Oct. 19, 2002, 6:04PM Q&A It's easy to set up credit card service The information here is intended to provide only a general understanding of small-business issues. Readers with business problems should consult appropriate professionals for advice on their particular circumstances. Q.I'm opening a retail store and want to be able to accept credit cards from my customers. What do I need to do to be able to process credit cards at my store? A. You will need to arrange for a merchant account. The merchant account provider, also called a credit card processor, is the connection between you and the banks that issue credit cards, and is responsible for making sure you get your money when a customer charges a purchase. When you make a sale and key in the credit card number or slide the customer's card through the point-of-sale terminal, a connection to your merchant account provider is triggered. The merchant account provider then contacts the bank that issued the card, and the bank checks that the card is valid and the transaction amount is available. An approval or denial is sent to your merchant account provider, the message is passed back to your terminal and a transaction receipt is printed at the point of sale. All of this is automatic and takes just seconds to complete. Then, usually at the end of the business day, you will batch all the transactions and send them to your account provider. This can be done manually, but in most cases can also be handled automatically by the point-of-sale terminal software. Your account provider submits the transactions to the appropriate credit card-issuing banks for payment. Funds are then processed through the Automated Clearing House system, a national electronic funds transfer system that processes trillions of dollars worth of credit card transactions each year. There is typically a delay of two to four days from the time the transaction occurs at your store until the money is deposited into your merchant account. There are several benefits to accepting credit cards. You will get your money faster than you would if you are paid by check. Unlike with customers using cash, you will have your customer's contact information to use for future marketing efforts. And, there is some evidence that people tend to spend more when they are using credit cards than when they are using cash or checks. You will need equipment and software to process credit card transactions. Costs vary depending on your type of business and on the types of transactions you will process, which could include not only credit cards but also debit cards and checks. The equipment can either be leased or purchased. Be aware of the variety of fees associated with credit card transactions. The applicable fees vary somewhat depending on the credit card-processing company, but the following fees are typical: · Application fee. A one-time charge to open up a new merchant account. This is often waived by companies trying to attract new business. · Discount rate. A percentage of the amount of a sale or return transaction. · Customer support fee. A special monthly fee for 24-hour customer service. · Transaction fee. Assessed for each transaction, whether it is a sale or a return, and assessed even if the transaction is declined. · Monthly minimum fee. Similar to some bank service charges, this fee applies if transactions for the month do not reach a minimum threshold. · Address verification service. A fee for a fraud-protection mechanism that verifies street numbers before shipping merchandise paid for by credit card. The online magazine Entrepreneur.com has several articles about accepting credit card payments. Go to www.entrepreneur.com and search on "merchant accounts." Jacqueline Taylor is associate region director of the University of Houston Small Business Development Center, which provides free consulting and affordable training seminars. Call the center -- a partnership of the U.S. Small Business Administration and the UH C.T. Bauer College of Business Administration -- at 713-752-8400.