Costs Of Credit Card Processing
Depending on how you accept payments in your business and which service you use, you may pay these fees to accept credit and debit card payments from customers:
- Transaction fees. Pay these each time a customer checks out with their card, whether they swipe or enter the information online. Fees are typically charged as a percentage of the sale, ranging between 1% and 4%, plus a fee of less than $0.50. Some processors charge a flat fee thats the same for every transaction, and some vary the percentage and fee depending on factors like which credit card is used or which membership plan youre on.
- Service fees. Some processors charge a monthly or annual subscription fee to use the service, on top of transaction fees.
- Equipment setup. If you have to get a POS station and a credit card reader, you may have to purchase or lease those, or pay a refundable deposit to use them. Some payment processing companies give you equipment for free with a monthly subscription.
- Incidental fees. You pay these one-time fees in specific situations, like chargebacks, non-sufficient funds or special verification services.
What Fees Do You Charge Each Month
This question is deceptively simple since some processors might provide you with a seemingly small upfront monthly fee. But be sure to dig deeper some additional fees might be hidden in the fine print. These can include fees for batch processing or fund transfers from a merchant account to your bank account, as well as statement fees. Processors might waive some of these fees to get your business, but could add them back in after a promotional period.
What Do You Need To Accept Online Payments
Payment gateway: This is a digital interface that allows customers to enter their card information securely. Companies like Stripe and Braintree offer online payment gateways. Many in-person POS systems also allow merchants to accept payments online, either directly or through an integration with an e-commerce system.
Payment processor: Like it does with in-person payments, a payment processor initiates and completes online transactions with credit card companies and banks. Payment processors charge a transaction fee for every payment accepted. Many payment gateways also include payment processing services.
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Integrate Payments Into Your Custom Mobile App
If youve developed a native mobile application for your customers, its because you wanted to create a seamless end-to-end experience for them. If your app bumps them to another website or forces them to login through a desktop to make payments, though, this adds friction to their user experience.
It also makes it more difficult for your business to actually get paid.
Make it easy by enabling secure credit card or ACH payments directly within your mobile app. Look for a solution that ensures PCI compliance at every step of the transaction so you can keep your customers information safe.
What Is The Best Way To Accept Credit Card Payments
Whats best for one small business might not be the right choice for another. Youll need to look into the different credit card processors available and do some research to find one that seems like the best fit for your business.
Not sure how to get started? Weve pulled together some of the most common credit card processors here, so you can start to explore your options:
Thats by no means an exhaustive list, but those are some of the most popular and reliable processors out thereso theyre a great place to start your search.
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How Does Accepting Credit Cards Work
You are probably wondering how works in the first place. When a customer makes a purchase, they utilize a physical or virtual terminal to complete the transaction. They swipe their card or type in their banking information which allows the card information to be transferred to the network, notifying the cardholders issuing bank as well as your processing bank. Once the funds have been confirmed and accepted, the transaction is completed. This process happens usually in a matter of seconds.
The funds from your transactions are stored with the processor until you batch out at the end of the day. Your earnings are then deducted depending on your fees and the remaining balance is posted in your business bank account.
Become A Hero & Save Your Charity Money With Discounted Credit Card Processing For Nonprofits
These processors all offer lower rates for nonprofits, but you’ll also want to check for recurring billing, a free payment gateway, and other useful features.
- Jason VissersJason Vissers has been researching, analyzing, and writing about small business software and finance since 2015. His financial expertise has been cited in numerous publications, including The Ladders. Jason graduated with a Political Science degree from San Diego State University in 2001.
Expert Analyst & Reviewer
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Convenience Fees Vs Credit Card Surcharges
You may be charged a convenience fee when you use a credit card but thats not the same as credit card surcharges. Each credit card brand has its own guidelines for convenience fees.
Surcharges are the fees that cover the cost of a card transaction. While convenience fees are charged for payment methods that a merchant doesnt usually accept. For example, a company might charge a convenience fee when you pay over the phone instead of online.
How Much Does It Cost A Small Business To Accept Credit Cards
Payment processing fees vary and include an interchange fee set by the credit card network and a processing fee set by the processor . Typical interchange fees range between 1% and 4% of the sale price, and processing fees range from $0.10 to $0.30 per transaction. Some payment processors charge a single rate to cover the interchange fee and their cut, while some charge a rate that varies with the interchange fee.
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Accept Echecks Through Ach Processing
The next most popular way to accept payments is through a direct debit of a bank account with an eCheck, or electronic check, through ACH payment options. This allows your customer to input the information from their paper check into an online payment form or software interface. This method processes the payment electronicallywithout the physical presence of a paper check. You can learn more about eChecks here.
ACH processing is governed by the National Automated Clearing House Association and has different transaction fees than credit cards. It can also be more secure and predictable than waiting for a check to come in the mail, making it one of the better online payment options for small businesses.
How Can I Pay With My Phone
Pay in a store
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Can I Accept Credit Card Payments Without A Business
Anyone can set up an account with a payment service provider like PayPal or Stripe you dont have to be a legal business entity. Those accounts let you accept credit card payments from anyone, including friends, family, customers and clients. You can use them to accept credit card payments online or via their mobile apps by sending a link to request payment or giving the payer your email address. When you receive payment for goods or services , you have to pay a processing fee, usually a small percentage of the transaction.
Accepting Credit Cards Can Give Small Businesses A Boost
Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.
Running a small business means keeping a tight handle on cash flow. One way to facilitate the movement of money in and out of your business is to expand your payment options to include .
Allowing customers to pay via credit card can make managing cash flow less stressful and eliminate the delays associated with waiting for check payments. If your business isnt yet accepting credit card payments, changing that may be easier than you think.
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Select Flat Rate Or Interchange Plus Pricing Avoid Tiered Pricing
Before you decide to do business with a merchant services provider, make sure they offer flat rate pricing or interchange plus pricing.
Flat rate pricing guarantees the same low monthly rate for any type of credit card and makes it easy to see exactly how much youll be paying in processing fees each month. This pricing is a fixed percentage based on what the credit card processor, card brand, and issuing bank charge.
In addition to flat rate credit card processing, interchange plus pricing is another option that can benefit small businesses.
Interchange plus pricing offers more transparency and can lower your costs. This pricing model is divided into charges based on the cost of interchange and assessments and includes an additional markup cost all three will be visible and separated on your monthly processing statement, so there are no surprises.
Steer clear of any provider that offers a tiered pricing option. Tiered pricing is a red flag.
With tiered pricing, processors typically offer a qualified rate, which is very low but can hide their margin behind a much higher non-qualified rate.
With flat rate pricing and interchange plus pricing, you can process credit cards at the same low rate each month without having to pay any additional transaction fees.
How To Lower Your Credit Card Processing Fees
While free credit card processing may not exist for businesses in 2022, there are many ways you can reduce the fees you pay. Here are just a few:
- Offer cash discounts: In many places, its illegal to pass payment processing fees onto the customer, but you can offer incentives for cash payment. Learn more about cash discounting .
- Set a minimum: You can require a minimum purchase amount for credit card payments. This can also help increase average order value .
- Negotiate new rates: It doesnt hurt to ask your processor if it can accommodate more affordable rates. Remind the provider if you have a longstanding history with its platform. The bigger and more established your business, the more leverage you have with negotiating. You can also choose a processor that automatically discounts your rates as your business grows, such as Helcim.
- Eliminate extra services: If your payment processor includes additional services, features, or tools, make sure youre not paying for themespecially if you dont use them.
- Fight fraud: Businesses around the world lost $28.58 billion to card fraud in 2020, equal to 6.8 cents per $100 in purchase volume. Merchants facing credit card fraud lose a lot of time and money to fraudsters and in managing these instances. Use chargeback prevention tools and take other steps to reduce chargebacks and fraud in your business.
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How To Accept Payments Online For Free
If your ecommerce business isn’t offering your customers multiple ways to make payments online, you’re leaving money on the table.
While there’s no way to escape some transaction fees and currency fees, there are ways to reduce payment processing costs and receive payments online for free.
In this post, we’ll talk about the software options available today for accepting free online payments as well as details about how to actually go about accepting those payments.
But first, let’s review some additional reasons you’d want to use a payment processing software.
Other Details To Consider
Some companies require a contract, and canceling before the contract is up can be costly. Other companies offer month-by-month subscriptions that you can end at any time.
More complex payment products, especially POS systems that allow highly customized menus, might require installation, setup or training, all of which can cost extra.
Customer service varies. If there’s a problem, will you want to speak to a person immediately?
Some companies share pricing details openly while others offer custom quotes to each prospective client.
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How Can I Accept Credit Cards Online Without A Merchant Account
To accept credit cards online without a merchant account is not impossible. However, you will need to find a third-party payment provider to work with. These companies can process customers credit card payments for you and simply transmit the amount to your account. They are referred to as aggregators and provide quick, pre-approvals for businesses. This is because they do not require initial credit checks or lengthy applications.
A few of the most popular third-party payment processing companies include:
These companies are similar to using a merchant account. In fact, some of the may even look similar to those who seek merchant services. They will take a transaction processing fee before sending the remaining funds to your businesss account. It takes one to two days for these transfers to occur after initiating a transaction.
How To Accept Payments Online
There are two main methods for taking payments online: credit card payments and Direct Debit. Online payments can be taken directly from an account, credit or debit card or through an all-in-one payment process such as PayPal or Worldpay Online Payments. These methods provide your customers with a quick, simple and safe way to pay online.
We’ve put together a summary of each online payment option, to help you decide which which is the best way to collect online payments for your business.
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Pay Attention To Credit Card Payment Processing Fees
Accepting credit cards through a merchant account or a payment service provider isnt free each charges service fees to facilitate those payments. As you get ready to accept credit card payments, consider how those fees factor into your operating and overhead costs.
If the fees are going to take a serious bite out of profits, you might compensate by increasing prices for your products or services. Or you could add on a surcharge or convenience fee for processing credit card transactions below a certain dollar amount. But be sure that youre aware of state and federal regulations on credit card surcharges to avoid any illegal practices.
You Can Pay Off Your Card Immediately With Cash
As Ive mentioned before, paying rent with a credit card is a very dangerous game. The only way this works in your favor is if you pay it off immediately with cash. If not, youll end up paying a service fee, interest on your credit card, and in the case of a mortgage interest on the loan. Thats why it is super important that you learn how to create a budget and stick to your monthly plan.
Again, this strategy makes the most sense if you are chasing a signup bonus unless, of course, you can avoid paying a fee to a third party.
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Decide How You’ll Accept Payments
First, decide how you will accept credit card payments. The primary options are:
Depending on the type of business you run, it might be quite clear what type of payments you’ll accept. For example, if you provide online services, chances are you’ll be accepting solely online payments.
For other types of businesses, you might need a combination of payment methods. For example, maybe you run an online e-commerce site where you sell crafts but also sell them in-person at craft fairs. In that case, you would probably need both online and mobile payments. On the other hand, a new restaurant might need to accept primarily in-person payments but also allow for online payments for to-go orders.
You know your business best, and only you can decide how you’ll need to accept payments.
Do You Charge Billbacks Or Are All Charges Related To A Transaction Billed In The Same Month
Its not unusual for a payment processor to entice you by quoting low rates. But sometimes that low rate only applies to certain types of cards . You may only find out after the fact that many of your transactions during the month didnt qualify for that low rate.
For example, in January, you think youre getting a 1.7% rate on your credit card transactions, but you processed several rewards cards. Even though you processed the transactions in January, come February, your processor charges you back, or bills you back, a higher rate. Now you have two different statements with two different rates for the same transaction, which makes it much harder to figure out the actual rate youre paying.
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No Monthly Fees For Payment Processing
We dont advertise a low transaction rate and then secretly charge a series of hidden fees. When we say no monthly fees, we mean it: no application fee to get started, no terminal leasing fees for our hardware, no monthly minimum fees to penalize you for slower months, no statement fees for you to access your fee statements, no online reporting fees to access your sales or transfer data, or any other recurring fees. Finally, our hardware and software complies with industry data security standards, and we dont charge fees for that, either .