Accepting credit and debit card payments will allow you to facilitate the movement of money to and from your business. Many customers out there don’t carry cash with them, so allowing them to pay with their credit card can increase your cash flow, boost sales, legitimize your business in the customers’ eyes, and improve the invaluable customer experience. It will make cash flow management a lot less stressful and eliminate all the delays from waiting for check payments.
Regardless of how new or small, your business is, being able to accept credit cards is a must. According to a Deloitte research, credit card payments made up almost $4 trillion in payment volume in the United States in 2018. Credit card transactions continue to increase, and if the demand for digital and/or contactless payments also rises, the trend will continue.
If your business is not accepting credit card payments, you need to know that it’s never been easier to make it happen.
What Businesses Can Accept Credit Card Payments?
Almost any type of business can accept credit card payments these days. You should consider utilizing a credit card processing system if you:
- Run a brick-and-mortar business or a business that operates completely online
- Are a sole proprietor with no employees
- Have a traditional business with employees
- Have a mobile business
- Are a freelancer or an independent contractor
In any of these scenarios where accepting credit card payments will make it easier for your customers to pay, having a credit card processing system in place could work in your favor.
How to Accept Credit Card Payments
If you have decided to accept credit card payments for your business, there are several steps that you will need to follow.
- Decide how and when to accept credit card payments
Determining how and when to accept credit card payments is the first step in the process. You can take credit card payments in-person, online, or by using credit card readers. Which one you should go with depends on the type of business you run. For example, if you own a mobile business, the best option is to use mobile credit card readers. On the other hand, if you run a brick-and-mortar store, you could accept credit card payments in-person (at checkout) and online (if you also sell goods via an eCommerce store).
- Choose the right payment processing system
There are two ways to start accepting credit card payments – payment service providers or merchant accounts. This type of payment process involves more than just taking a card and swiping it – the card and account details must be processed and reviewed electronically so the payment can be authorized. It is a digital process that takes a few seconds, and you need a payment process to make everything work.
- Merchant account
A merchant account is a business bank account with a merchant acquiring bank, which acts as an intermediary between the credit card company and business. Businesses use these merchant accounts so they can accept credit or debit cards and other electronic payments. The merchant acquiring bank facilitates the authentication of the payment. Once electronic payment is processed and approved, the bank sends funds into your merchant account.
First, you need to choose the credit card companies you want to work with. That depends on what countries you do business in and the type of business you’re running, but the primary banks you will most likely want to accept are MasterCard and Visa. After that, you should find a merchant acquiring bank to open your merchant account with. You will be required to submit information about your business activities, tax returns, banking information, and payment model.
The drawbacks of setting up merchant accounts to accept credit card payments are a high-risk factor and a time-consuming process. Merchant accounts are vulnerable to fraud, and it’s often impossible to identify if the credit card transaction is valid or not. The risk can be decreased by being aware of all the activities routed through your merchant account. Also, it takes more time to get your company approved for this account because of the fraudulent activities that are common with these services. The merchant account provider needs to investigate the genuineness of your company in detail as a precautionary measure.
If this process is too time-consuming for you, you can opt for using a payment service provider.
- Payment service provider
Payment service providers are companies that enable you to accept credit card payments without having to set up a merchant account. Your monthly fees will depend on the type of pricing model you choose, and they typically include an interchange rate fee, statement fee, and monthly minimum fees, as well as potential occasional credit card processing fees.
It’s a lot easier to get started with a payment service provider, and you won’t be locked into long-term contracts because the billing is month-to-month. A payment service provider may also charge lower transaction and credit card processing fees, so it may be the right solution if you have relatively small credit payment volumes or a newer business.
Low-volume merchants (business owners) using a credit card processor on a pay-as-you-go basis and have flat rates will find it more cost-effective than working with a credit card processor that charges multiple account maintenance fees (even if their transaction rates are lower).
- Use an eCommerce Platform
If you operate an online business, then you can only resort to accepting credit card payments online. One of your options is to set up an account on an eCommerce platform like eBay, Shopify, or Etsy. These platforms accept all major credit cards and have a built-in payment processor. Another option is to build your own eCommerce site from scratch, find and hire the right payment processing partner, and activate your payments. To set the system up, you will need banking information and EIN (Employee Identification Number).
- Setting up credit card payment hardware and software
After deciding on a credit card payment processing method, you may need to update your hardware and point of sale (POS) software to accept credit card payments. For example, if you run a physical retail business, you may need to install a credit card reader that’s EMV chip-enabled or buy checkout software to accept card payments. To accept online credit card payments, you’ll need to set up a payment gateway (which may be included with your payment service provider or merchant account plan.
Once you get the whole system set up, it is easy to manage and oversee it.
Credit Card Payment Processing Fees
Accepting credit card payments throughout a payment service provider or merchant account doesn’t come free because both charge fees for the service. Therefore, you should consider how the transaction fees factor into your operating costs. If these fees are going to take a significant portion of your profits, you could compensate by increasing your product/service prices or add on a convenience fee or surcharge for processing credit card transactions below a specified dollar amount.
Be sure to avoid illegal practices by studying the state and federal regulations on credit card surcharges.
Which is the Right Choice for My Business?
Different payment systems come with their own set of advantages and disadvantages. Merchant accounts could end up costing you less in the long-term but are more time-consuming to set up and exposed to a higher risk of fraud. On the other hand, payment services providers are easier to set up and launch but might come with somewhat higher fees. To determine which one of these options is right for you, you should ask yourself:
- What kind of features do I need?
- What kind of transaction volume will my business have every month?
- What level of customer support will I get?
- How much will I pay in fees?
Regardless of which type of credit card processor you decide to work with, you should avoid getting locked into long-term contracts if you are not sure about the future of your business. Some credit card processors don’t charge early-termination fees and offer month-to-month terms. Most processor contracts actually have a standard, three-year term, but many sales reps will offer a monthly contract if you ask for it (and their management allows it).
When looking for the best payment processing partner, be sure to take a look at what we have to offer. Bonita Payments can enable every type of payment that your customers want to make – anytime, anywhere, and anyway. We are on a mission to understand our clients and their businesses to offer them the best possible POS solution. Our POS systems will enable you to access the right apps for your business, accept payments in-store, online, and on-the-go, and reap the benefits of additional payment methods (e.g., Samsung Pay, Apple Pay, Google Pay, etc.). Contact Bonita Payments today to get a free quote!