Credit Card Processing

An excerpt from an old forum post:

Most B&B’s have made the move or are contemplating making the move to accepting credit cards as payment. There are many positives to doing this including more reservations, not waiting for deposit checks to arrive, having security against damages, no bounced checks…

So once you make up your mind to accept credit cards, you will need to find a processing company. There are tons out there and they all seem to have slightly different rates and fees. Since most B&B charges tend to be higher dollar and not a lot of small transactions, it is generally better to go with one that has a smaller percentage charge and perhaps a larger per-transaction fee.

However, there are two other issues to consider that are specific to Bed and Breakfasts and Inns.

1) Many credit cards are processed without having the card present since they call in or reserve by the internet. Typing in the credit card info (as opposed to swiping the card) often brings with it a higher fee as there is more risk that the charge is fraudulent since the card is not present. Most credit card processing companies will charge a lower fees if you ask them to upgrade you to more secure processing of non present cards. What this means is that instead of just punching in the card number, expiration date and amount, the machine will also ask you for the V-code from the back of the card, the zip code of the cardholder, and the street number of the card holder. Sure its a little more typing, but it does give you piece of mind that you didn’t accidentally type in the wrong card number and charge someone else. Punching in this extra information though does translate (with most processing companies) into lower fees, which saves you money.

2) The other thing to look into is how do they charge the fees and process refunds? Some processing companies only charge their percentage based on a monthly or weekly total of the incoming charges. Others charge the percentages at every single transaction. If they charge it at every single transaction, this means if you issue a refund to someone for a cancellation, they get all their money back, but you lose the % that was charged to you when you first took the deposit on their card. For us that translates to somewhere around $5 for every cancellation. If the company charges the fees based on the total transactions for the month or week, then you don’t lose money when you give refunds, as long as you took in some other money that month or week.

These two issues if addressed as you are choosing a credit card processing company can help you save a sizable amount of money over the years. It is worth asking the question. Most credit card companies have websites but I have yet to find one that actually describes how they handle these two issues. You have to ask a person…and lots of times, the first person you ask doesn’t know and they have to check with someone else in the company. Its a pain, but it is worth getting the answer.

4 thoughts on “Credit Card Processing”

  1. Great pointers, Steve!
    Another issue to watch and understand is chargebacks. Some companies (maybe all?) also charge a fee on chargebacks. So you not only paid the fee when initially charging the guest/customer, but also when they take the money back — add that to the loss of income and you’ve been hit pretty badly.
    Shop carefully for your credit card company because there are so many ways for them to “earn” money from you. You want a team member, not a serial pick-pocket.

  2. Kit wrote:
    …also charge a fee on chargebacks.

    This is true. We have never had a problem with chargebacks and going to the higher level of security where you have to enter v-code, zip, and address, makes it easier to challenge a chargeback should you have one. If you have your refund/cancellation/deposit policy clearly written out in either e-mail or on your website (preferably both) you are usually safe from most chargebacks.

  3. Greg has a good point about innkeepers not being required to have their own credit card processing equipment anymore. In addition to the site Greg suggests I’d like to point out that PayPal, Amazon and Google all have interesting payment options. Think outside the box. Take a look at lots of options, and consider offering several payment approaches for your guests.

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