Should I start taking credit card payments?

CreditCardsI had a little chat with one of my cousins at the wedding rehearsal barbeque last week, and he has started a sideline that he’s hoping will take off so he can quit his dull-as-dishwater day job (he used to deal with subprime mortgage lending, loved that…but that gravy train came to an end for him about 18 months ago). He’s getting into the sale of little credit card machines and processing. Worried that I was on the unpleasant receiving end of a sales pitch, I told him right off the bat that the basic cost of a machine was too much to be worth it for a one-man band like me ($300-800), so by cutting the CC vendor commission from 2.9% through PayPal (which a lot of folks don’t like or want to use) to 1.47% wasn’t going to make up for the initial outlay. He looked at me like I was an idiot – “You’re family, I don’t want to make money from family, I’ll get you the machine for free”. Well, that doesn’t feel right to me, because the actual cost of the machine to him is about half of what he sells it for. Sure, he keeps a piece of that 1.47% and gets a bonus that would make up for the gadget once I hit $20K in transactions…but honestly, that could take many, many years.

Still, I remembered a conversation I had with my financial adviser a few years ago, when he was establishing how I ran my business. He deals with a lot of little guys like me and he didn’t push hard, but he advised me to take credit cards because if you’re in a business where they’re rarely taken, that payment option alone will attract customers. He mentioned that a client of his who owns a dry cleaners nearly doubled his bottom line when he started taking cards. I found that interesting because it’s easier to pay a $20 dry cleaning bill in cash than it is to pay cash for a $100-200 for a massage. It also occured to me that I might be able to attract more female clients that way, since studies show that we distinctly prefer to pay with checks and debit/credit cards while men lean more towards cash.

So I followed up with my cousin, who texted this afternoon to say he was putting together a really great deal for me. Huh? As long as the machine is free and the vendor commission isn’t more than PayPal, as discussed, it was a phenomenal deal for me already (which is darn near word-for-word what I texted back). Maybe it’s the suspicious “no such thing as a free lunch” New Yorker in me, but I’m wondering what’s really involved here. I mean, I had it in the back of my mind that if taking credit/debit card payments had a significant impact on my ability to attract new business, then I’d send him a check for the wholesale price of the machine in a few months. And if it didn’t, one of us could resell it on eBay or craigslist for the going market price (which he keeps an eye on and knows is still above cost). 

So I’m trying to think through the possible “terms” that won’t work for me right now. First and foremost, I can’t afford a big initial outlay, as I sit in the middle of my fourth week out of the last five of making less than my “survival” level income. I really want to pay my mom back ($2K) without hitting up my savings, which is why I borrowed from her in the first place, and I’d love to buy the set of Myoskeletal Alignment DVDs from that course I took two months ago (about $250). Second, I don’t want to tie myself into a contract longer than 4 months. Third, I don’t know what kind of fees are involved that my cousin can’t waive. And fourth – which I mentioned to him by email – I’m self-employed and not incorporated, and I don’t know if that’s a qualification for taking plastic. He’s looking into that one.

Now if all of the above are in place…what else should I be worried about? My cousin started talking about services that their competitors don’t do so well on, like how long it takes for the money to be processed into your account. I should also ask how disputes are handled. But beyond that … well, does anyone out there have any experience with this? Because I’m a little bit clueless, and it’s just not in me to blindly trust anyone with this sort of thing.

10/2 Update:  Heard from cousin – his boss thinks I’d be better off using an online CC form instead of a handheld gadget, which would save me $100 one-time cost for the machine (because I won’t be putting through $5K a month in charges – hah, I wish!!). The fees he got me are 1.59% (3% for AmEx or reward cards) + .19 per transaction. All set-up fees and things like that are being waived because I’m family – sounds like that saved me about $200 right there – and apparently there’s no such thing as a contract in this particular industry, anyone saying otherwise is lying. All I need to get this up and running is a blank voided check and my business card. Oh, and get this – they process the payment into my account in 24 hours, woohoo!


13 Responses

  1. I got my machine for free, also, and only pay $5.00 a month, plus the regular fees. However, my contract is 3 years, because I didn’t read the seperate terms page on their website, only the contract they sent me that referenced the other one. Woops! Good luck, I am sure it will help!

    • Thank you so much for your comment – I read it about 15 minutes before my cousin called and it made me feel less dumb about this process.

  2. If it’s worth the costs then yes. It opens up to more people being able to purchase as well as having it opens your credibility.

    • Yes, I harbor a secret hope that accepting credit cards will be an indirect but obvious indication of my legitimacy and put off the idiots calling me for escort crap.

  3. I did my former business cc transactions online and didn’t have a contract. So you should be good to go. I think you’re getting a great set up. *bring in the $$**bring in the $$*

    May it make you that much more successful in your bussiness. 🙂

  4. Yeah, I Agee that you should be taking cards too – great for
    business!!! But, I’m kinda confused. If you’re doing it all online (unless, you mean YOU will be entering the card info online yourself every time) why not just use paypal anyways since it’s online? I think I’m confused. But it’s exciting either way!

    • PayPal requires the other person to have an account. You’d be surprised how many people don’t despite the popularity of eBay. Plus I have to set up the invoice beforehand, sometimes they haven’t used the account in so long the card has expired, but most importantly, there’s so much phishing and fake PayPal stuff floating around that my clients just don’t like it. This way, as I understand it, I just enter their CC details and print a receipt. It skips a whole lot of little steps that make strangers nervous.

      • J. Money, doing the CC transactions on-line just eliminates the need for a physical CC machine, but works just like one.

      • I used to have a business where I could accept credit cards through my paypal account from those who did not have paypal. There were nominal fees involved though I never really kept track of how much I “lost” due to those fees, I know it wasn’t much.

  5. My first rule of dealing with business is: If you aren’t on the internet with a half-decent (best if very great!) website, you don’t exist. (exceptions apply)

    I also turn to yelp — has anyone reviewed your services there? But last, if you don’t take credit, you better at least warn me. I’ll deal with cash/check only business is, but it is a slight negative.

    Taking credit makes it easier and I think would make your business seem more professional and established, and would set you apart from the crowd. Roughly what percentage of massage therapists take CC? And as you mentioned, few “massage therapists” do, so that might help.

    Excellent that you are getting a good deal. Seems to be worth the fee!

  6. uhh… I’d be wary of any place promising clearing in 24 hours. There are going to be times when it does not clear that quickly. A three day holiday will screw you up pretty badly if you are not careful. Think like this, you process an after hours payment at 11:30pm on a Thursday, which really won’t go through till Monday because Friday is a holiday. So you will see the money on Monday, but the bank won’t let you draw on it till Tuesday. That’s 5 days. Is that ok? There were times when my parents would be waiting 48 hrs for $20K in credit cards to get processed. It was crazy. (Of course, they went through the gas company clearinghouse which is a different arrangement altogether. But just be mindful that 24-hours to banks is not always ’24-hours’ to the rest of us.)

    Self-employment has nothing to do with credit card service contracts. My parents are self employed and their biz entities were all sole proprietorships until about 10 yrs ago.

    I hope this works out for you. 🙂

  7. Should you start taking credit card payments? Yes.
    It will help you grow your business, reach new customers and will make you look much more reliable and professional.

    Regarding the specific deal… you’d better check other options!
    The advice you received to use an ‘online CC form instead of a handheld gadget’ is the one you wish to avoid.

    Credit Cards can be physically swiped (“Card Present”), or be charged over the internet through a Virtual Terminal – the deal you’re offered – a “Card Not Present” (“CNP”) transaction. The fees for Card Present and CNP are different, and the CNP fees are much higher, regardless of what you’re currently told…!

    Go to:
    Choose: Domestic Merchant Account (which will take you to:
    Read the short explanation and navigate through the different providers
    (use the “Credit Card Menu” to view each of the providers in detail).

    You can get a much better deal! Many providers offer a free device, good rates and a virtual terminal – all in one.

  8. As a small business owner, wholesale credit card processing rates are key to lowering an owners credit card fees, thats when I decided to go with Merchant Solutions IQ (based in Torrance, CA) and love the service!

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