How many small business owners ask this question very soon after starting up a new business….why bother with credit cards? There are a lot of reasons why it doesn’t make any sense to accept credit cards. The biggest and most obvious is the cost. If the credit card companies take 2% to 4% of all my revenue, why the heck should I even consider it? Not to mention the enormous hassle of setting up a merchant account and a payment gateway. If most of my clients don’t mind sending me a cheque, and I get 100% of this money, then it’s a no brainer.
Or is it? In many small businesses, saying cash is king is a very fair statement. Too often if you are running a small consultancy or freelancer business and you run out of cash, your business grinds to a halt. If you are a young business, you probably aren’t able to get much help from the banks unless you have a fancy house to put up as collateral. Therefore, without much financial security, your business is at a major risk if a few clients do not pay on time. If you start to collect credit cards, it makes it that much easier for your clients to pay you immediately. Not only can they pay with credit (which helps them if they are also a small business), but you will receive the funds immediately instead of waiting for a cheque to arrive in the mail and having to make an extra trip to the bank to make the deposit.
At first glance it seems really crazy to give up 2-4% of your revenue right off the top to the bank. However, when you consider the ease of payment and steady cash flow, it is likely worth every penny. At the very least it is worth it to run the numbers on accepting credit cards. Maybe it isn’t worth it until you reach a critical mass of customers, or maybe you could start by just accepting PayPal. Either way, you owe it to your business to do your homework.
Copyright © 2000-2007
5:25 pm
One thing to keep in mind though is that although you might receive payment immediately you do not receive the money immediately. PayPal might be the most immediate since a client pays and IF you are buying something with PayPal now you have money to buy with, or if you have their credit card then you can use it anywhere. But for other payment processors you’ll have to wait around 3 days before receiving the money into your bank account. Which is about the same time as a mailed check would take, plus less risk on the mailed check for the business owner, since it’s easy to reverse a charge on a credit card, but not so easy on a check. One great thing is that clients don’t usually procrastinate when they can pay with credit card, so in the end credit cards are faster, not inherently, but due to customer habits
I just thought a clarification was in order, at least for my business
8:14 pm
Paypal (and in turn the optional debit card) have been a boon for my freelancing business. We typically don’t being work on a project until 1/2 of the estimate is paid up front, so often times clients will elect to pay via credit card through Paypal rather then wait for a check to arrive. We can then either use the cash in the Paypal account or take it out at an ATM. After reading Rick’s comment, I think I’ll stick with Paypal and eat the 2% fee - it sounds like a better deal overall.
8:23 am
This begs the question - what is the easiest way for a freshbooks user in Canada to integrate credit card payments into their invoices?
I’ve been looking at doing this for some time - but haven’t taken the plunge. I’d love to hear any recommendations on payment gateways/merchant account providers, etc. that have worked well for other Freshbooks users.
8:51 am
Hi Jeff.
Hands down, the easist way to start accepting online payments in Canada (and many other countries for that matter) is PayPal. It is reasonably priced and a cinch to get up and running.
Now if you don’t like PayPal, or want a more seamless solution, there are a number of different providers in Canada. We normally recommend some guys based out of Mississauga called PSiGate (http://www.psigate.com). They will get you going and recommend a merchant account. However, if you have a lot of US customers and want to collect in US funds (which isn’t a great idea right now what with the sate of the CAD) then there are a slew of US providers that are great. We normally recommend Authorize.net.
Check out our old website (http://www.secondsite.biz/Partners/) for some more ideas.
- Levi
12:22 am
Thanks Levi - definitely looking for the seamless solution - would prefer to stay away from the paypal option.
What would be your second choice for a Canadian provider beside PsiGate?
3:22 am
PsiGate is great because they integrate very well with FreshBooks and is Auto-bill capable. This means that you can setup to have customers credit-cards charged automatically every month or any interval that you setup in your re-occuring profile. They also have a bundle deal where you can get a USD and a CAD merchant account under one package ($39.95 / month on their starter package). There is a caveat on the USD account that you need to process a minimum transaction volume. The rates are either 3.49% or 3.95% depending on which package you go with.
Second chocie after PsiGate would be Moneris - however Moneris does not integrate with FreshBooks.
8:19 am
Hi Jeff,
The only other Canadian option that is integrated with FreshBooks is what was formerly Paradata and is now called Payment Processing, Inc. (http://www.paypros.com/)…Paradata was a Whistler based company bought by an American company.
6:56 pm
Actually watch out for PayPal. Read an article on our site about what happened and PayPal doesn’t even care!
12:53 pm
There is one thing that I don’t get!
It’s about the all concept of eCommerce, isn’t it supposed to be faster or even immediate transaction?
If I’m from Montreal and bill a client at Montreal, why do I have to wait 4-6 days.
At the end I’m waiting for about the same time to have my check and I’m paying fee for it.
If my bank account is already accepted in the PayPal system why it’s longer to get that data transfer compare of a piece of software that you bought by credit card and have it at the end of a download link made available immediatly?
As you can see I’m more then convainces about the effeciency of the Paypal gateway alike.
12:55 pm
There is one thing that I don’t get!
It’s about the all concept of eCommerce, isn’t it supposed to be faster or even immediate transaction?
If I’m from Montreal and bill a client at Montreal, why do I have to wait 4-6 days after being analyze by the federal reserve.
At the end I’m waiting for about the same time to have my check and I’m paying fee for it.
If my bank account is already accepted in the PayPal system why it’s longer to get that data transfer compare of a piece of software that you bought by credit card and have it at the end of a download link made available immediately?
As you can see I’m more disappointed then convinces about the efficiency of the Paypal gateway alike.
8:32 pm
Every business owner should print of this article:
17 Essential Questions Every Canadian Small Business Owner Must Ask Before Choosing A Payment Processing Provider
found at: http://www.canadian-merchant-account-services.com/payment-processing.html