It is often thought that a merchant account is a liability for a business based on the fees that are charged in conjunction with its operation. How true is that sentiment? Like any business decision, it’s prudent to weigh the costs against the benefits. On average you can expect to pay approximately 3% of your credit card revenue in merchant account fees. So, what is the benefit?
Many studies have shown that accepting credit cards can dramatically increase sales. One article released by Visa USA claims a 20 to 30 percent increase in sales for quick service restaurants. If sales can, in fact, be increased, what are some of the contributing factors that lead to increased sales?
- Convenience for Customers
- Expanded Sales Channels and Reach
- Ability to Leverage Receivables
Convenience for Customers
Let’s face it, you want to make it as easy as possible for your customers to pay you. You don’t want to loose a sale because you aren’t able to accommodate your customers preferred payment method. Whether we like it or not, cash and check payments are becoming a thing of the past as more and more consumers rely on their check and debit cards to complete most transactions.
Expanded Sales Channels and Reach
Another distinct advantage of establishing a merchant account is the ability to take your business on-line. The internet extends your store hours to 24 hours a day and 7 days a week. You are also able to increase your geographic reach as you can be found by customers all over the world.
Ability to Leverage Receivables
A superior advantage that most businesses forget about is the ability to leverage future credit card receivables for a cash infusion known as a Merchant Cash Advance. A Merchant Cash Advance works like this: the business sells the future credit card receivables at a discount in exchange for a lump sum advance. The advance is paid back as a percentage of the future sales and is automatically deducted from the merchants deposits each month. Through the leverage of future receivables the business is able to re-invest and expand without the need for traditional business loans that can be extremely difficult to qualify for, especially in today's economy.
Based on this information would it be worth spending 3% to make an addition 20%?