Introduction
Customers can complete their purchases more quickly and easily if your small business accepts credit card payments. Although the action takes just a few seconds, credit card processing enterprises are behind the curtain enabling a complicated process.
Your company’s hardware & service requirements will also be impacted by whether you wish to accept credit card payments in person, online, or both. Here are some of the best processing options along with instructions on how to accept credit card payments.
How credit card transactions are carried out?
Every time your company takes a credit card, a series of interrelated events involving several financial institutions are triggered. The procedure looks like this:
- The consumer taps, dips, or swipes their credit card. When they buy something online, they manually input their credit card details.
- The payment processor forwards the information to the relevant card network (like Visa) once your card scanner or web-based payment gateway safely records the card details.
- While this is going on, the payment processor sends a request for details to the card’s system, which then forwards it to the card issuer (like Bank of America or Chase).
- The issuer considers the request and decides whether to authorize or reject the payment.
- You are allowed to finish the transaction if it is accepted.
- Following approval of the transaction, the payment processor directs the issuing bank to transfer monies to the relevant merchant account.
- Usually, a few business days pass before the merchant has access to those monies (minus costs).
These intricate transactions often only take just seconds to finish, but they are impossible to accomplish without the assistance of a payment processing firm or the appropriate point-of-sale gear and software. The type of business you run will determine the best options.
To accept credit card payments, what do you require?
Payment processors, point-of-sale (POS) hardware, internet payment gateways, and merchant accounts are all necessary for your business to accept credit card payments. These components are typically available from the same supplier. In many cases, they are even combined into just one service.
Personalized merchant accounts customized for your company are available from certain credit card processing firms, but the application procedure might be drawn out. Payment service providers, sometimes known as all-in-one payment processing companies, combine or pool cash from several businesses that use their offerings into a single merchant account rather than providing separate merchant accounts. The money is thereafter deposited into the bank account of each distinct business.
Although the outcome is the same, there are certain distinctions to take into account:
- If you must immediately begin taking payments: Payment service providers offer a combined merchant account rather than requiring you to apply for a separate one, which makes them easy to use, quick to set up, and often affordable for smaller enterprises. But they are more vulnerable to interruptions like terminations or holds.
- If your firm has high volume: Businesses having a high monthly sales volume will often find the method more cost-effective because obtaining a personal merchant account necessitates an application and evaluation process.
- If your firm is high-risk: Businesses that are high-risk, such as those that sell goods subject to federal regulation or have significant fraud or chargeback rates, typically open separate merchant accounts. Numerous payment service providers have conditions of service that prohibit these businesses from using their services.
How to take payments using credit cards in the store?
To take card payments, physical businesses require a POS system and a payment processor. Your point-of-sale system will typically choose the processor for you, or at the very least, assist you in reducing your options. The reason for this is that some point-of-sale systems are just compatible with their company’s internal services. Others might integrate with a few external suppliers.
Companies that sell in-person need both POS hardware & POS software, which records sales and gathers other information for your company. A reader for a credit card is among the most basic pieces of equipment used to take card payments. Customers can tap or dip their cards in some readers, while others simply let you swipe them. However, well-established stores are likely to choose a POS terminal that is countertop-based and has a built-in cash drawer, receipt printer, and card reader.
How to take payments online with a credit card?
When a consumer makes a purchase in-store, the POS terminal or physical card reader serves as the integrated payment gateway, sending the credit card details to the appropriate parties. To allow clients to safely enter their credit card details on your website, you will need an online payment gateway and a payment processor if you conduct business online.
Some businesses, like Square, provide a comprehensive solution that combines a payment gateway, tools for creating an online store, and point-of-sale software along with processing services. Some, like Stripe, are more well-known for their standalone payment gateways which you can incorporate into your already-made website.
Companies that accept card payments both in-person and online should track both kinds of sales using the same POS software and processing company. They may consolidate their data under one roof and compare stats throughout sales channels thanks to this.
How mobile credit card payment is accepted?
Companies that operate across numerous sites, such as farmer’s markets or pop-up events, may find that mobile card readers are the most effective way to collect credit card payments. Companies that offer point-of-sale systems and payment processing frequently sell their individual compact credit card readers, which you may use with a free smartphone application. Additionally, there are payment applications that enable you to take contactless payments using only your phone.
How much does accepting payments with a credit card cost?
Beyond just processing fees, there are other expenses involved in taking credit card payments. A summary of each associated cost is as follows:
- Fees associated with processing credit cards
A transaction fee will be paid by your company each time a consumer uses a credit card to make a purchase. This charge combines assessment fees (imposed by the card network), interchange fees (imposed by the issuing bank), and markups added by processing companies.
Due to the increased risk of fraud associated with online transactions, you will typically pay more for them than for physical transactions. Transaction rates are also influenced by what type of card the consumer uses. For instance, accepting certain card networks—like American Express—can be more costly than accepting others, such as Visa.
Prices vary according to the structure of credit card processing fees. Flat-rate & interchange-plus are the two main ones.
Flat rate: These fees, which vary depending on the card network, are composed of a predetermined amount plus a portion of the transaction value (for example, 2.9% + 15 cents). They include interchange fees. Their consistency makes them easy to comprehend; often, there is a single set rate for online transactions, another for manually entered payments, and one for in-person purchases.
Interchange-plus: Along with a fixed markup, these pricing models also contain an interchange rate that differs depending on the credit card network. The fees are clear since you know the exact amount that goes to the payment processor against the credit card network.
The structure, however, may additionally make it difficult to forecast the expenses of processing your payments because interchange fees differ depending on the type of card. Having said that, your company benefits when clients use cards with cheaper interchange fees.
Not every business will find the same credit card processing firms to be the most affordable. Your company’s monthly revenue volume, the kind of credit cards your clients use, and whether you prefer to accept credit card payments in person or online will all play a role. Make sure you comprehend the charge schedule and any other related expenses, including setup or termination fees for early departure, and PCI compliance.
- Monthly expenses for POS software
If you require software with features specific to your industry, such as recipe costing or various sophisticated features, you should budget extra each month (for example, $69 to $199 and more). Free point-of-sale (POS) systems do exist, though, and they usually provide basic features like employee management tools, reporting, and invoicing.
If a free software package isn’t enough, you could potentially be able to save money by paying a yearly subscription fee; however, you need to make sure you enjoy the platform before committing to a one-year subscription.
- Costs for POS hardware
Although some businesses provide flexible payment plans that don’t demand a down payment, you will most likely need to shell out for hardware upfront. A basic credit card reader that links to a smartphone or tablet can be purchased for free, while a countertop point-of-sale system that includes a screen, receipt printer, and cash drawer can cost up to $700.
Benefits and drawbacks of taking payments with credit cards
With so many customers no longer carrying cash, most businesses find that the advantages of taking credit card payments exceed the drawbacks. But it’s also a good idea to be mindful of the difficulties associated with processing credit cards.
Pros
- Bigger customer base: Taking credit card payments increases your chances of attracting customers. Businesses that only accept cash run the risk of losing clients who otherwise would have made an expenditure but only had cards on hand, even though they save money on processing fees. In most cases, paying the processing fees for a sale is preferable to not closing the deal.
- Faster checkout experience: If consumers can just swipe their credit card at the terminal, get their receipt, and move to create a place for the subsequent individual in line, lines usually move more rapidly. Even though taking cash is not the most time-consuming procedure, if you have long wait times, the additional effort can add up.
- Safety: Since they can’t be held accountable for unlawful credit card transactions, consumers can feel more secure using credit than cash. Small firms are also safer when they don’t have a lot of cash on hand.
Cons
- Expenses: This is the main disadvantage of taking credit card payments. Processing fees, chargeback fees, and PCI compliance fees vary by processor and are examples of associated charges.
- Account freezes: Your business account may be stopped if there are sufficient customer disputes or if your processor detects credit card fraud. This might keep you from taking payments by card for weeks at a time. In the event that this occurs, be sure to get in touch with your payment processor, turn over any required paperwork right away, and take precautions to reduce your risk.
- Disruptions to the Internet: While you can accept cash without an Internet connection, credit card payments may require one. Verify that a point-of-sale system has a mode for offline operation before subscribing to it. This will allow you to continue operating your business in the event that the internet goes down.
Solutions that are widely used to accept credit card payments
- Square: Square is a renowned provider of payment services that handles card processing through its own hardware and point-of-sale system. Square does not collect setup fees, chargeback fees, or need a long-term contract. Both premium and free versions of its restaurant & retail-specific point-of-sale systems are available.
- Stripe: Although Stripe accepts in-person payments as well, its primary concentration is on payments via the Internet with a focus on customization. Without a business account, you can accept payments by credit card using its platform. There are no monthly fees with Stripe, however each chargeback costs $15.
- Helcim: Helcim is a good option if you wish to take credit and debit cards but don’t require any further services. The business does not require a contract, does not impose a monthly fee, and accepts both online and in-person payments. Interchange-plus billing is used by Helcim, and cost reductions are available to businesses with monthly card volume exceeding $50,000. For companies with large sales volumes, its price structure works best.
- Chase payment solutions: Take Chase into consideration for both your business checking and payment processing if you choose to employ a single provider for several services. You can receive your money the same day, and the prices are reasonable.
