Credit Card Machines For Small Businesses: FAQs
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There is no longer any doubt, for a small business credit card machines are no longer just a costly alternative payment option, a faddy luxury or a badge of prestige: they have become essential. Cheques are on the way out (sooner or later), the use of cash is diminishing and plastic is on the rise. While many small businesses see credit card machines as being unjustifiably costly and adding unnecessary complication to day to day transactions, many, many more are realising that turning away cashless but card carrying customers is a much bigger threat to the bottom line of their business.
Having decided to look into acquiring a credit card machine for a small business, the business owner will often find themselves confronted by such a plethora of choice that it can be off putting. Through our experience of matching business buyers with suppliers we’ve compiled a list of the most frequent FAQs and the most common misconceptions when it comes to obtaining credit card machines. This way we hope to arm the wary business owner with all the info they’ll need for making an informed purchasing decision.
How do credit card machines work?
Purely and simply, the credit card machine, or PDQ terminal, is a communications device. It sends encrypted data about the customer and the transaction to a card association (like Visa or Mastercard) which authenticates the customer’s card and PIN and then requests the amount from the card issuer. The card issuer then either approves or declines the transaction, sending a message back to the merchant via the credit card machine which then provides both merchant and customer with a receipt. All this happens in a few seconds.
How do I, the merchant, receive the money?
In order to use a credit card machine you need a merchant account. This is a special account provided by a bank or specialist merchant services provider which holds money requested from customer’s accounts while they are properly authenticated and transactional fees subtracted. The merchant account then disburses the funds to your business bank account.
Do I have to rent the terminal from the merchant account provider?
No. You can purchase a PDQ terminal or rent it from a separate supplier. Often though, if you sign up for a full merchant services package, the company will automatically update terminals, replace them when broken etc. In the same way that you wouldn’t purchase a mobile phone handset because of frequent updates to technology, the same is true for PDQ terminals.
Do credit card machines have to be connected to a landline?
While PDQ terminals do need to be able to transmit data via a phone line, they aren’t restricted to being plugged into the wall the whole time. Portable units communicate with a base unit (connected to landline) via Bluetooth technology, which is perfect for restaurants, bars and cafes where the terminal needs to go to the customer. Mobile units actually use mobile phone and GPRS technology to provide credit card processing almost anywhere. Airtime is purchased in the same way as with a mobile phone.
How quickly will I receive the money into my account?
The amount of time it takes between the actual transactions and when the merchant receives the money varies between different merchant account providers. Some offer a quick turnaround (2-3 days) but have high charges whereas others offer the opposite arrangement (14 days) and some lie between. It’s therefore wise to get quotes from several different suppliers to compare.
Who is liable for fraudulent transactions?
All modern PDQ terminals use chip and PIN technology which has reduced fraud significantly. However, fraudulent transactions do still take place which means that customer’s banks can withdraw authorisation for fund transfers after the transaction has taken place. These ‘chargebacks’ often also result in a fee to the merchant. As a merchant it’s important that you follow best practice and are vigilant against suspicious transactions to avoid ending up out of pocket through chargeback fees and lost goods.
Common misconceptions about credit card machines for small businesses
- Our business is ‘high-risk’ so we can’t get a merchant account.
Some businesses are classed as high-risk by merchant account providers due to the likelihood of chargebacks occurring on accounts. This can be due to the fact that the goods and services are often used for criminal activity or money laundering like used cars, can be illegal like some adult services or can be frequently cancelled by the customer like tickets for shows or travel. Many merchant services providers do however provide services to ‘high-risk’ businesses but charge extra to cover the liability.
- All card issuers charge the same transaction fee.
Visa, Mastercard, American Express, Diners Club, Maestro etc all charge different transactional fees and charge different amounts for credit and debit card transactions. Make sure you know the charges you’re being offered for each (these operate on sliding scales depending on your turnover) before agreeing to accept them.
- PDQ stands for Pretty Damn Quick, doesn’t it?
Sorry, but no. Process Data Quickly, actually.
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