The Merchant’s Guide to Credit Card Processing

December 2, 2008

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Calculating Losses, by Lisa Solonynka, morguefile

Caculating Losses, by Lisa Solonynka, morguefile

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This chapter is an excerpt from my new e-Book, Retailers’ Guide to Merchant Services and can be obtained at Gelise 1’s Storefront.

Chapter 1 Making a Decision to Accept Credit Cards Start-up business owners have to make many decisions about their cash flow and if they are not currently accepting credit cards, this may not be a priority when all seems to be running well. After all, people are coming into the store and paying in cash. Once in awhile, someone asks if you accept credit cards and the answer is “No.” If the customers really wants the product and has the cash, they just pay in cash. However, if the person does not have the cash, the business owner loses out on a sale.

But, this does not seem to matter, as most of the patrons come in with cash. The business owner may even direct the customer to the nearest ATM machine, at which time, the customer returns with the cash and pays for the merchandise.

Money in the Competitor’s Pocket But, what is really happening here? When the owner directs the customer to the nearest ATM machine, he pays for the use of the machine and the owner of the other business receives a fee for the transaction.

What about that customer who desperately needs or wants your product so badly and prefers to pay with a credit card? He leaves and finds another business which sells the same product, but accepts credit cards. Because he has found the product and payment terms he wants, he opts to become a regular customer. Let’s say you own a restaurant and the customer likes to go out to eat dinner with his wife once a week.

Your average dinner is $15.00. That computes to a loss of $60.00 a month or $720.00 per year. This does not seem to be much of a loss for your company on a yearly basis, but what if you turned down five customers per day and they all found another restaurant as the first customer did?

Calculating the Loss

You are open six days per week, so you turn down 30 customers per week. That’s 120 customers per month at $15.00 each which computes to $180 per month. At this rate, the annual loss would be $21,600! What could you do with another $21, 600?

If you are cost conscious, you cannot afford to let this continue. Your competition is earning another $21,600 per year because you will not accept credit cards! If you are profit motivated, you will think about your losses in this way. Could you ever imagine that letting people walk out of your establishment because they are unable to pay in cash could lead to losses of this magnitude?

Let’s imagine what could happen when a customer leaves your establishment to cash an ATM card. He goes next door to cash the ATM card. It costs the customer an average of $3.00 per transaction to use the ATM machine which is the business owner’s profit. If the customer is desperate for your product, they will use the ATM machine.

However, they may decide that $3.00 is too high to pay for acquiring cash out of a machine and leave the store looking for another store which sells the same product and accepts credit cards. If the business owner receives $1.00 for every customer who uses the machine and you send him five customers, he makes five dollars a day. If you are open six days a week, he makes $30.00 a week or $120 a month. After one year, he makes $1440.00, all because you are not equipped to accept credit cards. So now, you are losing $21, 600 + 1440.00 = $23,040. I ask you again, what would you do with an extra $23,040 per year?

Studies have shown that people spend an average of 12 – 18% more when they pay with a credit card. The owner must be prepared to accept the credit cards when customers present them for payment. If you were the owner of a restaurant and a customer came in to use a credit card, you would have to turn the customer away if you did not accept credit cards. Suppose the customer ordered a meal and paid cash for it. If he enjoyed the meal he may decide he wants to share it with friends who are coming to visit on the weekend. However, since he prefers to pay for large orders with a credit card, he decides to plan a catered event at his house.

Let’s suppose that the charge for a catered event is $500.00. You miss out on an additional $500.00 in profits. You may not feel that losing $500.00 a year amounts to much and you could make it up on other sales, but suppose one customer per month wants to pay for a catered event by credit card. Because you do not accept credit cards, you turn the customer away and end up missing out on $6000.00 per year.

This loss could amount to more during the holidays. If you add the $6000.00 to the previous losses, it totals $29,040, all because you do not accept credit cards. What could you do with an extra $29, 040 per year? Sooner or later the business owner is going to resign himself to the fact that if he accepts credit cards at his business, he will make more money. How many years are you going to wait until you decide to purchase a credit card terminal? If you wait one year, you lose $29,040. If you wait two years, you lose $58,080. If you wait three years, you lose $87,120. What could you do with an extra $87,120?

Despite itemizing these losses, some business owners will not be impressed. In their own mind, handling credit cards is just another burden. Having to learn how to make transactions on the credit card terminal, learning the record keeping and watching out for fraud are very time consuming duties. The business owner would have to learn new terminology, keep abreast of the compliance issues, and work to avoid charge backs. These are added responsibilities for which he has to set aside time to perform these tasks. In some cases, the business owner is already overwhelmed with the day to day operation of the business.

ow will the business owner fit this into his schedule? Will the representative be there to assist in the areas where he needs help? What if he cannot get in touch with the representative? These are all valid questions and the owner should not proceed with ordering a credit card terminal unless these questions are answered. Is the extra time spent on learning about credit card transactions worth the $29,040 saved?

Let’s answer these questions one by one. The first question, is one of time management. The owner is going to have to examine his schedule very closely and see when he will have extra time to devote to learning all about accepting credit cards. He may have to delegate some of his duties to his employees in order to free up some time. ss_blog_claim=74da3239dd6b3ea2b0b14afc135d0ec5

There is much to learn, including the operation of the credit card terminal, how to batch out, recognizing fraud, and when and how to call credit card numbers into the credit card companies. Then he has to review and become familiar with the compliance issues. A good representative will assist the new business owner in learning everything that he needs to know. He will answer questions, make himself available when necessary, and provide a telephone number where he can be reached. The representative should be able to answer most of the questions. In order to retain the customer and receive referrals, the representative should ensure that this process is as efficient for the owner as possible. In the event that the representative is not available, there should be a technical support department which will assist the business owner and answer any questions he might have.

Most credit card processing companies have a technical support department available twenty four hours a day seven days a week, including holidays. Most questions and problems with the terminals can be handled over the telephone. Your patrons will take you more seriously when you install a credit card machine. Your current customers will go out and tell their friends that you accept credit cards and then they, in turn, will tell their friends. Advertisers say that the best advertising for a business is word of mouth.

The ones who pay in cash now, will probably continue paying in cash. But now, you will gain new customers who prefer to pay in credit cards. Customers prefer to have a choice in payment methods and studies have shown that you will retain your customers when they have a choice. Credit card terminals also accept debit cards which are a safer transaction for the consumer. Debit cards require the use of a PIN number which only the owner of the debit card has.   In order to use the debit card, the owner must enter his PIN number into the machine. The business owner incurs a charge for the debit card which is below the rate for the lowest priced credit card, the qualified VISA or Master Card. The savings in processing debit cards is around sixty percent. This means that the fee to process debit cards is about sixty percent lower than the qualified rate.

In order to process the debit cards, the owner must purchase a PIN pad in which the consumer enters his/her PIN number. If the owner does not purchase a PIN pad or ask the consumer to enter his/her PIN number, then the fee for the transaction is at the check card rate which is a about double the rate for processing a debit card. Because of the savings involved, some business owners choose only to process debit cards. Debit cards have become very popular as many people carry them in lieu of cash. When people use the debit card, they have the option of receiving cash back from the purchase. This means they can receive an amount over and above the amount of change they would receive from the transaction. The maximum amount is determined by the owner.

Receiving cash back is another very attractive benefit for the consumer to use his debit card instead of a credit card as he would not be able to receive cash back from a credit card. Now the customer has a choice of using cash, check, credit card or debit card. What do you gain by turning down a customer? Studies have shown that a customer is more likely to recount a bad experience rather than a good one. When he relates the experience, people tend to believe the story-teller and boycott the place rather than investigate on their own. You may still continue doing business, but your business will not grow as much as it would have, if you were accepting credit cards.

Some business owners do not believe in credit cards for the social reasons of how customers misuse them. While this may be a valid point, most people are responsible in handling their credit cards. We are living in the “Age of Plastic” and people are able to purchase things that they normally would not purchase because they possess a credit card. Credit cards make it possible for people to have businesses and make more profits than they normally would have if they did not accept credit cards. When the merchant accepts the payment by credit cards, he receives cash in his business checking account within three to five days. As long as the credit card machine accepts the credit card, the merchant is guaranteed to receive the money.

People are responsible for their own credit cards and how they use them. Your decision to accept credit cards will not contribute to the customer’s lack of responsibility in controlling his expenses. This is an issue that the customer must address. It is not the business owner’s responsibility to ensure that the customer does not over spend or abuse his credit card privileges.

Just as the owner must be responsible in learning enough about the credit card processing industry in order to process credit cards, so the customer must be responsible in learning how to manage his debt. The customer, as an owner of a credit card, has certain responsibilities that he must undertake and he/she must make a conscious decision to accept the responsibilities.

© Gail Cavanaugh and The Merchant’s Guide to Credit Card Processing, 2008.
Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

Excerpts and links may be used, provided that full and clear credit is given to Gail Cavanaugh and The Merchant’s Guide to Credit Card Processing with appropriate and specific direction to the original content. ss_blog_claim=74da3239dd6b3ea2b0b14afc135d0ec5

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APSense – Get Paid While Promoting Your Business! Check Out: Comments: Name: Business blog Website: This is a good article that any business not already taking credit cards should read and especially in the present economic climate. In the UK for example, for a long time Marks & Spencer refused to take credit cards, so customers could only pay by cash or cheque, until eventually they started to loose customers to their competitors and in the end they had to bow to the pressure and ended up taking credit cards.

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Name: Jamwes Website: Very good information. Thank you.

Name: Chuck Bartok Website: Gail, Very Informative Blog site. Yes merchants can benefit from a well manged Credit Card Processing System. Also another advantage is the Judicious use of the “loans” available to Strong accounts. But like all Credit, it must be managed well.

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Naming Beneficiaries on a Life Insurance Policy

March 7, 2014


Perhaps one of the most sensitive issues in managing a life insurance policy is in choosing beneficiaries. If we have been responsible enough to buy life insurance, we must also be responsible enough to appoint the best person to collect the proceeds, use it wisely, and fulfill our wishes as to how the proceeds should be spent.

One of the benefits of life insurance proceeds is that they can be collected with having to be probated. The beneficiary simply notifies the life insurance company of the death of the policyholder, and the insurance company processes the claim. A check is then issued to the beneficiary within a few days to a few weeks, after the insurance company has determined that the beneficiary has a right of claim according to the terms of the insurance contract.

If the policy being considered is to pay the final expenses of a burial, a spouse should be named as the beneficiary, since, he or she will be the one to make the funeral arrangements. Usually one beneficiary is needed, but the policyholder can name a contingent beneficiary, if the beneficiary dies before the policyholder has a chance to name another, or if both the policyholder and the beneficiary were to die together in an accident. The policyholder can change the name of the beneficiaries as often as he/she feels necessary.

For larger policies which are being created to fund a trust or to give money to multiple members of the family, the policyholder can name more than one beneficiary along with the percentage of the proceeds to which each has been assigned. In this way, the proceeds can be collected without having to go to probate and the proceeds are tax free.

It is important to choose a beneficiary wisely as this is going to be the person who will carry out your wishes. If you decide to tell the person you have chosen to be a beneficiary, it would be wise to make it clear how the money will be spent. It is also wise to have a will which will detail your wishes for the settlement of your estate. Many people have disputed the settlement of estates and the decisions as outlined in a will.

If a policyholder does not have a next of kin or does not wish to name a beneficiary from the family, he/she can name his/her estate as the beneficiary. In this way, when the estate is settled, the probate judge will disperse the funds according to his own discretion. As it takes two or three years to settle an estate, or maybe longer, the family will have to wait for the probate judge to make a decision. This could interfere with the funeral arrangements if there exists no other insurance or proceeds to pay these expenses. This is why a life insurance is necessary for the payment of final expenses.

The probate laws for each state are different and it is important for all the involved parties to know how the laws are interpreted. If there are questions, a lawyer can help ensure that the family follows the laws of the state and the instructions outlined in the will.

Rhode Islanders and Healthy Nutrition

January 23, 2014


I have been covering for a friend who owns a nutrition club in Middletown, Rhode Island and I am amazed at the number of people who are taking care of their bodies. I have met several people who have lost several pounds through nutritious protein shakes and working out at the local gym.

It is great to observe people trying to prolong their lives and even have a better quality of life. When people live longer, they need more savings set aside to ensure that they have an income throughout their retirement. This means planning for the future with retirement plans and life insurance. Because people are healthier, they can work more hours to earn extra income.

In conclusion, taking care of the body through diet and exercise will enable consumers to work more hours in order to eliminate their debt and accumulate more money.

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Business Webinar – Marketing Concepts

December 14, 2013

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People go into business to market sell their great ideas.  In order to do that, they need customers who need or want what they have to sell.  Marketing is about how to attract those customers to the business so that they can purchase the products and services.

In order to attract the customers, the business owner must learn everything he/she can about the business, the products, and the customer.  If the business owner does not learn the steps to successfully marketing the product, the business will fail.

In order to help the start up business owner or the person who has been in business for several years to become acquainted with marketing the business on the Internet, I have developed a series of weekly webinars entitled “Marketing Concepts.”  (To register, click onto “Marketing Concepts.”)

Here are the dates and times of the webinars:

Schedule: December 18, 2013 – 8:00 pm – 9:00 pm – Marketing Concepts – Introduction

December 23, 2013 – 8:00 pm – 9:00 pm – Identifying the Target Market

December 30, 2013 – 8:00 pm – 9:00 pm – Designing the Website

January 8, 2014 – 8:00 pm – 9:00 pm – Selecting Key words thru Tools

January 15, 2014 – 8:00 pm – 9:00 pm – Writing Content

January 22, 2014 – 8:00 pm – 9:00 pm – The Social Networks

January 29, 2014 – 8:00 pm – 9:00 pm – Marketing on Facebook

February 5, 2014 – 8:00 pm – 9:00 pm- Marketing on Twitter

February 11, 2014 – 8:00 pm – 9:00 pm – Marketing on Google+

If there is enough interest, the webinars will extend beyond these dates.  If you have any questions, please list them in the “Comments” section. 


Green Monday Strategies for Sales

December 9, 2013


Business is booming on the Internet this year as shoppers utilize their iPads, Smart phones, PC’s, and tablets to purchase Christmas gifts for family and friends. Major retailers reported an increase of 30% in sales from Black Friday to Cyber Monday, which is the weekend following Thanksgiving.

Green Monday, which falls on the tenth day before Christmas is predicted to be another day where businesses can boost their profits. In the past, consumers in the United States spent $1.133 billion on merchandise. Consumers could well exceed that amount this year, as we have experienced record sales during the Black Friday, Black Saturday, and Cyber Monday. Pinterest received the biggest gains for on-line sales, but few business owners are using the site.

Bizrate has observed that there are advantages to using Pinterest, which include,

70% of online consumers surveyed utilize Pinterest to “get inspiration on what to buy”

67% use it “to keep up on the latest trends on things [they] like”

43% use it to “associate with retailers or brands with which [they] identify”

39% use it for “special offers from retailers, brands, or people that [they’ve] pinned/followed”

In addition to posting on Pinterest, business owners can advertise their products on sites such as Whofish. Here is a place where business owners can post advertisements for their products, services, and events, as well as list their businesses in their own communities, as well as other states. Business owners can gain followers on their listings, as well as send unlimited e-mail to friends and followers whenever their business listing or event is featured on the site. Therefore, if business owners have not yet advertised for Green Monday, this may be a place for them to advertise.

Sending e-mail to clients and prospects relative to the new deals you are offering with Christmas themes will attract many buyers, especially if products are priced to sell. Business owners could include their coupons in the e-mail to be used on-line or in the brick and mortar locations.

Accumulating Money for Retirement

December 5, 2013


Before we continue on in the discussion about protecting the assets, I would like to discuss how to accumulate them. As we have discussed in the past, we need to be disciplined in accumulating money for retirement or any other reason. We need to set aside money for ourselves on a weekly basis so that we can have an income when we retire. Unfortunately, many of us never learned the importance of saving, nor did we learn how to be disciplined. Social security alone is not enough to retire, but it could be a nice supplement to our retirement account.

We have learned from the many economic crises and depressions that we have experienced in the United States that we need to be more disciplined about saving, and we need to make more sacrifices if we are going to be able to save money for retirement. Because of this lack of discipline, many of the Baby Boomers do not have a retirement plan. Consequently, some will need to work to support themselves during their retirement.

Even so, we should still try to save money in the event of an emergency. The first thing to do is to accumulate an emergency fund in a savings account, approximately $2000 or $3000, in case the car, refrigerator, or washing machine break down, or we have to take an unexpected trip somewhere. Charles Farrell in his book, Your Money Ratios – 8 Simple Tools for Financial Security at Every Stage of Life, has developed ratios to determine how much money to save on an ongoing basis for retirement. He recommends saving 12% of you salary per year and accumulating twelve times you annual salary as a retirement fund. After setting aside the emergency fund, we can begin to accumulate retirement money.

A close examination of the budget will reveal where we are spending money and whether or not we need to adjust the budget in order to save twelve percent. By keeping track of money spent and deciding what we can eliminate from our spending, we will find the twelve per cent to move into a retirement pan. We can begin a plan at work, or if self- employed, we will have to begin a plan on our own, through a bank, or an insurance company.

Once the plan is in place, we should purchase a life insurance plan to cover other expenses, such as estate taxes, and final expense benefits, so that the spouse will not have to use the pension plan proceeds to pay for these expenses.

In conclusion, accumulating money for retirement, and protecting the income with life insurance are wise decisions for those who desire to live comfortably during retirement.


New Radio Show for Business Owners

December 4, 2013


Business owners need access to information about their businesses which will help them to make important decisions about their businesses.  One of those decisions involves providing protection for the business against financial ruin.

Since we work hard for the business to provide an income for our families, we would need to be able to keep abreast of all the changes which could affect the business, as well as to learn more about maintaining a cash flow for the business.

In response to that need, I will be hosting Dollars fro Business radio show beginning on Wednesday, December 12, 2013 at 7:00 am on Blog Talk Radio.  I will be discussing ways to manage the business owner’s risk to exposure to loss of cash flow for the business through insurance plans, such as life, health, and disability insurance.

If you are preparing to go to work or driving on the way to work, tune into the show for the latest discussions on asset protection for the business.  Just click onto the above link and be ready with an open mind.

Holiday Shopping on Cyber Monday

December 2, 2013




Black Friday is supposed to be one of the most profitable days in the year for businesses; however, for the people in the Northeast, it was not as profitable. The Digital Age is changing the way we shop as more and more people use mobile phones, Smart phones, and iPads as part of their routine activities. This means that business owners have to be prepared to meet this oncoming demand from consumers to search for services and products, and shop on-line.

This year, shoppers accessed retail websites on-line after Thanksgiving, which resulted in sales before Black Friday and Saturday occurred. Cyber Monday is expected to be a day for a phenomenal amount of sales as well. While the major department stores such as Walmart, Macy’s, J.C. Penney, and Target fared well on Black Friday and Saturday, on-line stores, such as Amazon, and freight companies, such as FedEx, are expected to do well on Cyber Monday. Because of the many incentives to shop on-line, people are spending more money on-line in recent years than in the past. Retailers are offering free shipping and bundling of products.

While the amount of sales occurring online in 2012 was $1 billion, the amount spent in a retail store was $59 billion. It is clear that sales at the retail store are the favorite ways to shop. However, cyber sales are expected to increase this year, due to the new mobile phones, Smart phones, iPads and applications. This is quite a phenomenon, as everywhere I go, people utilize and carry digital products.

It will be interesting to see how the digital age has impacted holiday sales this year.


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