Accepting Debit Cards
Grow Your Business, Not Your Inbox
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.
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).
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