Accepting Debit Cards

Grab more sales by accepting the newest form of payment, debit cards.

In addition to credit cards and checks, more and more smallbusinesses are accepting ATM or debit cards. Consumers like thecards because they allow them to avoid the hassle of writingchecks, offset the need to stock a wallet with wads of cash, andensure security, thanks to a customer-activated secret personalidentification number (PIN).

Many merchants, too, prefer accepting debit cards over creditcards or checks. In fact, debit cards can even be better thantraditional cash. Debit is less expensive than a credit card orcheck, and is not vulnerable to employee theft like cash is. Debitis also a guaranteed transaction: Money is immediately debited fromthe customer's account and deposited into yours-giving youinstant access to funds. Finally, debit gives you access toconsumers who don't have credit cards.

Getting Online
Installing a debit system in your business can be as easy aswalking into your local bank, filling out an application requestingdebit acceptance capabilities, and clearing some counter space nextto your cash register for a debit terminal and printer (some bankscan interface directly with your cash register).

You can purchase equipment for as little as $200 to $500 orcheck out monthly leasing options. You may find that you alreadyhave most of the necessary equipment. Some merchants' existingcredit terminals can simply be reprogrammed to accept debit cardsas well. If your terminals don't already have printers,however, you'll need to install them, since federal regulationsrequire merchants to provide receipts for debit cardtransactions.

Thanks to emerging technology, more electronic devices thataccept both credit and debit cards are becoming available on themarket. Some are even integrated with the cash register. Becausethe debit PIN-pad terminal needs to be within easy reach thecustomer and clerk, however, smaller businesses may opt for astand-alone POS debit system. When you buy the service from a bankor other payment service provider, look for a system that acceptsboth credit and debit cards. A joint system takes up less counterspace and is usually less confusing for clerks and customers tohandle.

Another consideration is where your POS takes place. Restaurantmerchants, for example, may choose to collect the bill from patronswhile they are still seated at their tables. In this case,you'll need the capability to take the PIN pad to each tablefor customers to key in their PIN. Such technology is availablethrough most major financial institutions that provide debitequipment.

Beware, however, that not all banks are experienced in debitcard services. Although sticking with your current financialinstitution when setting up a debit card system may have itsadvantages, make sure your bank understands debit before signing onwith them.

Once you find a bank to service your debit needs, you will mostlikely be required to fill out a simple one-page application.Applying for debit is not like requesting merchant credit cardstatus, which is an extension of credit, and thus represents a riskfor the bank. Since debit cards are typically a guaranteedtransaction, the credit of the applicant merchant is not evaluatedas stringently.

Once you've set up your POS terminal, the fee you pay forits use depends on which debit network you're connected to.Unlike the fee charged for credit card use, banks typicallydon't charge merchants a percentage of each debit card sale.Instead, the bank might charge merchants somewhere between 10 and25 cents for each transaction.

While there's no doubt the cost per debit transaction addsup, it's still significantly less than some other options. Forexample, check processing typically runs from 18 to 50 cents percheck, not taking into account the costs of bounced checks. Cashhandling can also be expensive.

Entrepreneurs who accept debit cards say they like the safetyand security of this method. The bottom line: Debit offers yourcustomers another way to pay . . . and the easier you make it forcustomers to buy, the more sales your business will ring up.

Excerpted from Start Your Own Business: The Only Start-UpBook You'll Ever Need, by Rieva Lesonsky and the Staff ofEntrepreneur Magazine, © 1998 Entrepreneur Press

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