How to accept credit card payments
Meveryone starting new businesses today is too young to even remember the days of the old-fashioned credit card printer – you know, that clunky plastic device that made a carbon footprint of a credit card next to a manuscript received?
Fortunately for us, payment processing technology over the past 30 years or so has made it much easier to accept credit card payments, even for small start-ups. In fact, most of the major credit card processing services today bundle payments with other features, such as e-commerce and inventory management. Here are some convenient and efficient ways to accept credit card payments.
How to accept credit card payments
Accepting credit cards is relatively quick and easy for any type of business, and you can process purchases in person or online.
Credit card processing steps
Whether you receive card payments in person or online, the transaction process typically includes the following basic steps:
- The customer swipes, inserts or taps their credit card or mobile device, or enters their credit card number, to enter their information into the payment processor.
- The payment processor communicates with the card issuing bank to ensure the availability of funds or the credit limit, and to detect potential fraud.
- If the bank approves the transaction, the payment processor debits the customer’s account and credits your merchant account with the amount of the transaction.
The difference between the different ways of accepting credit card payments is mainly in the way you enter the card information on the front-end.
In-store credit card payments
To accept credit card payments at a retail outlet, such as a restaurant or store, you need a point of sale (POS) system with a card reader or capable credit card terminal. to process transactions by itself.
Modern point of sale systems like Square and Clover include hardware and software that allow you to process both card and cash transactions.
If required, customers can typically enter a personal identification number (PIN) for a debit card or sign to authorize the transaction on the screen or on a printed receipt from the credit card terminal.
To accept payments online for ecommerce or other activities, you need an account with a payment service provider (PSP), such as PayPal, Stripe, Square, or Shopify.
You’ll need to hook it up to your online storefront, which is usually pretty straightforward with the right website builder. Many modern website builders, like Squarespace, Kajabi, and Shopify, and marketplaces like Etsy, are designed to make online shopping easy and integrate easily with payment processors. While most website builders come with a Security Sockets Layer (SSL) certificate to keep your customer safe, you may need to use a standalone service if you want to accept payments over the internet. You can check out our guide to the best SSL certificate services for more information.
If your existing website doesn’t work well with payment providers, you may just need to log into your account (for example, with a PayPal “pay now” button on your website) and allow customers to complete. payments through the third-party site. This process will be less transparent and may require more manual work on your part to keep the controls straight.
Mobile payment processing
You can accept physical cards anywhere without any equipment other than your cell phone through mobile payment processing apps. These lightweight solutions are ideal for on-the-go sales in places such as farmer’s markets, art fairs, trade shows and parties.
Square is the best-known and easiest-to-use mobile payment processor. Its card reader is a small accessory that fits directly into the headphone jack (including Lightning connectors) of your smartphone.
You can simply download the Square Point of Sale app on your Android or iOS device, enter the customer’s order or total, and swipe the card to complete the transaction, just like an in-store point of sale. If necessary, customers can sign to authorize the transaction directly on the screen.
Credit or debit card transactions
Credit and debit card transactions look the same but are different on the back. They are both facilitated by credit card networks, so the point-of-sale process is similar: enter the information, contact the bank, and process the transaction.
On the customer side, the difference is that a debit card transaction immediately withdraws money from their bank account, unlike a credit transaction.
On your side, the payment looks different. Debit card transactions usually settle faster and the money lands in your merchant account the same day. Processing credit cards requires the payment processor to deposit money into your account (and settle with the customer later), and this can take up to a few days.
The fees for debit and credit cards may also be different, depending on the type of account you have with the payment provider. And a credit card network may restrict minimum transactions for debit cards but allow them for credit cards (due to regulatory requirements).
Merchant account vs payment service provider
Traditionally, you had to open a special type of bank account, called a merchant account, to accept credit card payments. You sign up with a bank and negotiate a fee contract, then receive or purchase the hardware needed to process payments.
Payment service providers like PayPal, Square, Stripe, and others make this process much easier, and in many cases, cheaper. They look like merchant accounts, but you can easily register and manage the account online. And it’s easy to transfer money to and from your PSP account to make refunds, make purchases, or deposit to your bank account.
If you’re starting from scratch, a payment service provider will likely be the easiest and most affordable way to accept credit card payments for a small business.
Credit card processing fees
When you accept payment by credit or debit card, you will be subject to the following typical charges:
- Interchange Rate: This is a percentage of the sale that goes to Visa, Mastercard, or another credit card company. Rates can range from 1.5% to 3.5%, usually higher for premium cards.
- Transaction fees: This is the discount you pay to the payment service provider or processor on top of the interchange rate. Some processors charge a flat rate per transaction that covers their discount and interchange rate, and others use a plus interchange model that charges you the interchange rate plus their own variable fees.
- Service charge: Depending on the provider, you can pay a monthly or annual subscription to use the service. Most small business PSPs, like Stripe and PayPal, waive these fees and only charge a flat transaction fee.
Frequently Asked Questions
What’s the best way to accept credit card payments?
The most convenient and affordable way to accept credit card payments for your business depends on several factors, including what you sell, where you sell it, your sales volume, and how your customers prefer to pay. Lump sum payment service providers are best for businesses with sales of less than $ 5,000 per month, while more complex models might be better for larger businesses.
How can I accept free credit card payments?
You cannot accept credit cards without paying a fee, as it is one of the primary means of payment for credit card networks for their service. However, you can overcome the fees by adding a surcharge to credit card payments or increasing the prices. You can incentivize cash payments by offering a discount to customers who pay cash.
Is there an app to accept credit card payments?
Several mobile apps exist to accept mobile credit card payments, including Square, PayPal Here, Payanywhere, Clover, and QuickBooks apps. Square is the easiest to use and transport thanks to its small card reader that fits perfectly in your pocket.
How do I accept credit cards on my phone?
To accept card payments using a smartphone, you need to download a mobile payment processor, such as Square, PayPal Here, Payanywhere, or Clover. When you sign up, they’ll send you a card reader that plugs into your phone’s headphone jack, so you can accept physical cards and complete entire transactions through your phone.
What’s the cheapest way to accept credit card payments?
Payment processors with flat transaction fees are generally the most affordable option for businesses with less than $ 5,000 in sales per month. Processors with trade-in-plus models are best for larger companies with higher sales volume.
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