When starting a business, it’s important to consider exactly which payment options and which direct debit provider to accept. Some customers are likely to prefer certain payment options over others. By offering a range of payment solutions, you can appeal to a wide range of customers and win over more business. Of course, it’s also important to consider the fees and caveats that may come with certain payment options – there are certain payment options that may not always be a good idea. This post delves more into the pros and cons of various payment options.
Should you accept cash?
Cash is the oldest and most traditional form of payment. It used to be the case that every business accepted cash, but in recent years more companies are going cashless.
Why is cash falling out of favour? For many businesses that operate solely online or deal with large transactions, it is often impractical – it’s slow and there are big security concerns. Companies that deal with small in-person transactions are more likely to accept cash, but even some of these types of businesses are starting to say no to cash. Card payments are often more convenient – they’re faster and you don’t have the problem of miscounting change. Cash also has the potential to spread germs and viruses, unlike card payments.
Of course, cash does still have its benefits. You don’t need an internet connection to accept cash payments as you do with a card, making it possible to accept cash from pretty much anywhere. There are also some people that still carry cash and prefer to use it for small payments over card – by not accepting cash, you may risk losing these customers.
If you do accept cash, you’ll need to have a means of keeping it secure, as it can be a target for thieves. Most stores have cash registers and safes. You should regularly deposit some of this cash into a bank when you can, while keeping some for change. Don’t fall into the trap of keeping huge amounts of cash at home for tax evasion purposes – if you get caught out you could face heavy penalties, plus you could lose all your money if a fire or burglary occurs.
Should you accept card payments?
Pretty much all businesses can benefit from accepting card payments. As mentioned in the drawbacks of cash, card payments are a lot more convenient for both the vendor and the customer. They’re also incredibly versatile – you can accept card payments in person, over the phone and online.
If you’re accepting card payments in person, you’ll need to buy a card reader. Nowadays there are portable card readers that you can operate using an app on your phone from any location. There are also more traditional non-portable card readers for use with POS machines – some of these can accept mobile payments on top of card payments.
If you’re accepting card payments online, you’ll need to set up a website with a secure payment gateway. Website developers and custom website builders can help you to easily set up a payment gateway. It’s important to make the payment process simple so as to not put off users while also keeping it secure.
It’s worth noting that there are two types of card payment: debit card payments and credit card payments. Not all card readers and payment gateways will accept both and you’ll usually need to set up separate accounts to accept each. Credit card payments also carry extra fees, which can sometimes make them unsuitable for small transactions. Some companies that deal exclusively with small transactions don’t accept credit cards and only accept debit cards for this reason, while others set a minimum card payment limit.
Should you accept checks?
Check payments have largely died out. In this age of online debit card payments and instant bank transfers, there’s almost no need to pay by check – check payments are slower and there’s a greater risk of them bouncing. There’s also a risk that checks could get lost or destroyed is not handled carefully.
Some people over a certain age still like to use checks, however this group of people is fading fast. In most cases, it’s best to not accept checks aside from as an emergency backup solution.
Should you offer payment plans?
Payment plans involve allowing customers to pay in installments over an extended period. When it comes to big ticket items and expensive services like vacation packages, furniture or dental bills, it can sometimes benefit customers to offer a payment plan as it can make your product or service more affordable. However, there are drawbacks.
Customers may fail to pay future installment, which could mean having to chase them up to get back the money you owe. You can reduce the risk of this happening by running credit checks on customers and putting in place late payment charges, however you may still encounter late payments.
Finance plans are an alternative to payment plans, which involves working with a third party lender that can loan the money to you. The customer then pays the lender back the loan in installments, usually only having to pay a small deposit upfront. Finance plans are more convenient for the vendor, but can be less appealing to some customers as they typically charge interest fees. This is something to bear in mind when choosing between offering payment plans and finance plans.
Should you accept foreign currencies?
If you run an online business and you’re thinking of accepting business from customers in other countries, you may be considering the idea of accepting foreign currencies. This could open up a huge market, however it does mean having to set up separate accounts for these currencies, as well as paying exchange fees to convert this money into dollars. Certain currencies may also be more volatile than others, so you should carefully consider which currencies you accept.
Online card payments are typically the easiest way to accept foreign currencies. Many website payment gateways allow you to accept select foreign currencies. You can also automatically convert pricing on your website.
Should you accept cryptocurrencies?
More people are starting to use cryptocurrencies. These are digital currencies that are decentralized and they include the likes of Bitcoin, Ethereum and Litecoin.
A few companies have begun accepting cryptocurrencies to appeal to these customers. Cryptocurrencies can be a great way of accepting payments from customers in other countries as they do not require you to pay currency exchange fees. That said, there are other fees involved when dealing with crypto, plus such currencies can be more volatile than regular currencies.
It’s worth fully researching cryptocurrency before getting involved such as understanding the difference between tokens versus coins and looking into different exchanges. This will ensure that you don’t make any expensive mistakes. There are certain online gateways that accept select cryptocurrencies – these are one of the most convenient ways to accept these payments.
Should you offer loyalty points, gift cards, coupons and other incentive payment options?
It’s possible to create your own unique forms of payment in the form of loyalty points, gift cards and coupons. These can all have their advantages and are worth looking into in certain types of business.
Loyalty points are ideal for companies that receive recurring customers. They can inspire customers to keep using your business in order to collect points, which can then be spent like real money to essentially get products or services for free. Loyalty points can be collected by setting up an online account or by using a points card. Check out this guide to starting a loyalty program for more info.
Gift cards are cards that customers can pre-load with a certain amount of money to spend in order to give to friends or family. A benefit of gift cards is that even if they don’t ever get used, you still make money the moment a customer purchases one. In fact, if a gift card is never used, you’re essentially receiving free money. Gift cards typically come in the form of physical cards, but they can also be issued digitally.
Coupons are another form of payment that you can offer to customers. These are tokens that allow discounts on certain products or services for a limited time. Coupons can help to encourage extra business, but you need to be careful of giving away too many as it could affect your profits. How you distribute coupons can have a big impact on how effective they are. Some companies give them out in exchange for something such as buying a product, completing a survey or signing up to a mailing list. Others use them to entice new customers or old customers who haven’t used your service for a while.
These are just some of the personalized payment options you can provide – there are many other creative options that you can look into such as discount cards or even in-store currency.
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