The Dangers of DIY Credit Card Processing



From e-commerce shops to traditional brick-and-mortar stores, small businesses need the ability to accept credit cards to compete in the modern market. Opening a merchant account was the only way to do this in the past, but smartphone card readers and other alternative platforms are making “do it yourself” (DIY) processing more popular.

Are these third-party options always the best idea when you run a small business? Consider these four potential pitfalls before deciding on the DIY route.

Time Wasted with Inadequate Equipment

A point-of-sale system (POS) needs to meet the requirements of your business based on pricing structure, sales volume and diversity of inventory. If the POS associated with a third-party processing service lacks flexibility or requires complex inputs to manage sales, it not only takes far too long to set up and manage but also slows down transactions with customers.

Speed and efficiency are hallmarks of commerce in the technological age, and any business unable to keep up with the pace consumers expect will quickly lose sales to competitors with better equipment.

Getting Hit with High Fees

Merchant accounts have a structure of monthly and transactional fees associated with handling credit card processing, but DIY solutions take out a percentage of each sale. Major credit card companies charge additional processing fees, and the combination can exceed the amount you’d pay to open and maintain a merchant account.

You may also be asked to pay setup and equipment fees or be subject to a hefty cancellation fee if you bow out of an agreement. Before choosing any third-party processor, do the math to see how much of your company’s income would go toward payments.

Lack of Supportive Service

DIY point of sale systems are at a much higher risk for failing when you need them most. If you find yourself in an area with poor cellular coverage and no Wi-Fi access, you could be out of luck when trying to accept credit cards. Should other issues arise, it’s harder to get in touch with support representatives than with those handling merchant accounts. You’re likely to have to research and fix the problem on your own or lose sales while waiting for help to become available.

Potential Security Risks

Despite the wide use of third-party payment gateways, some people are still wary and prefer to deal only with companies using traditional merchant accounts. One reason third-party processors are perceived as less trustworthy is the increased risk of hacking. Smartphone apps in particular are susceptible to outside attacks, and merchants using outdated equipment are now held liable for losses associated with data breaches. Should security become compromised, your business could spend a great deal of money making restitution for losses.

Whether you use a merchant account or a DIY process to handle credit card payments can have a significant impact on profits, security and the customer experience. Research the processing services available for your business, and choose the most reliable and trustworthy partner to handle sensitive transactions.