Choosing to Accept Credit Cards

Shop owners share experiences with taking payment by credit card. April 6, 2007

I have a one man shop and have been asked by a client to accept payment by credit card, which I've never done previously. I've heard of some on-line services that handle this for small businesses. Am I better off through my bank? What are other small shops doing? Who are you working through? Anything else to look out for?

Forum Responses
(Business and Management Forum
From contributor R:
I have never found myself needing to take credit cards. Some customers have asked about it and after I say no, and they come up with another way to pay. The cost is too much for a small business taking a credit card maybe six times a year. It can be set through banks. Credit card companies that just do that, or Paypal online. But it will cost you a fee plus monthly service charges depending on how you go.

From contributor J:
I agree with contributor R. I got set up to accept credit cards through QuickBooks a couple of years ago, thinking it would be a great service to offer. As long as I had the service, I never had a customer pay with plastic. I finally turned it off a couple of months ago, as it was a total waste of money for me. Certainly others would use it more. If you use QuickBooks, it's built right into your program and the setup is done over the telephone. My service (making no charges) cost me $37 per month.

If you have a storefront or situation where a customer comes to your place of business to trade, you may want to consider going through Wells Fargo (or others) to do a 12 month same-as-cash plan. It doesn't cost you anything, and if you provide WF enough business it may actually put money back in your pocket. I wanted to do this but I operate from home and WF wouldn't do it because I don't have a walk-in business. Twelve months with no interest would appeal to me much more than putting cabinets on a credit card.

From contributor T:
If you're using QuickBooks, this is a very easy thing to set up and to use. Intuit offers this service and while it is not free, it isn't that expensive either. You could always try it out for a year and see how you like it. If the clients will use it, it makes it easier for them to do business with you.

From contributor B:
We set up a Paypal account, which is free. If a client insists on paying by credit card, then I insist that they pay the processing fees. It's a percentage plus a transaction fee, and Paypal's are pretty reasonable for businesses like ours that don't do a lot of transactions. This way we accommodate our clients without incurring any additional costs.

From contributor O:
We are a small company and we take Visa, MC, and Discover through QuickBooks. It has worked very well for us. Sometimes a customer might not have the money but is willing to use plastic. A couple years ago, a customer that had money long overdue offered his credit card for a $2200.00 bill and I thought, what, are we a bank? Well, If I had taken his cards, I probably would not have had to chase him for another two months. For us it is well worth it.

From contributor B:
Contributor B, how much does that cost? We're on QB too, and I'm feeling too lazy to look in to it right now. Good point about collecting payments; also, sometimes people want the frequent flyer miles.

From contributor C:
I also accept credit card charges through QuickBooks. My monthly charge is $14.95 plus a transaction fee per charge. Very easy to use. The company through QuickBooks is Innovative Merchant Solutions. I would recommend it.

From contributor E:
Propay is less expensive than QuickBooks. I've been using them for my fine wood crafts business for a couple of years. Easy to use, good price and no problems with the several hundred transactions I've processed. Actually has improved my sales quite a bit. With that said, I don't think any of them are worth the price for just a handful of transactions a year.

From contributor Y:
We also use Paypal and really like it. It is free to set up and doesn't cost too much for the transaction. I have a Paypal debit card so I can access the funds quickly.

From contributor G:
We have accepted credit cards for many years. On small jobs it’s not a problem, but the fee on a $30,000.00 kitchen is around $700.00 and even more for Amex. If I get a sense that the client wants to use a card, I try to bury the fee in the cost of the job so the customer pays. I don't think it’s legal to charge them upfront for fees.

From contributor T:
I think that you will find that charging for fees is quite common. If you purchase anything online, the exact shipping and handling fee is calculated after you enter your credit card. It includes the processing fee.

From contributor L:
I accept them and it opened a line of cash flow I was missing out on. I always do the bid and add the fee into the estimate. I would highly recommend this be set up with your local bank. This does a lot for the relationship between you and your banker.

Beware, there are clients that need to be reminded that your services and products are not something that gets pulled off the shelf and can be returned, like at a box store. The merchant services department at my bank helped me in this grey area and you need to be aware of it. Your attorney can help draft a letter to better explain this.

From contributor D:
I thought it would be a good idea about two years ago, so sold a large job on credit card. Almost two years later, it cost me probably 2-3 thousand dollars (on around a $30,000 job). The fees are high and the monthly fee is around $40 plus a percentage of everything you put on card - around 3% or a bit less.

I hated the experience and cancelled it as soon as I was finally paid on large job. By the time I was paid, I would have sold the job for 50% more, as my prices increased a lot.

Keep in mind it is not legal to add the fees into the job in any way - I certainly would not have done it, as I have to live with dishonesty.

I suppose a larger shop that carefully managed their business might use them to their advantage - there are millions of retail stores that couldn't survive without them.

From contributor B:
After some brief internet searching... It appears that references above to the illegality of charging for credit card usage relates to Section 167 of the federal Truth in Lending Act, which states: “No seller in any sales transaction may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means.”

Here's some additional info from the Michigan Retailers Association website:
***"Bankcard companies also include in their agreements with retailers a section that prohibits businesses from imposing a surcharge on credit card purchases. Businesses that violate this or any part of their bankcard agreement may be dropped from the bankcard program.

However, businesses are allowed by law to offer a discount for purchases made by cash or check. Check your bankcard agreement to see what it says regarding these transactions.

The difference between a surcharge for credit (which is illegal) and a discount for cash (which is legal) is the advertised price—a retailer cannot charge a credit card customer more for an item than its advertised price."***

So in our case, we do not advertise our prices; and the full cost of our product is disclosed to the client prior to them entering in a sales agreement/contract. If we price a project for a client who plans to pay by credit card, and they change their mind to pay by cash, then there is a cash discount! Nothing illegal or dishonest about that. :-)

Do a web search and you can find plenty of places that do charge processing fees for credit card transactions. Seems to me this is a good law in spirit, as one doesn't want to go to purchase something and get blindsided by large fees.

From contributor B:
This is an interesting issue. I'm sure we've all been to coffee shops or other stores that do in fact charge surcharges on transactions under a certain amount. It sounds like those places are probably in violation of their bankcard agreement. Also, there are other places that get around it by having a minimum for credit card transactions, which seems to me, as a consumer, worse than a $.50 surcharge, because I have to decide between not having an Americano or buying $12.00 for a pound of French roast. I'd usually just rather pay an additional $.50 for the Americano.

The University of Texas at Dallas charges a 1.9% CC processing fee; it appears from their website that this was approved by an act of the Texas Legislature. I wonder about the legality of this bill in light of the federal Truth in Lending Act. Perhaps there are government exemptions. On their website they claim that CC transactions cost the University $600,000 last year.

It seems clear that the cost of these transactions is onerous to businesses, and becoming more so.

From contributor L:
Whoops, not to trip over my words, but I have raised my prices on everything to cover the cost of doing business (and increase the bottom line) and consider the transaction/merchant fees one of those costs. I don't ever ask how someone intends to pay, so I don't actually have the opportunity to put it in the bid. I just raised prices all around knowing that it would help. If they ask, I have it available for their convenience.

From contributor D:
That is completely legit, and just plain good business - a good method for those of you who use credit cards.

For many years I was working for essentially nothing till I started listening to my many friends on web forums and raising my prices. Fast forward 6 years later and we finally are making good money, have all new vehicles and are starting seriously saving towards slowing down.

From contributor L:
Once you instilled some of the advice, how long for the turn around? Mine has hit me in the forehead pretty quick (the turnaround) and light at the end of the tunnel is not the train coming at me. This change was instilled last 90 to 120 days, but I was curious about the fast forward six years comment. As I've raised my prices and work myself out of this hole I'm grabbing for more info, getting better organized, looking for better clients that are organized and want a complete project, not a low price, and better process to get the projects out the door and cash flow in. We do frameless and face frame, tops and furniture.

From contributor D:
The main change had to come in my mind. Once I realized I had to change, it began one job at a time. I had been priding myself on getting 8-9 out of 10 bids, when suddenly someone suggested that meant I was usually low-bidder! Duh!

I began nearly doubling my prices almost immediately and found right away I got only 2-3 out of 10 bids, but (huge but) I nearly made same gross as I was getting 7-8 bids! There were several "ah-hah" moments, such as the bid I was mulling over for a high-end library cab around 30' long with curved section in center and rolling ladder. I originally figured around $14k, but in keeping with my new determination, bid $28k. I remember my sweating – I was convinced I would never get the job. One day later, customer called and asked when I was getting started! I blurted out "as soon as I get a check!" I'll never forget stopping by his office and picking up that $14,000 check - what I was originally prepared to do the whole job. I called my wife and told her I was on my way to the bank to deposit money - we both were happy and grateful.

By the way, that job ended up around $50k when everything else was done. I also set goals nearly every day. If I would make $1000 in a day, I would set a goal of doing that four more times that year and then doubling that next year. I met those goals and it helped a lot! The reason this type of goal worked for me is it got me thinking on every job, how much can I charge? My goals now are to make more money in the present and future so my family will be well-provided for.

Several years ago I had a $2000 day and did the same thing. Made a goal of doing that again at least once that year and doubling that next year. It has been three years since that goal and this year I had nearly 6 days I did that. Matter-of-fact, yesterday I made $1500 just by watching every invoice and pricing as high as possible.

It was around 6-7 years ago I began and three years ago I hit our target, which was $175,000/year gross. We have done that each of the last three years and have all bills paid, new service van, all new equipment, and are paying off last bill - home, on accelerated schedule of around $40,000/year. We will be able to go to around 1/2 day schedule in around 3-4 years - when I'm 65.

Again, main thing happens in your mind! Make the decision to double your gross right now and think about it every day, every job, and it will happen! By the way, changing to frameless was a big part of our turnaround - we were one of the original True32 clients.

From contributor L:
Congrats! I have not doubled my prices as of yet, but we are increasing them rather quickly. My interest in True 32 has been peaked recently as I have started to get more focused, organized and profitable. This has me slowing down on the weekends and pushing like crazy in the week. I understand the change of the state of mind, and that's actually why I'm asking. As my mindset has been changing, the process is starting to gather steam and daily I'm doing things to get organized better in the office and shop and have a life. I truly appreciate the response.

From contributor D:
Sounds like you are heading in the right direction. Keep plugging away! You know, it actually becomes kind of fun turning unprofitable work down - I do it nearly every day - did it today, as a matter of fact! Lots of people out there want you to do a lot of work for little or no pay - it's a shame, but it happens all the time. All most people have to do is compliment us a bit, "so and so says you are the best,” and we are hooked and say yes when we ought to be running away. I have become somewhat of an expert at sniffing out the really profitable stuff in my city.

From contributor W:
Here's my perspective on credit cards. I'm also a one man operation with part-time help on call as needed (sometimes four all at once). Besides providing a variety of component parts, some custom finishing and one of a kind items to a handful of brokers (who always pay in 10 days for the discount), our main product sources of income are from a line of commercial candle holders and game calls.

The customer for candle holders represents $60K yearly and also pays in 10 days. The money issue is with the game call line, approximately $180K yearly. I didn't want to fuss with credit card paperwork and especially after discussing with my bank and looking at the extra monthly charges. Consequently, over the last 3 years, I got stuck with $20K in uncollectible receipts.

Last year we had a website made and had to offer some kind of credit card payment. My website manager suggested PayPal. It's been great! Now I tell all the phone customers to use it. In fact, many of the 100+ call-in customers now go directly to the website to order. On phone orders, I simply email them a PayPal request for payment. The money is there the next day, confirmed, and I can ship the order within 24 hours. A couple of times a week, I open my PayPal account and transfer any funds into my business checking account. It couldn't be easier! The reasonable fee charged per transaction is a business expense I'm happy to pay. In the last 12 months, I've not had a single unpaid invoice.