Merchant Credit Card Processing: Putting Credit Payment in Context
“There are three types of lies: lies, damned lies, and worse yet, statistics,” said famous British politician, Benjamin Disraeli.
If you are a merchant who evaluates bankcard statistics, then you understand what he meant. As one statistic shows the benefits of credit card acceptance, another one shows its drawbacks. Instead of helping the problem, independent selling organizations (ISO) often contribute to it, using bankcard statistics out of merchant context to promote credit card processing.
The Need for Honest ISOs
Without transparent ISOs, merchants must navigate these statistics alone, a task requiring significant time once investors are involved.
Sorting Out Bankcard Statistics
As every merchant can recite in its sleep, “credit is king.” Considering the Federal Reserve Bank of Boston found that U.S. consumers hold 609.8 million charge cards, and the number of purchases they charge grew 10.7% between June 2010 and June 2011, that expression seems correct.
Credit Revenue vs. Consumer Credit Ratings
The robustness of credit revenue can be inversely proportionate to the robustness of consumer credit ratings.
The above is a technical way of saying that consumers who overcharge often end up with no credit line.
For businesses, merchant credit card processing means bigger sales (the average cash purchase is $9, compared to $40 for the average charge purchase). But for consumers, bigger purchases can cause something that hurts both merchants and themselves: mounting debt that leads to card cancellation or bankruptcy.
Credit Debt and Consumer Bankruptcy
Contrary to popular perception, credit debt is not the leading cause of bankruptcy. According to researchers at Harvard
Uncontrolled Spending
Charge card defaults fall into the category of “uncontrolled spending,” bankruptcy’s third leading cause behind medical bills and job loss.
Does that mean credit’s reign as king is secure? Not necessarily, say experts.
Today, many consumers are cognizant of their spending—a decision that can mean more than better bankcard habits. Instead of charging sparingly, some cut up their cards, while others are forced into cash and debit payment by banks whose credit issuance has tightened in the wake of unsecured loan defaults.
In 2010, TransUnion reported that, in the past year, eight million U.S. consumers had stopped using their charge cards, turning to debit, check, and cash spending that increase financial responsibility. For merchants, this finding does not mean credit processing is becoming less valuable. Rather, it reinforces what merchant services have said all along: maximizing revenue with merchant accounts is about account diversification, not choosing the “best” account, as it were.
The Importance of Account Diversification
For most merchants, charge cards are an invaluable revenue source.
Capturing Non-Credit Purchases
Capturing the revenue of non-credit purchases requires check and debit processing accounts. Ideally, merchants should ideally accept credit, debt, and check payments through the following accounts, as applicable: retain processing, Internet processing, mail order / telephone order (MOTO) processing, and wireless processing.
AVPS has the Solutions You Need
The more payment options a merchant offers, the more sales are completed. If your business offers some payment options but not others, it could be missing out on a significant chunk of revenue. At AVPS, we supply a full range of merchant accounts, including small business accounts. To learn more about credit card processing and how to accept online payments, contact us today.
