In today’s burgeoning digital economy, businesses of all sizes need some form of payment processing.
The pandemic encouraged consumers to use debit and credit cards rather than cash. And now, even small businesses are taking advantage of e-commerce to increase sales, meaning they need payment processing to handle online credit card transactions and transfer payments.
Credit cards have become an increasingly popular method of payment. Research shows that 80% of consumers prefer cards to cash, including 54% who use debit cards and 26% who use credit cards.
Credit card transactions offer consumers and merchants several advantages. These transactions:
- Make payments easy for consumers.
- Improve cash flow for businesses.
- Increase sales by offering customers more ways to pay.
- Simplify accounting for both consumers and businesses.
- Help to “legitimize” small companies.
A business needs to have payment processing if it plans to accept debit and credit cards, making it necessary to qualify with a payment processing provider that can handle card transactions.
Signing up with a payment processing company isn’t difficult. The process is similar to qualifying for a loan. However, some roadblocks can delay approval for credit card processing.
Why You Need to Accept Credit Cards
Like it or not, credit cards have become an essential form of payment for both in-store and online purchases. The COVID-19 pandemic has accelerated movement away from cash, forcing consumers to make more purchases online and discouraging merchants from accepting paper currency. In 2010, about 51% of consumers in the U.S. were using cash. In 2020, that number dropped to 28%.
The growth of e-commerce and online purchases has also accelerated credit card use. Digital marketplaces now make up 60% of the total e-commerce volume, and the majority of online purchases are made with credit cards.
Additionally, more merchants are accepting electronic payments from third-party services. In fact, there were 900 million new mobile payment app users worldwide in 2020. Third-party payment services are becoming popular as well. Research shows that 50% of U.S. retailers now accept Apple Pay, making up 70% of global card payment volume.
With the increased use of credit cards and online payment services, vendors need payment processing services more than ever.
Applying for Payment Processing
As we said earlier, qualifying for payment processing is much like qualifying for a loan or line of credit. To qualify, you need to show you are a viable business that generates sufficient revenue.
As part of the application process, you will need to present certain documents and information, including:
- A business bank account for processing payments
- Financial statements to demonstrate viability and cash flow
- A business license to show you are a legitimate business
- A physical address for your business, not just a post office box or mail drop
- An employer identification number (EIN), even if you are the only employee
- Proof of Payment Card Industry (PCI) compliance, earned by correctly storing, processing and transmitting cardholder data
Additional documents may be required, depending on where you apply for payment processing.
Most Common Reasons Merchants Aren’t Approved
Not all vendors will be approved to handle credit cards. Even if you have all the necessary paperwork and can show you have been in business for some time, certain circumstances could prevent you from qualifying for payment processing:
1. Poor Credit
Your credit score is the gauge used to assess your creditworthiness. If you have a poor credit score, it shows you may be a risk, so you might not qualify to accept credit card payments.
2. Size of Transactions
If you sell big-ticket items or routinely handle large transactions, that may make you ineligible for credit card payments. Some payment processors won’t accept payments higher than a preset amount, and if they do, there may be transaction fees.
3. Bankruptcy or Collections
If you have a bankruptcy in your credit history or unpaid debt sent to collections, it shows you may be a risk.
4. Lack of Credit History
It will be harder to qualify for payment processing if you are just starting out or don’t have a solid credit history. One way around this problem is to get someone with good credit history to cosign the application.
Even if you have poor credit or another issue, you may be approved for payment processing if you have a reputable vendor willing to work with you. For example, you may have extenuating circumstances, such as starting a new business.
Partner With the Right Provider
It pays to find the right payment processing provider. Find a company that offers plenty of options and has experts willing to work with you. Personalized services can be invaluable.
If you are considering expanding your business and are looking for payment processing, the experts at National Processing are willing to help. Contact us today so we can help you get started.