As a small business owner, you’ve probably thought about acceptable payment options. In a world where people are increasingly tapping to pay, has your business started accepting these types of payments?
There are some things to consider when deciding how to handle credit card and digital payments. You want to make sure your business insurance coverage protects you from potential fraud liability. You also need to decide if you’ll charge people more when they want to use digital forms of payment.
Insurance for Payment Fraud
You might have thought business insurance would protect you from liability and your company equipment, but did you realize you could get coverage to protect your electronic payments?
Electronic payment options carry risks, including the potential for fraud, security breaches, and chargebacks. Having a small payment issue here and there probably won’t put your business at risk, but a security breach or a chargeback on a huge purchase could seriously hurt your bottom line. As you know, profitability is essential to staying in business.
Cyber liability insurance will protect you from the financial repercussions of data breaches. Chargeback insurance can be added to your business insurance policy to protect you from losses related to chargebacks.
When it comes to car insurance, additional protections, like comprehensive and collision coverage, help ensure adequate protection. Business insurance works similarly, and you need to consider coverage options beyond the basics.
Also, it’s important to note that some payment option platforms offer chargeback protection. Your standard credit card companies do not, but Shopify and PayPal do. So, if you’re operating online, these are options to compare with chargeback insurance.
Types of Payment to Consider
Cash and checks are basic forms of payment. Even though younger generations tend not to shop with cash and checks, older generations depend on it. If you don’t offer cash and check options, you could lose business.
At the same time, if you only allow payments with cash or check, you’re likely to lose business because many shoppers don’t carry cash, and fewer and fewer people write checks.
Credit cards and digital forms of payment can cost you money, but they’ll also help bring you business.
Ideally, you’d accept all forms of payment, but in reality, you may need to decide which makes the most sense for your situation.
Costs of Payment Options
To accept credit card payments, you have to use a credit card reader. The companies that offer these readers charge you to use them. Some companies, especially large businesses, choose to absorb those costs to avoid deterring customer business.
Smaller companies often opt for a 3% surcharge on credit card payments. While some customers accept that surcharge, others refuse to do business. Even those who pay without complaint may decide not to frequent your establishment in the future because they’re annoyed about the payment surcharge.
Platforms like PayPal or Shopify are clever tools, but they also incur costs. Shopify, for example, will charge up to 3% of the transaction to use their platform, plus a small per-payment fee.
With the pros and cons involved in accepting many forms of payment, you have to decide if the benefits are worth the costs. But no matter what, make sure you have the insurance coverage you need so that digital payment methods don’t result in losses that far exceed the 3% usage fees.
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