Accepting credit cards at your business -- whether you have a physical location or operate solely online -- has been a proven way to attract and retain more customers. This is due, in part, to the fact that many people like to have the option of using their credit cards as payment.

I've been in the payments world for years now. Accepting billions of dollars in payments for all of our customers. I've learned a few things over the years that most business owners don't realize.

While there is a significant amount of information about accepting credit cards, this article provides an overview of the various areas that you need to consider when adding this payment method to your business.

Merchant Services versus Credit Card Processing

You may hear these terms and wonder what's the difference between them and what they mean to you as a business owner. Merchant services are the entire process of dealing with payments while credit card processing is just one component of that. For example, merchant services can also allow you to accept other kinds of payments, such as debit cards, international payments, ACH/eChecks, mobile payments, digital wallet payments and more.

Your merchant services account also provides you with the payment gateway and terminal or POS systems (if you plan to do card present transactions). They can also give you the software for online and mobile payments as well as security and compliance tools.

Understanding How Credit Card Processing Fees Work

There can be a long list of fees associated with credit card processing, depending on what company you work with to handle these transactions. Some fees are necessary while others can be negotiated down to a lower price or completely eliminated.

Some examples of possible credit card processing fees include an annual, or startup, fee, which could be only charged the first year or continual as part of an annual maintenance of your merchant account. There are statement fees for viewing paper or online versions of your monthly merchant account statements. When closing an account, some companies will charge you a termination fee, especially if you signed a contract with them and are now trying to get out of it.

A transaction fee is a minimum fee that is charged for each transaction. This typically varies, depending on the dollar amount and volume of transactions your business does in terms of credit card payments. The lower your credit card processing volume, the higher the transaction fees.

Often confused with a transaction fee, the discount rate fee involves a percentage of each credit card transaction and is based on the type of card your business accepts for payment. Since there are different types of credit cards, you will need to familiarize yourself with these and understand the various costs involved in accepting each one.

If you plan on credit card processing in person, then you will need equipment that you either purchase or lease from your payment processing partner. This will also incur fees and charges. However, if you are only going to do online payments, this cost is not part of the equation for your business.

One of the biggest issues for businesses today is chargeback fees, which are being linked more to what's termed "friendly fraud" with consumers trying to get out of paying for merchandise or services they have received. Chargeback fees are associated with any dispute that a consumer will open with their credit card company related to a charge on their statement that they are questioning. This fee can quickly become very expensive and also lead to lost revenue from the returned product or refunded service.

Credit Card Processing Equipment

As previously noted, not every business needs equipment to process credit cards. If you are running a regular storefront, you will most likely need Point-of-Sale equipment like a credit card terminal. However, if you are operating a food truck or kiosk, you most likely just need a mobile card reader for the tablet or smartphone you can then use to process credit cards. An online business doesn't necessarily need any equipment but instead will pay a gateway fee and establish a shopping card system.

A Risky Business and Environment

The word "risk" is commonly used in the credit card industry. That's because you might be considered a risky business to partner with in terms of the industry you work in, which may have a higher level of chargebacks or other types of fraud. Some examples include online gaming, auctions, international merchandise, online pharmaceutical sales, etc. Additionally, a credit card processing company will look at how long you have been in business and even your own credit score to determine the level of risk involved in providing you with credit card services. This will often dictate the cost of that credit card processing for you.

The other aspect of risk related to credit card processing is the increased numbers of data breaches from hacking, phishing, and other schemes where criminals have exploited vulnerabilities in the technology used to process credit cards. Therefore, risk management and security tools become the most important aspects of your overall payment acceptance strategy.

How to Select a Credit Card Processing Partner

Not everything is about getting the lowest price possible. There are some specific criteria that you want to look for in a credit card processing partner to ensure you can offer the best user experience for your customers. That means your credit card processing partner must deliver security, compliance, education, value-added tools and features, service, and support.

When you are dealing with other people's sensitive information, you want to make sure you can keep it secure from data breaches and not put your business at risk. Plus, with increasing compliance regulations, you need a credit card processor that can ensure you stay updated in this area or you will again be hurting your business. A reliable credit card processing system is also critical, especially if you are offering online payments and your customers want to be able to shop at any time of the day or night.

Lastly, your credit card processing partner needs to understand the unique nature of your business. If you are in an industry that is more prone to fraud, it's important to work with a company that is willing to accommodate those issues and provides you with a risk management plan.