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Tuesday, July 25th, 2017


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Young Entrepreneur’s Guide to Credit Cards, Part 1

As an aspiring entrepreneur, you have your sights set on pursuing your passion, competing with the best entrepreneurs in your niche, and earning enough to take care of yourself and the ones you love. But there’s a basic fact you may be overlooking: to be a great entrepreneur you must be good with finances.

At the outset, you can’t afford a financial adviser. The entrepreneur who masters finances on her own has more money to put into the business, therefore she gets more out of it. As the saying goes, you have to spend money to make money. Is that necessarily true? Well, now this thing called credit enables entrepreneurship. If you use credit correctly and run your business well, you can spend other people’s money to make money. This guide will help you understand how to do just that. Let’s start with making money through credit payments online.

E-Commerce and Credit Card Payments

E-commerce isn’t a buzzword and it’s not something only big corporations like Amazon do. The first quarter of 2017 saw e-commerce sales makeup 8.5 percent of the retail market. Given the fact that e-commerce has only been a thing since 1994, that number is huge. And that’s just the retail market; all sorts of e-commerce comes in the form of subscribing to software-as-a-service, buying white papers, and paying to access scientific research.

So, as a young entrepreneur you can either setup your e-commerce site on a hosted platform or choose the self-hosted option. One primary difference between a hosted platform and a self-hosted platform is that the latter allows for more customization. A hosted platform, however, will include built-in best practices.

One of the best practices is to accept credit card payments. This may seem like a no-brainer to you, but there are some things to understand about ecommerce credit card processing:

  • Open a merchant account: You must have a merchant account setup with a bank to accept credit card payments on your website

– If you have good credit and can pass a risk assessment, a dedicated merchant account will allow you to  set your own sales rates

– A third party account through Paypal or Square is easier to establish and works great for small businesses

  • Choose a secure payment gateway: This is the form through which the customer inputs payment

– The platform you use for your e-commerce site will help you determine which payment gateway to use

– Pick a payment gateway that has a plug-in for the platform you’re using; this will make it easier to setup

  • Know you’ll deal with a processor: The payment processor handles the transaction between your payment gateway and the banks involved, including your bank and the customer’s credit issuer
  • Know about fees: There are processor fees, interchange fees from credit card organizations, and possibly monthly service charges from your gateway service; pay close attention to fees involved and compare rates

Seems like a lot to think about, right? It’s worth it, because so many people use credit cards. Without accepting them, you won’t compete with all the other e-commerce sites.

There’s one gigantic issue with setting up an e-commerce site, accepting credit cards, and doing your best to steer customers to your business: security. Basically, you’ll be accumulating data when you’re operating an e-commerce site. The accumulation of data brings security risks with it.

You’ll need to do marketing to direct people to your site. The majority of effective web marketing involves analyzing your target audience’s data as well as that of your customers. You need a place to house these data, and it’s typically the cloud. What’s more, there’s all manner of data related to your internal operations. These data are a byproduct of e-commerce, just like the records you would create when running a brick-and-mortar operation. Since there’s not a lot of room on hard drives, a lot of your business data will end up on the cloud, which is a burgeoning business itself. Whether it’s on the cloud or on hard drives, the data is vulnerable.

Be careful—as you operate in the light on the World Wide Web, the dark web is there, with its huge contingent of hackers and bad actors. Basically, as people are making payments on your site and you’re collecting data, hackers operating on the dark web can tap in and steal data. They can also steal your internal data. They’re so sneaky, the average data breach takes over 200 days to detect. A third party discovers about 85 percent of breaches.

That’s why it’s very important to prioritize security. You can earn a great deal more money by taking credit payments, but there’s more to lose from threats such as ransomware and other types of malware. Do your best to keep all software up to date, and use a best-in-class data security solution to make sure you don’t fall prey to hackers.

In the next installment, I’ll talk about entrepreneurship, business credit cards, and personal credit cards.

Featured image courtesy of 401kcalculator.org

About daniel matthews

Daniel Matthews is a freelance writer who specializes in finance, tech, business, and current events. You can find him on Twitter.
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