Paper currency has a long history in the United States. Even before the
Declaration of Independence was penned, coins and bills were quite
common in the colonies. The era of national American currency
officially began with the First Bank of the United States (1791). In
time, popular commodities like gold, tobacco and animal skins lost out
to an established monetary system everyone could agree on.
it may not make the history books, we are currently experiencing a
similar shift in popular payment methods. For over two hundred years,
cash was king in America. Personal checks came along a few years later,
but they were never as popular as paper money. It wasn't until 1950
that a non-paper option was introduced.
Depending on whom you
ask, the modern credit card was first offered by either American
Express or Diner's Club in 1950. It was advertised as "plastic money"
and it was only issued to preferred customers. Since most retailers did
not have the equipment to process these transactions, they were only
accepted at select locations. It wasn't until the 1980s that these
cards caught on with the average American consumer.
help of the debit card, which was introduced in the late 1980s, plastic
payments outstripped paper payments (cash and checks) in 2003. Six out
of every ten retail purchases are now made with a debit or credit card.
The numbers are even more lopsided on the internet, where ninety
percent of purchases are electronic.
history has taught us anything, it is that old ways of doing things
rarely come back into fashion. In short, there is absolutely no reason
to suspect that cash will ever again be king. If anything, cash is
growing less popular by the day. Slowly but surely, we are headed
toward a truly cashless society. What does this mean for modern
Cash only establishments are indeed a dying breed.
The small general store, the local diner, or the town barber shop may
be able to get away with it. After all, their customers understand that
the services and products they offer are typically inexpensive. They
also know that accepting plastic costs money. However, shoppers are not
nearly as understanding when they shop for more expensive items.
after survey has confirmed that customers expect multiple payment
options when they shop at most retail stores. We also know that when
their preferred payment option is refused at the register, they almost
never return to that store.
Merchant Service Accounts
we mentioned, sixty percent of retail purchases are made with plastic,
and every single one of them was approved by a merchant service
provider. They check the cards, collect payments, and transfer funds to
their client merchants. For these essential services, they charge a
number of standard fees. Like the credit cards they process, the rates
vary from customer to customer.
The single most important factor
when it comes to rates and fees is how the merchant accepts payments.
If he processes plastic payments in person, his rates are often quite
reasonable. The explanation is simple. People are less likely to use
stolen credit cards in person than they are on the internet because of
additional security measures. When a card is present, the cashier can
ask to see ID or check to see if the signatures match. But an online
seller has no such security measures. Unless the card has been reported
as stolen, he has virtually (pun intended) no way of knowing if he is
doing business with the rightful cardholder. Not surprisingly, rates
for online sellers are much higher than they are for traditional
What are the benefits?
While it is true
that a merchant always receives more when a customer pays in cash, it
is also true that customers typically spend more when they pay with
plastic. The average credit card sale is about twenty dollars higher
than the average cash sale. Customer surveys also confirm that shoppers
think more highly of businesses that offer multiple payment options,
while cash only outfits are generally viewed with a jaundiced eye.
Where to Start?
we mentioned, the single most important question is how you will be
accepting plastic payments. Traditional retail sellers must actually
swipe each card by hand through something called a point of sale (POS)
terminal. These terminals are designed to accept both credit and debit
cards. When the customer uses a debit card, he must enter his pin
number before the transaction can be reviewed.
must also apply for and obtain a merchant service account, but because
they do not do business in the flesh, they obviously do not need a
point of sale terminal. All internet sellers must install specialty
software called payment gateways instead. These gateways give them the
ability to process electronic payments in real time and to protect
their customers' financial information by encrypting it.
Merchant service accounts have been shown to increase monthly sales volumes by improving customer service and loyalty.
Jim Hildebrand is a freelance writer who writes about a range of topics including businesses that accept credit cards.