institutions that provide debit
equipment.
Beware, however, that not all banks are experienced in debit
card services. Although sticking with your current financial
institution when setting up a debit card system may have its
advantages, make sure your bank understands debit before signing on
with them.
Once you find a bank to service your debit needs, you will most
likely be required to fill out a simple one-page application.
Applying for debit is not like requesting merchant credit card
status, which is an extension of credit, and thus represents a risk
for the bank. Since debit cards are typically a guaranteed
transaction, the credit of the applicant merchant is not evaluated
as stringently.
Once you've set up your POS terminal, the fee you pay for
its use depends on which debit network you're connected to.
Unlike the fee charged for credit card use, banks typically
don't charge merchants a percentage of each debit card sale.
Instead, the bank might charge merchants somewhere between 10 and
25 cents for each transaction.
While there's no doubt the cost per debit transaction adds
up, it's still significantly less than some other options. For
example, check processing typically runs from 18 to 50 cents per
check, not taking into account the costs of bounced checks. Cash
handling can also be expensive.
Entrepreneurs who accept debit cards say they like the safety
and security of this method. The bottom line: Debit offers your
customers another way to pay . . . and the easier you make it for
customers to buy, the more sales your business will ring up.
Excerpted from Start Your Own Business: The Only Start-Up
Book You'll Ever Need, by Rieva Lesonsky and the Staff of
Entrepreneur Magazine, © 1998 Entrepreneur Press