Taking credit cards is now a necessity
If cash is still king for payment, credit cards are next in line to be crowned. Many rental stores extol the virtues of credit cards — the ability to track payments, the certainty of being paid and having payment ensured by the credit card company, and the speed of payment. Others say the convenience of credit cards far outweighs the fees they pay to process them. Also, they say, customers love the option.
Credit cards are the most popular type of payment at Vermont Tent Co., South Burlington, Vt., according to Lon Finkelstein, the company’s chief financial officer.
“Everything is credit card processing. Customers can get miles and points, and that’s incentive to use credit,” Finkelstein says.
“We use a virtual service integrated into our rental software,” says Holly Maloney, CPA, chief financial officer, Canton Chair Rental, Canton, Ohio. “We are able to swipe customer credit cards on our computer keyboards. Transactions are approved via the Internet. We send a batch at the end of each day to our credit card processor and the money is deposited into our bank account within 48 hours.”
Make sure to get the credit card slip signed, though, to prevent issues later. “If you take a credit card, you have to make sure you have a signature. If you don’t have a signature, you don’t have proof of payment and it can be argued by the customers,” says Will Holditch, general manager, Marquee Rents, Austin, Texas.
For some, credit card processing fees can be prohibitive, but others say it’s just part of the cost of doing business.
“Even though you lose money from processing fees, you know it’s secure. There’s no concern over waiting for money or for a check to clear,” Finkelstein says.
“We continue to monitor credit card processing fees and we shop the services at least once a year. As for the fee itself, I think the fee for credit processing is absolutely worth it. There is a value associated with having the cash in your bank account and not as a balance in your receivable account.” says Barbara Scull, CPA, president, The Alleen Co., Cincinnati.
“The hardest part of accepting credit cards are the debit cards, because debit cards are not exactly the same as credit cards,” says Jim Cortese, finance manager, RentalMax, Wheaton, Ill.
“The biggest difference is debit cards are regulated under a different set of rules and can be different from one bank to another. Because it says Visa® or MasterCard® on the card, the customer thinks it works like a Visa or MasterCard credit card. If you buy something by debit the transaction is simple. If you rent or purchase something that requires an authorization it has a different set of rules.”
Andy Cooke, vice president, Cooke Rentals, Cornelius, N.C., agrees. “Credit cards allow you to authorize money. For a tool rental, we do an authorization. So, when they bring the equipment back, we charge the actual amount. For instance, with a floor sander, for the convenience of the customer, you want to send them off with extra sandpaper, because they might need it. So you get an authorization for $200, but when they bring it back, the entire charge might not be more than $150. I don’t want the customer to make extra trips and it kind of works in their favor. That works well on a credit card,” Cooke says.
“Debit cards are different, because instead of authorizing the money, it will freeze the actual funds. It ties up the $200 from the customer’s account and it takes a number of days to release that money, regardless if I process the actual charge tomorrow,” Cooke says. “I’ve had to go to battle over a credit card payment, but not often. It’s a better form of payment.”
Will Holditch, general manager, Marquee Rents, Austin, Texas, says if you have a corporate client, make sure you know who to deal with directly to get paid.
“If you’re dealing with a large chain hotel, is the person paying the bills at the hotel? No, they are in another state. You have to know all his or her information, cell phone number, direct line, extension number and email. You need to know who to call up the food chain on larger corporations to go to for payment,” he says.
You better shop around
Did you know you can call your credit card processing company and ask for a lower rate? Barbara Scull, CPA, president, The Alleen Co., Cincinnati, says she does and it pays off.
“We continue to monitor credit card processing fees and we shop the services at least once a year. I go back to my credit card processor and say, ‘My fees look like they have increased — what can we do about that?’ It behooves everyone to shop their processors at least annually. It is a very competitive service. You would be surprised at the rate adjustments you might get just because you asked,” Scull says.
Credit or debit?
Debit and credit cards may look the same, but they are very different in transactions, says Jim Cortese, finance manager, RentalMax, Wheaton, Ill. “The biggest difference is debit cards are regulated under a different set of rules and can be different from one bank to another,” Cortese says.
“For instance, if a customer has a Visa® or MasterCard® credit card, and the rental store authorizes $100 on the credit card, it comes off of the credit availability. The credit card company authorizes $100, the rental store may later use $50 and the remaining $50 is then put back on the card instantly or within a few days,” he says.
“However, if a customer uses a Visa or MasterCard debit card, and the rental store authorizes $100, the bank customarily takes all $100 right out of the customers account and holds it — even though the rental store does not receive the money. Then the rental store may later use $50 of the authorization, but the bank sometimes also will take this $50 from the customer’s account. The bank may not redeposit the original authorization amount until their policy determines the timing and the amount that should be deposited back into the customer’s account. The timing of the redeposit may vary from bank to bank,” he says.