Credit Card Research
Third party credit card processors refer to the company that is supposed to accept the payments of the credit cards on your behalf. They are also responsible for processing the payments that are paid by the customers. Finally, you as the retailer are paid minus a fee charged as the commission by the third party merchant. It is not necessary to pay for high cost fee of processing, monthly fee or the minimum fee of the transaction. The customers may not loose money on this because they only pay a small percentage of the sales made. (Marc and Rysman, 2006).
Interchange fee refers to the charges made by the banks that issue the credit cards and the debit cards. These fees are meant to minimize the risks that the customer may not pay or to cater for the cost of processing the transaction. These charges are paid by the merchants who have agreed to use the cards to make their payments. The fee charged comprises of a fixed per every transaction plus a small percentage of the amount which is charged. These charges may be a big expense to the merchant who decide to use them to make the payments for the goods and the services.
This is because every transaction consists of a chain of four parties which includes the merchant who is the owner of the card, the bank which the merchant belongs to, the bank that issued the card as well as the card user. Interchange fees are taken as a function that comprises of several functions including the quantity of the transactions which are made by the merchant, the procedure used, whether the card was swiped or entered manually and the type of the card that is used during the transaction.
The increased use of the credit cards combined by the costs paid by the merchants has brought about battles between the two parties. To compensate for the losses made during the credit card transaction, the merchant may decide to buy his or her own credit card processing machine that would enable him to cut on the middle men during the stages of setting up your businesses to ensure that your business accepts the credit card processing. The merchant may also put up a very big banner on the front of the store indicating that the business accepts the credit cards payments.
This may bring up new customers who may compensate for the charges that are used in setting up the credit processing machine. The merchant may also decide to raise some prices of some of the lower cost items which would enable the business to compensate for the credit card processing. In addition, the merchant has to teach and require all his employees to check always the credit card signature of the customer alongside the customer identification and the expiry date for the credit card in order to reduce the chances of having fraud credit cards. (Marc and Rysman, 2006).
Apart from the increased profits for the owner, the increased sales have many advantages for the business. First there is increased sales because the credit card orders are large than any other type of payment. The credit cards would also cheaper to process. Therefore they make work easy as a result of the large amounts of the work that is ordered; it would be cheaper to process the credit cards. Increased sales also leads to more security of the merchant as they compensate for any charges that may be incurred during the transaction in the credit cards.
Increased sales also make the company to increase the options to the customers because the business may opt tom use both the cash and even the credit cards. Increased Sales – credit card orders are generally larger in nature than other forms of payment. (Marc and Rysman, 2006). From a personal opinion, it is reasonable for credit card companies to charge a business a processing fee in addition to charging consumers interest on each purchase. This is because the merchants have to charge the merchants in so that they may receive the payments from the merchants.
For some small businesses or the businesses that do not make a lot of sales, the merchants may decide to charge a small fee when using the credit card, or else, the merchant may be forced to set a minimum fee in order to avoid the fee. For example, they may decide that any purchase below $5 has a fee that is charged and all purchases that are above $5 are not charged anything. (Marc and Rysman, 2006). References Marc and Rysman. (2006) An Empirical Analysis of Payment Card Usage. Department of Economics. Boston. University Press