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Merchant Services What they are and How they Apply to your Business

Though he may have been a forgettable President, Calvin Coolidge did produce his fair share of memorable quotes. His single most famous line was when he said, "The business of America is business." What exactly did he mean? According to historians, the 30th President believed that small businesses were the backbone of the economy. While the quote is often cited as an example of overconfidence in the American economy before the Great Depression, in time he would be proven right.

Small business is the engine that drives the modern economy. Defined as any firm with fewer than five hundred employees, they have generated nearly two-thirds of all new jobs over the past fifteen years. No, the corporations do not run the U.S., at least not on the local level. An incredible 99.7 percent of all independent businesses are small businesses.

Pizza parlors, diners, car washes, barber shops, and nail salons open every day in America. More than five hundred thousand small businesses open their doors each year, according to the U.S. Small Business Administration. Most of these firms offer products and services that have been around for many years. But in an ultra-competitive economy, owners simply cannot afford to run their businesses the old-fashioned way.

The Modern Shopper

Technology has had a profound effect on the American consumer. He can now shop from home, make payments online, and save himself time and money. But even so, the average shopper prefers to shop in person. One possible explanation is that he fears identity theft and fraud on the internet. Another is that he actually enjoys shopping in real stores.

Customer surveys confirm that shoppers are willing to pay a bit more for a pleasant shopping experience. This means the store had better have a helpful and knowledgeable staff. They should also accept multiple payment options. We are speaking specifically about credit and debit cards.

Sixty percent of retail purchases are completed with a debit or credit card. Cash is involved in only about thirty percent of transactions. The remaining ten percent of purchases are made with personal checks, money orders or gift cards. Since they surpassed paper payments in 2003, plastic has become the preferred payment method, both online and in person.

While it is true that some businesses can survive without electronic payment, they are typically small-town shops that offer inexpensive products or services, like diners or barber shops. Any business that sells more expensive items, like a dress shop or a shoe store, is expected to offer multiple payment options.

Merchant Service Accounts

The reason some retail establishments choose to remain cash only is because it costs money to process credit and debit card payments. Every business that accepts plastic must obtain something called a merchant service account. Offered by banks and other financial institutions, these accounts provide protection from fraud and theft. The most important job of the service provider is to make certain that the card is valid and that it has not been reported stolen. If the card checks out, the provider will approve the transaction. An electronic bill will then be sent to the customer's credit or debit card company. Once the funds have been received, the provider will deduct certain service charges from the balance and transfer the remainder to the merchant's bank account.

What are the benefits?

The average American has a total of eight debit and credit cards in his wallet. As we mentioned, he uses them to pay for six out of every ten retail transactions. This average consumer has come to expect that most establishments will accept his cards, which is why he often forgets to stop at the ATM. Sometimes he doesn't carry any cash in his wallet at all. So, you can imagine how he feels when he is rebuffed at the register. Not only is it embarrassing, but it is also unexpected. The chances that the average consumer will ever return to the store that refused his credit/debit card are roughly slim and none.

Customer surveys also confirm that shoppers have a higher opinion of businesses that process plastic. They find them to be more reputable. Perhaps that is why most businesses report an increase in customer loyalty soon after they obtain their merchant service accounts. Repeat business is essential to the survival of any retail establishment.

Now, this next part might sound a bit shady, but it has been well documented. Americans spend an average of about twenty dollars more when they pay with a credit card rather than cash. One obvious explanation is that credit gives them the ability to enjoy something today and pay for it later on. Instant gratification is a motivating factor behind many electronic transactions. But does that make it unscrupulous? Of course not! It is the consumer's job to manage his own accounts; the merchant simply wants to satisfy his customers and make a little money in the process.

Whatever your business needs, there is a merchant service account that can meet them.

About Author Jim Hildebrand :

Jim Hildebrand is a freelance writer who writes about a range of topics including <a href="" target="_blank">merchant services</a>.

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Article Added on Sunday, May 1, 2011
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