Cash will be slowly becoming obsolete. The particular cashless trend is forcing more and more businesses to start acknowledging credit credits.
A recent survey found that will just 16% of Americans say they always carry cash. 58% of respondents plan to stop using cash altogether in the near future.
Whether you’re launching a startup or you’ve experienced business for decades, accepting bank card payments has become crucial within today’s day and age. For online businesses and ecommerce stores, credit cards are the only reasonable way to get paid.
Prepared to get started? I’ll teach you how to begin accepting credit card payments for your business in just a few simple steps.
What to Expect When Accepting Credit Card Payments
Accepting credit cards is easy. The bulk of the effort will be spent choosing a processor and setting up your equipment.
- Find a payment processor chip
- Negotiate your own terms
- Get the equipment
- Take payments
The best part about accepting credit cards is definitely convenience. As previously mentioned, consumers are carrying less cash (if any). By taking credit cards, you’ll attract far more customers.
Credit cards improve efficiency too, especially for in-person payments. They can help eliminate long lines and reduce the time each client spends at the register. A quick swipe, dip, or tap is much easier than counting cash and making change.
It also assists minimize human error, like incorrect change counted. Credit card payments help prevent cash theft by employees as well.
Recent world activities have also increased the requirement for touchless payments. Customers often use smartphones, wearables, digital wallets, and tap-to-pay credit cards to purchase goods and services. This helps prevent the spread of bacteria during checkout.
Modern credit card processing techniques make life easier from the bookkeeping standpoint as well. Nearly all these solutions sync along with accounting software to minimize guide journal entries. These techniques can even integrate with software program for things like inventory tracking and more.
The particular Bad
The most frustrating part about acknowledging credit cards is the fees. Involving the card network, processor, providing bank (cardholder’s bank), plus acquiring bank (your bank), there are many players associated with every credit card transaction.
Each party charges a little fee for their role along the way, which is ultimately paid by the merchant.
Based on your contract’s pricing construction, you could be paying different charges for each transaction, which makes it challenging to predict your total digesting costs. For example , an ecommerce purchase paid with an American Express card could be more costly than an in-person payment with a Visa—even if the 2 customers had the exact same transaction total.
Corporate credit cards, consumer cards, plus debit cards could all have different fees.
Credit card processing requires updated and stable hardware plus software. If you have problems with the terminal or your internet link is unstable, you might be not able to process certain transactions. Setting up specific hardware can be a time-consuming task as well.
Chargebacks are another color point associated with accepting credit cards. A chargeback occurs each time a cardholder disputes a charge directly with their card network or bank. Credit card companies and banks are more likely to side with the cardholder during a dispute, which can be expensive and frustrating meant for businesses.
Particular types of businesses might have trouble getting approved to accept credit cards. This is known as “high-risk charge card processing. ” High-risk industrial sectors include tobacco, gambling, drug paraphernalia, vitamins and dietary supplements, weapons, multi-level marketing, existence coaching, adult services, weed dispensaries, and more. Even business owners with poor credit could be considered a higher risk.
In case approved, merchants that fall into those categories are typically enforced with higher credit card processing fees.
Step 1 – Find a Payment Processor chip
There are many ways to start accepting credit cards. Each method has its reasonable share of pros and cons. To get started, you need to find a payment processor that accommodates your needs.
Payment processors assist in credit card transactions. They behave as a mediator between the company and other financial institutions involved with the transaction. Here’s a brief summary explaining the different roles related to credit card processing.
Processors authorize transactions and help the transfer of money from the issuing bank to the merchant.
Yet payment processors come in different shapes and sizes. Let’s take a closer look at the types of payment processing companies you can choose from.
Payment Service Providers (PSPs)
Using a SONY PSP is the easiest way for your company to start accepting credit cards. They are typically considered “all-in-one” options, as they offer everything you need to get going.
Companies like Square and PayPal every fall into the payment provider category.
PSPs have revolutionized the bank card processing industry in recent years. They will allow businesses to accept credit cards without setting up a merchant account. They typically offer month-to-month contracts and flat-rate prices.
Flat-rate processing is easy to comprehend, but it isn’t really always the cheapest option. Prices typically cost around second . 9% + $0. thirty per transaction. There’s not a ton of room regarding negotiation here unless you’re a high-volume merchant.
But PSPs are really easy to set up and have turn out to be increasingly popular for startups and businesses new to accepting bank cards.
Merchant Accounts Providers
Vendor account providers are ideal for businesses that want to get the best possible processing rates. Payment Depot plus Fattmerchant are two well-known solutions in this category.
Both of these companies provide membership-style pricing. For a month-to-month fee, transaction fee, and interchange, businesses have access to “wholesale” credit card processing rates. Here’s an example from Payment Depot’s pricing page so you can find what I mean:
An interchange is the cost imposed from the card networks. So you could pay as little as $0. 05 + interchange per deal with a merchant account provider, compared to nearly 3% per transaction with a PSP.
Businesses with an online store should consider using an ecommerce platform for credit card processing. Like PSPs, this type of processor can become a one-stop-shop or an all-in-one solution for your digesting needs.
Shopify is an industry leader in this space. In recent years they’ve basically become the gold standard for managing an ecommerce internet site.
I like Shopify because they offer integrated transaction processing with every program. So , you won’t have to worry about using third-party shopping cart software to simply accept payments on your ecommerce site. Shopify even has POS (point-of-sale) solutions for e-commerce sites that also have the physical retail presence.
This ecommerce platform integrates with 100+ extra payment providers as well. Therefore , if you find another processor later on, you could always switch without having to change your online store.
Step 2 – Negotiate Your own Terms
Once you’ve narrowed down the type of processor you want to use, look around for the best rate. Believe it or not, charge card processing fees can actually end up being negotiated. This is especially true if you’re obtaining competitive quotes from multiple processors. You can use those quotes as leverage to get the most effective deal.
To negotiate successfully, you need to understand exactly where credit card processing fees come from. Generally speaking, there are three major components to credit card digesting rates:
- Interchange – Imposed by the credit card network and giving bank.
- Assessment – Smaller fee paid directly to the card network.
- Markup – Charged by the processor.
Interchange and assessments are non-negotiable. But cpus might be willing to negotiate their particular markup. Interchange fees vary by card network and transaction. For example , here’s a snippet of Visa’s interchange rates:
The type of credit card that a customer uses will impact the fees. Take this into account as we discuss the types of credit card processing structures shortly.
In addition to the direct costs of credit card digesting, you should also consider factors like:
- Contract duration
- Setup charges
- Early termination fees
- PCI compliance fees
- Statement fees
- Terminal fees
- Gateway fees
The list goes on and on. A few processors will try to put these extra costs into the contract. Review everything in depth before you commit. That’s precisely why negotiating your terms is really important.
At this point let’s take a closer look at the different contract structures in the world of credit card processing:
Flat Rate Pricing
Flat-rate credit card processing is the easiest to understand. This is actually the most common pricing model offered by PSPs.
With this structure, the interchange prices imposed by the card system are irrelevant. You’ll spend the same cost per deal, regardless of the interchange category being utilized. The only factor that would influence the rate here would be how the card is processed (online vs . in-person).
Interchange Plus Pricing
Interchange plus processing is typically more cost-effective than flat-rate pricing. As the name implies, this contract framework involves paying the interchange rates plus the processor markup.
As mentioned earlier on, processors might be willing to bargain their rates, which possibly gives you access to lower charge card processing fees.
Subscription or Membership Prices
Subscription pricing can best be described as a hybrid between flat-rate and interchange pricing. Businesses pay a monthly fee to service provider account providers for entry to lower flat-rates.
For example , a $99 month-to-month subscription fee could provide you with access to a $0. 07 plus interchange fee for each transaction. The processor costs a lower markup but still gathers a monthly membership charge.
Tiered prices is the worst. Stay away from this at all costs.
Using this pricing structure, the processor charges three different rates—qualified, mid-qualified, and non-qualified. Each category has a different processing rate (qualified being the least expensive, and non-qualified being probably the most expensive).
However , the processor determines which category each transaction falls under, based on relatively unidentified criteria. So businesses generally end up paying mid-qualified and non-qualified transactions more often than they initially thought.
Step 3 – Get Your Equipment
If you’re processing transactions in-person, you’ll need to get the appropriate equipment. Lots of processors out there advertise free of charge equipment, but these are rarely actually free.
Don’t rent equipment. It might seem like a cost-effective solution in the short-term, but it’s always more expensive for the lifetime of your equipment.
It’s worth noting that several equipment is proprietary to specific processors. For example , let’s say you’re using Square as your processor. If you decide to switch processors in a year or two, you’ll no longer be able to use any kind of Square equipment.
Here are the different types of tools you might need to accept credit card obligations.
Credit Card Ports
This is a conventional countertop piece of hardware employed for accepting credit cards. They are stand alone pieces of equipment, separate from registers or POS stations.
Credit card terminals typically look like this:
Be sure you choose a terminal that’s contemporary and compatible with multiple payment options. For example , legacy ports and outdated hardware will not accept chip payments, tap-to-pay, or mobile wallets.
Integrated POS Terminals
POS systems with built-in credit card terminals are becoming increasingly popular. Clover has some of the best POS equipment on the market today.
These are useful in quick-serve restaurants and retail stores. Integrated POS terminals are a bit more expensive than a traditional standalone terminal, but they are user-friendly and offer more functionality.
Mobile Cards Readers
Intended for businesses that operate on-the-go, a mobile carder is definitely an absolute must-have. They’re actually useful for food trucks or even field-service jobs where professionals can accept payments straight at a customer’s home or even job site.
Square offers free mobile card readers that can switch any smartphone or tablet into a POS station.
Mobile readers can even be utilized within retail stores so clients can pay without having to visit a checkout counter.
In addition to the hardware requirements of accepting credit cards, you’ll likely need to get the right software as well. For example , to make use of the Square mobile viewer (mentioned above), you’d need to download the Square POS app.
On the internet credit card processing requires shopping cart software. But if you’re using an all-in-one ecommerce platform like Shopify, this will come included with your own plan.
Virtual terminals are software made to turn computers into payment processors. This software is ideal for processing credit card information on the phone.
Step four – Accept Payments
Now that you’ve chosen a processor, agreed to terms, and have your equipment setup, it’s time to start receiving credit card payments.
Depending on the solution you chose, customers should be able to swipe, dip, tap, use mobile purses, pay online, or spend over the phone for your services and goods.
But you do not technically receive payment at the time of the sale. There’s an extra step in this process.
Settle Your Transactions
“Settling” or “batching” is the final stage of accepting credit card payments. The original swipe, chip, or keyed entry is known as the authorization stage. This is only to say yes to or deny a deal.
But the purchase isn’t fully processed until the settlement.
Once per day (typically at the end of the company day), those authorizations must be sent to your processor. The actual steps to complete this process will be different based on the equipment you’re using and the processor.
If you don’t settle transactions within 24 hours of a sale, the transaction could be subject to increased interchange rates.
Monitor Your Bank Account and Claims
Finally, you need to verify that you’ve already been paid. Funds typically appear in your bank anywhere from twenty-four to 72+ hours following the settlement.
Be sure your statements match the particular deposit amount in your accounts.
As previously mentioned, some credit card processors are usually notorious for imposing extra and unnecessary fees. Therefore , make a habit of reviewing your statements each month for virtually every irregularities. If you’re unsure in regards to a charge, call the processor and find out what it’s with regard to.
This will help maintain your credit card processing costs as little as possible.