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The Basics of accepting credit cards online

in Payments

There is no doubt that credit cards are a major part of e-commerce.  The question is whether or not you should or need to accept credit cards online with your tourism related business.  There are a number of pros and cons to accepting payment by credit card, whether or not you choose to accept payment by credit card will depend on your comfort level with the terms of accepting credit card payments.  Here are some pros and cons of accepting credit cards:

PROS

  1. Impulse purchases – Customers can pay right away.  This works particularly well if you are able to deliver a real-time response with a ticket or voucher.  The impulse purchase is also particularly good for on-location purchases or purchases that are relatively low value ($200 or less).
  2. Security & Credibility – Customers have come to recognize that credit card payments come with many customer protection mechanisms.  Although this may not be an advantage to you as a merchant, the increase in security means that customers are generally more willing to pay via credit card because of the consumer protections that are in place.
  3. Currency Conversion – This may not seem like an advantage, but the burden of currency exchange is carried by the customer in credit card purchases.  This means that you can charge in your base currency and the customer is responsible for the conversion amount.
  4. Upselling & Upgrades – Customers paying with credit cards are more likely to upgrade their purchases because they are able to spread the re-payment out over a longer period of time.
  5. Faster payment – In most cases, you are able to get access to your funds quicker then other methods.  For example a foreign check may take 30 days to clear your bank whereas the funds from a credit card purchase may be available within 24 or 48 hours.

CONS

  1. Credit Cards are Not Cheap – Despite what many merchant providers will tell you, accepting credit cards is not cheap.  Travel, especially, is considered a high risk category because of the time between the sale of the ticket and redemption of the service.  This increased risk means that many travel companies, even if you are a small tour or activity operator, has to pay 3-5% per transaction.  On top of the transaction fees, you can expect to pay a per transaction fee (usually $.10 – $.25) and monthly statement fees ($10 – $50).  You will need to take these costs into account when you price your products both for off-line and on-line sales.
  2. Protection for Consumers but Not Merchants – When there is a dispute between a consumer and a merchant, the card companies tend to favor the consumer.  In most cases, with a charge back, for example, you (as the merchant) must prove that you delivered the service or product and back up your claim with documentation.  This guilty until proven innocent approach to charge backs can be a real challenge for small businesses, especially if you rely on pre-payments for the purposes of securing services for your customers.
  3. Deposits & Rolling Reserves – It can be very difficult for travel companies and tour operators to secure merchant accounts without large deposits or rolling reserves, sometimes in excess of 30% of transactions.  If your tour or activity business sells in-destination tours with a lead time of less than a week, then your business will likely be considered less risky.
  4. Increase Security Requirements – There are a lot of things that come along with having a merchant account including PCI compliance and secure certificates.  These increased security requirements can cost anywhere from a few hundred to thousands of dollars depending on your volume of transactions.  If, for example, you handle over a $1 Million in e-commerce transactions, you must undergo a much more stringent PCI compliance process which costs $10-$15,000 annually.  Luckily for you, Rezgo is a PCI compliant service provider, which means you don't have to worry about these costs.

I recommend that you talk to your colleagues in the industry and find out who they use for processing.  Each country has its own rules and although there are dozens of sites on the web that can provide you application forms, it is the experience of fellow business people that mean the most.  If you are a member of Chamber of Commerce, business association, or industry association, find out if they have a partnership with a merchant processor.  Quite often you will receive preferred rates through an association membership then if you just walk in and ask for a merchant account.

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