The right to accept credit cards

US amendment 28 guarantees businesses the right to accept credit cards, or not so much…

Plastic cards have become the normal way for businesses to accept payments. Electronic transactions passed up cash and paper checks a few years ago, and are now so integrated into our lifestyles that carrying cash is far less common than several plastic cards. With this complacency to the idea of credit cards, many have become equally complacent on how much of a privilege it is to be able to take your customers card.

Let’s quickly break down what is really happening when your customer hands you their card for a purchase.

Your customer – To start off with, your customer is granting you an enormous amount of trust that you will charge them the correct amount for their purchase, and that the product you sold them isn’t a complete piece of crap. Let’s face it, in reality you could just type in a number much higher than the actual cost, and they may not notice for several weeks. If it’s a debit card, the money’s completely gone from their checking account! With every transaction, your customer is basically giving you the key to their bank account, telling you to take the money yourself. How often do you hand your wallet of cash to a cashier, and just tell them to get it themselves?

Your processor (or acquirer) – Next, let’s look at the service your merchant account provider is actually providing you. Yes, they magically move the money from your customer to your bank account. However, that’s the least significant role that they play when you process a credit card. What a processor is really doing is granting your business instant credit, every time your customer makes a purchase from you. Let me word this in another way: when you accept a payment, your processor is depositing the money into your bank account on 100% credit. In 99% of cases, the processor has no collateral against the money they are giving you. Your processor may not see any revenue from your processing for 2 months, and they’re not collecting a dollar of interest on that money while they wait! Would your bank allow you to walk in every day and give you cash for your invoices only on your word that you’ll pay them in a few weeks or so, without asking for interest… Probably not.

If you take into consideration that there are millions of businesses in the US, and that some large businesses accept millions of dollars in credit cards a month, it is truly remarkable how much credit is continuously issued. Sure, there’s sometimes errors but fact that billions of dollars of credit is available at any time, without further qualification, without any input from a bank, and considering how smoothly the entire system works, it is simple amazing.

In the age of today, it’s easy to overlook the amount of trust that merchants receive when they do something as simple as swipe a card through their terminal. In addition, many interchange regulation activists skew the actual role of how processors fit into the merchant account industry, and where the fees that you pay each month actually go. Next time your business accepts a card, just remember the amount of trust that you are given for that money to end up in your bank account. It’s far more remarkable than just some electronic transfer between your customer’s bank and you.