If you're a new merchant of either the online or brick-and-mortar variety, you will most likely want to configure your business to accept credit cards. By accepting credit cards, you can make your goods and services available to a wider customer base, as well as significantly increase your sales. However, credit cards represent a greater risk than cash, as they carry the possibility of fraud. Unauthorized credit card purchases can result in chargebacks, which are fees the merchant must cover in cases where the actual cardholder did not make or authorize a purchase. In order to start accepting credit cards, you need to follow a few preliminary steps intended to protect both the customer and the merchant from credit card fraud.

The first thing you'll need to do is open a merchant account. A merchant account is a bank account connected to your business, and you can open one at most banks. All financial transactions related to your business are conducted through the merchant account, providing a valid record of all credit card activity. In order to be approved for a merchant account, the bank must first verify your identity, business history, credit rating, and prior business affiliations. You must also provide accurate contact info, including the physical location of your business. Virtual merchants, who only conduct business over the Internet, are still required to provide a physical base of operations. This prevents merchants from operating invisibly and anonymously, which helps to secure against possible fraud.

How to Accept Credit Cards

Once your merchant account has been approved, you will need to purchase a credit card terminal. A terminal is usually a small device equipped with a magnetic strip reader, manual keypad, receipt printer, and small screen. It is used to receive credit card information and transmit it to the card provider, in order to verify the card's authenticity and integrity. If a card has been reported as lost or stolen, the terminal will be instructed to deny the card, as it is most likely being used by an unauthorized party. The terminal is also notified if the card has exceeded its limit, in which case it prevents the sale. Online merchants can install a virtual terminal on their server. In conjunction with secure shopping cart software installed in an online store, virtual terminals can receive and secure credit card payment information that customers transmit to the site via an encrypted connection. Virtual terminals fulfill the same functions as their traditional counterparts, but have no need of the strip reader, manual entry keypad, or receipt printer, as there is never any physical interaction with the customer.

In addition to the measures used by merchant account providers and credit card companies, fraud prevention can also be implemented by merchants. Merchants can enforce address and identity verification, as well several online counter-fraud measures. One such approach involves following up with customers after a purchase, but before the purchased merchandise has been shipped. Cyber thieves may ignore merchant follow-ups, hoping to keep interaction to a minimum for fear of being found out. Over a third of online merchants have cited customer follow-ups as being effective in the reduction of online fraud.