Accepting Credit & Debit cards

[AZ-Tax]

Here I am again this year considering accepting Credit & Debit cards. I would like to hear from you Tax Pros on who you are using and what their fees are?

[DTS]

Thoughts of changing

I would like to hear about this, as well.

I have about 25 clients do credit card payments per year. I've been doing this through QB and I've been pretty happy until yesterday, when I opened my business account statement to find an add'l $35 yearly charge for something akin to "privacy maintenance" or some mumbo-jumbo and the long, involved process of registering (since I inquired about the fee!). I was just extremely irritated with the whole time-consuming mess when I got off the phone.

There has to be an easier, cheaper way to do this for our small offices.

D

[Koss]

Credit Cards

Our practice is small, and the number of clients who choose to pay with a card is very, very small. We have used two different processes, with varying results. We have never had any serious problems. Both options have no monthly fees, but relatively high rates per transaction. And that works well when the volume of transactions is very low.

PayPal allows you to send the client an invoice by e-mail. The client does not need to have a PayPal account. They click on a link in the e-mail, and it takes them to a PayPal web page. The amount is designated in the invoice and on this page. They enter their card number and other relevant data, and click submit. And it's done.

You get an e-mail from PayPal notifying you of the payment. Then you log into PayPal and transfer the funds from PayPal to your checking account by direct deposit. It takes a few days to get the money into your account. But you are notified immediately after the client makes the payment, and you know the funds are good.

Downside: If the client is a dinosaur (no computer, no internet) this won't work well, and may not work at all. The client has to at least have a functional e-mail address. I've had one or two clients where I issued the invoice while they were at my desk, and then allowed them to use my PC to log into their e-mail account (Yahoo!, Gmail, etc.), click the link, and make the payment right then and there.

For this option, it is important that you have a PayPal business account. A personal account cannot be used to bill for professional services. You have to understand and follow the PayPal terms and conditions, or they'll shut down the account.

The PayPal rate is 2.9%.

Square is a completely different business model. Square is a small credit card reader that plugs into an Android phone, an iPhone, an Android tablet, or an iPad. Payments can only be made using the phone or the tablet. Square is an application that you install on the device.

You cannot process payments on a computer. You can access the account on a PC, but payments can only be made on the phone or tablet.

The card reader is free, and you can have multiple phones associated with a single account. Like PayPal, it takes a couple days to get the money. Unlike PayPal, the funds are transferred to your bank account automatically after each payment. You don't have to log in and do that.

With Square, you can take payments verbally on a telephone call with the client. If the client is present in your office with the card, then you swipe it. But you also have the option of getting the data verbally, and manually entering the information into the Square application on the phone or tablet.

For card swipe transactions, the fee is 2.75%.

For manual entry transactions, the fee is 3.5% + 15 cents.

And just in case this isn't clear: With Square, you perform transactions by using an application that is installed on your Android or Apple device (not a device that belongs to the client).

For both processes, there are no setup fees, no monthly fees, and no contract term, i.e., you can cancel the service at any time.

BMK

[DTS]

Thank you, Burton

Many of my clients have PayPal accounts and this is something I'll look into now. My fees always seemed reasonable and never seemed to matter much, until yesterday.

[JohnH]

If you aren't getting ANY complaints about your fees, you probably should raise them.

[DTS]

If you aren't getting ANY complaints about your fees, you probably should raise them.

My fees, or Intuit's?

[JohnH]

Intuit got the message a long time ago...

[Koss]

Clarification

PayPal offers merchant accounts, and e-commerce services, but that's not what I'm talking about. Those services have monthly fees associated with them. With those services, you can take payments over the phone and manually enter the data, and there are other options as well.

What we have used is a PayPal Standard Business Account, which has no monthly fee. It works a lot like a personal PayPal account, but you are allowed to use it to bill for professional services. It is not a true merchant account.

I looked at PayPal's website, and it appears that this type of account now also offers the option of swiping the card on a phone or tablet.

Check this out:

https://www.paypal.com/webapps/mpp/compare-business-products

BMK

[oceanlovin'ea]

Square

I started using Square this year. I LOVE it. I had to get an iPhone to do it and have a data plan which cost me $30 a month. But I was able to access my email when I was gone and not take my laptop so I think it is worth having.

I probably used it less than 10 times during tax season but it is so convenient. Like Burton said 2.75% per transaction. I probably won't use it all summer till season starts again.

Be sure to go on www.squareup.com to get your reader. It is free from them. I think some places charge you for it. But the company gives it to you free.

Linda, EA

[Koss]

Square

And I have to give credit where credit is due...

I made the decision to investigate Square after Linda's post earlier this year:

http://www.thetaxbook.com/forums/showthread.php?t=19190

BMK

[Lion]

My kids who opened a bakery this year are using PayAnywhere to accept credit cards:

http://payanywhere.com/

2.69%

I have a free card reader from Intuit on my iPhone but get special rates on all their merchant services as a ProAdvisor.

[S T]

While PayPal and Credit Cards are a "Convenience" for us as Vendors and possibly collecting our fees in a more timely manner, I have always understood that we can not pass the % Fees (based on amount) and then another separate Transaction Fees charged by the "CC Processing" on to the client.

Question for those that are using these services, are you just absorbing the fees as a cost of doing business, and not charging a separate fee to the client. Is there a "workaround" for the added cost for the ability of the Client using PayPal or CC?

I see in some of my Retail Accounting Clients - some of the "Merchant Fees" are quite large for this convenience - and I won't go into the other issue that if the client decides to dispute the charge and it is reversed/disputed, and the time and effort involved to rectify, if that is even possible - CC companies will always take the side of the Consumer - not the Vendor.

Thoughts and experiences

Sandy

[Koss]

Passing on the Cost

My office doesn't do it. The number of clients who pay with a card is so small that it has almost no impact. We simply absorb it.

With that being said...

It is not illegal to charge an additional fee on a credit card transaction, especially if the amount of the additional fee is reasonable, and bears a legitimate mathematical relationship to the additional expense incurred.

And for most small businesses, I do not believe that it is a violation of the terms of service of PayPal, or Square, or GoPayments, or most other similar services.

If you have a genuine merchant account, where your financial institution has you wired directly into the MasterCard/Visa system, and you get the funds the same day, then you may have a contractual agreement with MasterCard and Visa that has some additional baggage. It could be buried in the fine print.

If you are full-blown retail operation, where you accept debit card transactions, and potentially offer cash back at the point of sale, then you definitely have some pretty heavy duty baggage in your agreement. A couple years ago, Wal-Mart announced that it was going to start charging customers a fee for certain Visa debit card transactions, and the result was some pretty heavy duty litigation, with multiple parties, including, I think, a federal government agency.

Yes. You do have to be careful. It can get really complicated really fast. In full blown commercial accounts, it is common knowledge that American Express charges higher fees than MC/Visa for small merchants with low volume. But the agreement strictly forbids charging AmEx customers more than MC/Visa customers. This restriction is in the agreement between the merchant and AmEx. You can charge more for all credit card transactions, but you can't discriminate against AmEx cardholders.

Bottom line: For most small businesses, it is totally legal, and permissible under the terms of service, to add a card processing fee, as long as you do it in a manner that is fair and consistent.

The IRS does it.

No, really. They do. Tax payments on cards go through a vendor that adds a convenience fee.

And so does the county treasurer here in Franklin County, Ohio, for property tax payments.

BMK

[Lion]

I have a small number of pricey clients that want to charge their prep fees. I feel like my prep fees are such that I absorb the CC fees. Even if one of my less expensive returns charges, that small percentage to Intuit is just a very small part of my overhead.

I have heard from companies that accept cards that you can charge set fees to everyone, but offer a discount for cash. As opposed to charging more to accept a credit card. Definitely read your fine print.

I want to make it as easy and as painless as possible for my clients to pay me. If they feel better about my high fees when they get airline miles or whatever their CC offers, that helps them feel better about my fees. When I accept cards, the payment happens seamlessly from my desk. I'm out in the boonies, so when I take a check it means time and gasoline before that check is in my account. (Yes, I'm going to look into Intuit for taking checks, as well as the larger banks that do so, from iPhones or whatever. But, my business checking account has NO fees, so I'll probably stick with my friendly, local state bank for my biz checking.)

I end up with only a couple PayPal payments each year, and my favorite NY/CT-ATP educational dinners accept/encourage PayPal payments. So, I never transfer from PayPal to my bank account -- the part that would cost me the most money -- but leave any payments I receive in PayPal to pay my own bills when booking CEUs. If you do much purchasing online, that system might work for you also.

[oceanlovin'ea]

Most of the time I really didn't know until after I had finished the return and printed their receipt and said you owe me $XX.XX. Then they say "oh,no. I forgot my checkbook..thought it was in my car/purse, etc. I don't have that much cash on me. I can bring you back a check." Then I say well I can take your credit card this year. They say oh, that's great and pull out their card.
So I can't really add a fee since I have already told them how much it is. But really it is an insignificant amount for the few that I did. So I am not worried about it. IF it came to the point that a lot of clients wanted to pay with CC, I probably just incorporate that in raising fees across the board.

Linda, EA