How to Accept Credit Card Payments

Credit and debit cards are a common payment method favored by many customers. It has become an expectation that your business will accept cards, a standard you are all too familiar with if you must repeatedly explain to customers that your business accepts cash only. Luckily, accepting credit and debit cards is as easy as partnering with a credit card processing company.

This guide will walk you through the ins and outs of the credit card processing industry, and highlight the important factors you need to look for when choosing a card processor. It will also cover the different credit card processing platforms, from point-of-sale systems to mobile devices.

How do you accept credit card payments for your small business?

Accepting credit and debit cards begins with selecting a processor. To choose the one that is best for your business, it’s important to understand the different types of companies that are out there. In addition, you should always look for a credit card processor that offers low rates, few or no fees and month-to-month contracts.

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Unfortunately, the credit card processing industry is a crowded field that can often be confusing to navigate. With varying pricing models, complicated fee structures and different types of processors for different platforms, it can be a gargantuan task to find the right partner for your business. Breaking the process down into several steps can help simplify your decision-making:

  1. Determine the type of processor you need. Choosing the type of credit card processor you want to work with is based on two main factors: whether you want to partner with a service for individuals or businesses, and your average monthly volume of credit and debit card payments.
  1. If you’re an individual accepting payment from a handful of trusted sources, using a peer-to-peer application like Venmo is suitable.
  2. If you want a payment processor less susceptible to transaction disputes, a payment facilitator like Square or PayPal is a good option. Square and other payment facilitators work well for small businesses with a low monthly volume and small sales tickets.
  3. Businesses with a higher volume and larger sales tickets should consider an independent sales organization or merchant service provider like Helcim or Flagship Merchant Services. For a more detailed breakdown of the different types of credit card processors on the market, visit our credit card processing best picks page.
  1. Consider how you will accept credit cards. When you begin accepting credit cards, it’s generally because your customers prefer using them. So, it’s important to consider how your customers use their cards. If the vast majority come into your physical location and swipe their card, then perhaps that’s the only method you need to accept. However, you might also want to accept credit cards online, over the phone, on a mobile device or across multiple channels. Determining the methods of payment you will accept can help you better understand what type of credit card processing equipment you need.
  2. Examine pricing models and fee structures. Pricing models and fee structures vary greatly from company to company, so this is one of the more arduous parts of the buying journey. There are multiple pricing models available which determine the rates you will pay on certain transaction types. Most processors charge between 2% and 4% of the transaction value, plus a small transaction fee based on your monthly processing volume, average ticket size, your industry, and your processing history. In addition, there are often several fees processors charge. For a breakdown of the most common pricing models and fees, visit our credit card processing best picks page.
  3. Compare quotes. By using the criteria above, narrow your list of candidates down to about three to five. Call each of these credit card processors and request a quote. Sometimes, a credit card processor’s rates are negotiable, so don’t be afraid to haggle – especially if you’ve already received estimates from other companies. After comparing quotes, request a contract from one or two companies that offer the most competitive rates.
  4. Review contracts. As always, review these contracts very carefully. If possible, have legal counsel look at the contract as well to ensure everything is above board. Consider whether the contract includes automatic renewal clauses, early termination fees and other binding clauses. Once you are satisfied that the contract is fair, sign with the company you believe is the best fit for your business.

Once you’ve completed these steps and decided which credit card processor you’d like to partner with, you are ready to apply. Generally, applications can be submitted online and take two days for the processor to review. Once your application is reviewed, the processor will set up your account and walk you through the process of selecting any hardware you might need. Once the hardware arrives, the processor will help you set it up and test it.

How do I accept credit cards on my phone?

To accept credit card payments on your phone or another mobile device, you will need a mobile credit card reader. Many of these readers plug into the headphone jack of the device. More advanced mobile credit card readers connect to your mobile devices via Bluetooth.

When you sign up with a credit card processor, most companies give you a free credit card swiper. However, it is beneficial to purchase one that also accepts EMV chip cards. EMV chips allow you to skip signature authentication, and they speed up the payment process. You should also select a reader that is NFC enabled for accepting contactless payments. NFC capability allows you to accept payments from contactless cards and mobile wallets, such as Google Pay or Apple Pay. You can expect to pay less than $100 for this type of mobile credit card reader.

Using a mobile credit card reader doesn’t limit you to accepting payments on your mobile device only. These readers can be used as part of a larger system that includes additional hardware. Mobile credit card readers are useful for traveling businesses, businesses that frequent trade shows and businesses that simply want to accept payments from anywhere within their physical location.

How to accept credit card payments online

Accepting credit card payments online requires the use of what is known as a “payment gateway.” Payment gateways are often provided by credit card processors, either directly or through a third party.

Typically, a credit card processor charges you an additional monthly fee for this service, so it’s important that you only set up a payment gateway if you regularly make sales online. In addition to the monthly fee, some credit card processors charge a gateway setup fee and an additional per-transaction fee, so be sure to review each processor’s terms and conditions before signing up.

How much does it cost to accept credit cards?

The price of each transaction varies based on the method by which a card is accepted as well as the pricing plan you’ve chosen. There are three main pricing models you are likely to come across in your research. They include

  1. Flat-rate pricing: Generally a model of payment facilitators like Square or PayPal, flat-rate pricing includes fixed rates for certain types of transactions. For example, PayPal charges 2.7% for a card-present transaction, meaning the card was swiped at a physical location. For online transactions, PayPal charges 2.9% plus 30 cents per transaction. For a card that is keyed in over the phone, PayPal charges 3.5% plus 15 cents per transaction. The elevated price here is due to the increased risk of fraud associated with this payment method.
  2. Interchange-plus pricing: This pricing model is based on the interchange rate paid by all credit card processors, plus a processor’s markup fee. It is the most transparent model available because it is based on a universal rate. The markup, which is how the processor makes money, is usually negotiable in this pricing model.
  3. Tiered pricing: This pricing model differentiates between “qualified,” “midqualified” and “nonqualified” transaction types. Qualified transactions are generally basic debit and credit cards that are physically swiped at a terminal. These are the cheapest rates in a tiered pricing model. Slightly more expensive are midqualified transactions, which often include rewards cards that are physically swiped. Finally, the most expensive nonqualified transactions include premium rewards cards and card-not-present transactions, such as those you key in when you accept payment from your customer over the phone.

Of course, in addition to rates you pay for each transaction, the credit card processors that use the interchange-plus and tiered pricing models charge account maintenance fees. These include a monthly fee, a monthly minimum, payment gateway fees, a PCI compliance fee and various network fees. Some processors may also charge a setup fee, a payment gateway setup fee and other fees. These fees all vary from processor to processor, so request a breakdown of all pricing and fees in writing, then read the contract before signing it to verify that you’re aware of everything you’ll be required to pay.

What is the cheapest way to accept credit card payments online?

Determining the cheapest way to accept credit card payments online has a lot to do with your unique situation. A small business with less than $3,000 in monthly credit card sales is in different circumstances than a larger-volume business, and the processor that benefits one might be a detriment to another.

For the small-volume merchant, using a processor that has flat rates and provides its services on a pay-as-you-go basis is going to be more cost-effective than working with a processor that charges multiple account maintenance fees, even if that processor’s transaction rates are lower. Once a small business eclipses $3,000 in monthly volume, though, a processor with lower rates might be more cost-effective, even with the associated fees.

No matter which type of processor you choose to work with, you should avoid long-term contracts. The best credit card processors offer month-to-month terms and don’t charge early termination fees. Even though most processor contracts have a standard three-year term, most sales reps are eager for your business and will offer a month-to-month contract if you ask for it.

How do you accept credit card payments on Square and other apps?

Accepting credit card payments on mobile wallets or peer-to-peer applications should only be done when you know and trust the people sending payment. It is much easier for a customer to dispute transactions and recoup money using these platforms, whether it is Square Cash or PayPal. Freelancers working with well-known clients, however, can benefit from using peer-to-peer payments. To do so, simply set up an account and link your bank account to begin sending or receiving money to other users.

For established businesses that want to accept payments from a customer’s mobile wallet, investing in an NFC-enabled terminal or card reader is the way to go. NFC-enabled readers allow you to accept contactless payments, so customers can pay with apps like Google Pay or Apple Pay while your business is more protected from chargebacks and transaction disputes.

Accepting credit cards is a customer service must

In the modern business landscape, it’s imperative to accept debit and credit cards. Cards as a payment method have become so ubiquitous that many customers don’t carry cash any longer. Accepting credit cards is a means of boosting customer satisfaction and driving more sales. Choosing the right credit card processor for your business can ensure that you not only keep your customers happy but that it doesn’t cost an excessive amount to accept credit and debit cards.

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