Debit, Credit Transactions Offer Convenience, Concerns

Cash might be a long way from obsolescence, but it gets a little bit closer with every swipe of a card. Credit and debit transactions have been on a steady rise for the last several years.

The cards are certainly more convenient for many people than carrying cash, and many might be more likely to make a purchase at a business that takes cards than at one that doesn’t.

Though there can be some drawbacks to taking plastic such as concerns about fraud, chargebacks and, of course, fees, the advantages usually outweigh the disadvantages.

TransFund, an electronic funds transfer network based in Tulsa, has tracked consumer credit and debit habits and has seen a significant increase in use of the cards, said Dave Sharp, company director.

Though the company started out as an ATM-only operation, it began offering check card service in 1994. In 1997, the average TransFund cardholder made 8.5 purchase transactions per month, Sharp said.

By 2002, that number was 12.5 and by 2007 it had gone up to 18.6, he said.

“I think the convenience of using debit cards is really being seen in the marketplace,” Sharp said. “As a business owner, that would definitely be one of the advantages.”

One of the disadvantages would be the interchange fees charged to merchants every time a customer swipes a card.

These fees vary in price according to many different variables, including whether the card is swiped or entered with a PIN, what type of business the merchant runs and if the card offers reward points or miles, said Greg Frumin, vice president of the North American Credit Card Association, a card processor based in Greenwich, Conn.Some of the reasons why fees are different have to do with risk, namely risk of fraud or chargebacks.

“A swiped transaction has less risk and will have a lower fee while a keyed transaction has higher associated risk and a higher fee,” Frumin said. “Ninety-five percent of all worldwide credit card fraud happens when the card isn’t present.”

One type of business that has a very high risk of chargebacks – and thus higher transaction fees – is adult entertainment, Frumin said.

As far as taking plastic is concerned, small business owners should research their options before establishing a merchant account with a card processor, Frumin said.

“Most merchants just have to be careful not to overpay and to understand what they’re signing,” he said.

PayPal Offers Business Accounts for Net Payment

For Cindy Arsaga, co-owner of Arsaga’s Espresso Cafés in Fayetteville, accepting plastic has cut down on one headache many small business owners deal with – bad checks. Taking cards “solves that problem for us,” she said. “We don’t have to worry about the money not being there.”

Arsaga and her husband Cary Arsaga held off from taking cards for several years because they didn’t want to slow down the line for their coffee-loving customers. Eventually, they decided to make the transition and found that it didn’t slow things down.

Another option for small business owners is setting up a business account with online payment service PayPal.

That option has worked out well for Jeremy Waterhouse and Mark Daniels, owners of Sound Junkie LLC, a DJ service based in Bentonville.

It’s a convenient way for their customers to pay the deposit required, and it shows up instantly into their account. The customers don’t even need a PayPal account to make a payment; they can use their credit card.

Prices and fees for business accounts through PayPal vary according to the volume of transactions a business processes each month.  Daniels said about half of the business’ deposits are paid via PayPal. He was enthusiastic about the service.

“We’re kind of like a walking billboard for PayPal,” he said.