Today's world with credit cards

In today's business environment, accepting credit cards is becoming a must for entrepreneurs and small businesses. There are numerous social, demographic and technological factors combining to make plastic the payment form of choice for increasing numbers of people.
The average American cardholder has roughly four bank credit cards. Credit card purchase volume has been expanding about 15 percent per year for the past five years, or three times faster than the increase in overall U.S. purchases. As of 2005, credit cards accounted for 19 percent of all purchases, debit cards for 33 percent, and checks for only 11 percent. According to one estimate, businesses forfeit up to 80 percent of consumer impulse buys if they don't accept credit cards.
Why people use credit cards: To understand the growth in credit card use, it's important to grasp the reasons for their popularity. Consumers typically use cards because:
-- They don't want to carry cash.
-- They want to save cash in hand.
-- They want to gain loyalty points (such as airline miles).
-- They are making a large purchase.
-- They are looking to float money in a bank account.
-- They are making a reimbursable purchase for a company.
Plastic on the Internet: Even as credit card use grows in the real world, plastic already dominates online shopping. This breakdown of how people pay for Internet purchases demonstrates that credit cards are the key to e-commerce:
-- Credit card online -- 85 percent
-- Check mailed -- 10 percent
-- Credit card via phone -- 2 percent
-- Credit card via mail -- 1 percent
-- Other method -- 2 percent
The business-to-business opportunity: It's becoming increasingly clear that credit cards are also playing a greater role in business-to-business transactions. For example, Visa is bundling credit and cash management products for small businesses under the umbrella of the Visa Business Card.
Larger companies are also streamlining their buying processes using business cards for indirect purchasing. Each business card transaction shaves a reported $50 to $100 in purchasing costs. That's something to keep in mind if your company works with large companies.
The future of plastic: Market research indicates that consumers view credit cards as lifestyle enhancers that contribute to other areas in their lives. And alternative credit card products now in development, such as online debit cards, promise to further extend the use of credit cards.
It all adds up to bad news for checks. Paying with plastic is becoming increasingly popular for even routine bills such as gas and electricity. And younger customers' preference for plastic cards is even more pronounced. Check and paper credit use has continued to fall as consumers become more comfortable with the security of online credit card submissions and the rise of operations like PayPal.
Picking a credit card processor
Look for companies with well-established track records and solid reputations.
Compare pricing from at least three processors before making a final choice.
Compare all the fees the processor charges, not just the discount rates.
Find out if a processor has a minimum monthly charge and make sure the additional credit card sales justify the expense.
Find out whether the processor allows you to use your existing bank account or whether it requires you to set up a merchant account with its own bank.
Work with a sales group
Many banks have gotten out of the credit card processing business, and those that remain are often skittish about servicing small businesses, particularly ones with limited histories. Many small businesses must therefore go through a specialized credit card processor or an independent sales organization. An ISO can help small businesses find a credit card processor and get the necessary equipment and training to begin accepting credit cards.
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