At Abode, a two-year-old modern home furnishings retailer on Westminster Street in Providence, the importance of accepting credit cards as a means of purchase is well-understood. More than 90 percent of sales made at the store are through Visa and MasterCard, said co-owner Dann Cady.
It is about “making it as easy as possible for people to make a purchase,” he said.
Beyond Cash Donations: How New Forms of Giving Are Transforming Not-for-Profit Accounting
Evolving Funding Landscape for Not-for-Profits Not-for-profit organizations are being asked to do more with less,…
Learn More
Abode uses the QuickBooks POS merchant service software that is ideal for the store to verify electronic purchases and keep accurate sales and inventory numbers, said Cady.
Laura Hirsch, co-owner of Relish, a gift shop on Broadway in Providence, said that in the nine months since she opened her store, she noticed not as many people carry cash. She wanted to make sure her store had the capabilities to accept electronic payments, she said.
Since the end of November, Relish has used Merchant Services Inc. (MSI) for about 75 percent of the store’s total sales that are made via credit or debit card.
These up-and-coming companies are following the national trend for purchases that is going away from cash and more toward electronic payment options. Point-of-sale (POS) spending with credit and debit cards reached nearly $2.2 trillion in 2004, according to the Nilson Report released in July.
Paul DeRoche, executive director of the Rhode Island Retail Federation, said electronic payments are consistently growing and are important for a retailer’s peace of mind.
“(Electronic payments) give the security to know (a retailer) achieved the goal of payment,” said DeRoche, who works on behalf of 18 of the major retail chains in the state.
Jon Hurst, president of the Retailers Association of Massachusetts, said a retailer must first determine the number of transactions in the store and then figure out the average sale among those purchases. The higher the average sale, the better rate a company will get from a processing company, he said.
A company must also, “take a close look at the entire package a processing company is offering,” noting that some processors’ “rates look good,” but there are additional fees that range from statement, postage and paper fees to an annual fee for the service, he said. A retailer may also have to purchase equipment and software from the processor.
One factor that determines the rate a retailer will pay is the way a card is processed: either swiped or entered manually. It costs more to process a card manually, being of extra work and the chance for human error when entering a card number, said Hurst. Most machines are equipped to handle either form.
A retailer should get a “bid that shows every potential cost a processor can pass on,” said Hurst.
He said it is a good idea for a retailer to look into group buying when securing a credit card processing company. This will allow a group of companies to negotiate a lower rate that would not necessarily be available to a sole retailer.
A survey of nearly 13,000 randomly selected respondents in an October through December 2004 survey revealed that 85 percent used their ATM/debit card in the last 30 days, according to Star Systems, an expert in electronic transactions. Consumers estimated they spend 32 percent more than with cash and 24 percent more than a check when they use a debit or credit card for purchases.
The survey reported that customers in the New England and Southeast regions use credit cards the most, an average of nearly eight times per month. Credit cards are most used in specialty retail locations, grocery stores and gas stations, the survey reported.
First Data, a processor of electronic transactions, works with more than 4.1 million merchants, according to Jeff Fowler, spokesperson for the merchant services department.
Consumers are demanding more options at the point-of-sale, he said. First Data can authorize credit and debit cards, checks and gift cards, he said.
“Electronic payments are continuing to grow,” said Fowler.
Jim DeRentis, co-owner of Abode, is also the executive vice president of retail, banking and marketing for Bank Rhode Island. He said it has to be easy for a small business to choose a card processor.
He said the bank provides a specialist to work with new business owners in determining the electronic payment option that is best for the business.
