What Should You Look For In A Credit Card Processing Company
A credit card processing company does essential work for your small business, but it doesnt do it for the laughs. The costs can be high so, at the very least, the processor you choose should provide you with the services your business needs. When selecting a credit card processing company, what should you consider?
What Do I Need In Order To Accept Card Payments
Anyone who accepts card payments must get accepted for a merchant account – a type of account supplied by a bank or payment facilitator that lets your business process card payments.
When a card payment is made to your business, the money goes first into the merchant account where its processed, verified and approved by the customers bank. Then the payment is transferred into your own business bank account.
There are lots of providers to choose from – including well-known names like PayPal, Worldpay and Barclaycard, plus Zettle and Square, two providers that are popular with small businesses.
Youll need to do your research to discover which will offer the best value for your needs .
What Is The Best Way To Accept Credit Card Payments For Small Businesses
The most affordable way to accept credit card payments for your business depends on factors including what you sell, where you sell it, how much you sell and which payment methods your customers prefer. Flat-rate processors are best for businesses that make less than $5,000 in sales per month, while interchange plus models are best for higher-volume businesses.
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How To Accept Credit Card Payments By Phone
If you want to accept credit cards through a phone call, youll need a point-of-sale system that allows you to manually input card details. Your customer will read off the card information while you enter it. This is called a card-not-present transaction and is common for businesses like restaurants and florists.
Be aware that card-not-present transactions will incur a higher fee because of the higher risk of fraud.
How To Start Accepting Credit Cards
If your business is new or not yet accepting credit card payments, you’re probably wondering how to accept plastic and how much it will cost. These steps will walk you through the process of setting up credit card processing for your business, and provide questions to contemplate.
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How Does Talech Help Me Adapt To Changing Customer Behavior When It Comes To Paying
Customers expect the ability to pay in any environment- online, in-person, by phone, in-app or by mobile wallet. U.S. Bank Payment Solutions and talech allow your business to accept payments from anywhere a store front, online, over the phone from home, on location or wherever your customers are. In addition, talech provides a contactless shopping experience.
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How To Accept Card Payments
Taking card payments in-person, be it in-store, at a convention, a market or on the road, is now more straight-forward than ever. Previously, business owners needed to sign-up to subscription model contracts with a number of extra payments and barriers to entry that made them question if accepting card payments was worth it. Today, small businesses can turn to industry leading payment specialists such as SumUp and start accepting card payments with a few clicks.
Card payments can be made with either debit or credit cards in the UK, with the card type changing nothing for a business who uses SumUps payment devices, as they can accept both card types with no extra steps or fees. According to the UK Finance organisation, 44% of all payments in the UK in 2020 were with debit cards, whereas credit card use declined by 18%, as consumers preferred to pay back debt and use money they had available rather than take risks during the pandemic.
Set Minimums For Credit Card Purchases
To combat processing fees cutting into your profits on small-dollar items, you could set minimum purchase totals for which youll accept a credit card payment.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 allows merchants to set credit card minimums of up to $10. You may not be allowed to do the same for debit cards, however credit card network rules might prevent minimums, and Dodd-Frank doesnt affect debit purchases.
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How Much Does It Cost For A Payment Machine
You can either buy a machine or rent it as part of your contract from your merchant account provider.
The cheapest card machines are app-based, connecting to your smartphone or tablet, and can cost as little as £19.
Hiring a terminal can be a good option for more expensive card machines. Youll sign into a contract and usually pay a monthly fee for the length of the contract.
When choosing how you want to process card payments, always consider any fees that youll be charged on top of the payment machine cost. This will help you get the full picture of how much youll be paying each month and can help you compare options easily.
Sign Up For Your Best Choice
Contact your chosen provider whether it is a bank, merchant services broker or online services provider. To complete the application, have the business information, bank account information and tax identification number. If your business is new, the merchant services provider may ask for your personal tax information to guarantee the account. Sign and complete the application.
Be aware of contract terms. Should you decide to upgrade or change providers, you don’t want to be hit with high contract-cancellation fees. For many small businesses, starting out with a mobile chip reader and online gateway provides an opportunity to evaluate the success of offering credit card processing. Most mobile and web gateways don’t have contracts, so upgrading isn’t a cost concern.
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Ways To Lower Credit Card Processing Fees
For many businesses, credit card processing fees are a huge recurring expense. To some degree, they are unavoidable and only increase in volume as your business grows. However, there are a few things you can do to reduce your fees.
Learn more: Read our full guide on Level 2 and Level 3 payment processing and our top picks for the best B2B payment processors.
Once your business grows to a place where you are consistently processing over $20,000 per month, you can likely negotiate lower rates with different processors. Actively shop around and request quotes to see if you could be saving several hundred dollars per month by switching credit card processing companies.
Merchant Account With A Bank
This is the most professional solution, but also the hardest to achieve.
A merchant gateway means you have a bank account, called a merchant account, with an actual bank . This allows you to accept credit and debit cards.
This allows you to have your own online merchant gateway instead of using PayPal. This means you can log into a website, enter someones credit card number, expiry date and CCV , and debit the money from their credit card like magic!
It also means you can pay fewer merchant fees .
It also means you can get a physical credit card machine that accepts EFTPOS payments when the client doesnt have a credit or debit card, just their normal ATM card.
A merchant account can be difficult to get though, especially when starting a business. Try contacting a smaller bank or a bank you have an existing history with. The banks main concern is the risk of credit card fraud and customer complaints.
An example of low risk to them is having a physical store, where the goods are delivered when payment is made.
An example of high risk is someone that does not have a physical store, and the service is delivered months after the payment is made.
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How Much Do Credit Card Processing Fees Cost
Like we mentioned before, credit card processing fees are a big hang-up for business ownersand understandably so. Not only can they be costly, but theyre also somewhat confusing to grasp. Thats because theres a lot of different fees that come into play.
Remember, youll need to pay a fee to your actual payment processor or merchant services provider. Thatll be either a transaction or a monthly fee. But regardless of your choice there, youll pay a couple of other fees on each transaction as well. These typical fees include:
- Interchange fee: Fee collected by the bank that issued the credit card.Price: Varies greatly depending on the issuer but is around 0.3% for debit cards and 1.8% for credit cards.
- Assessment fee: Fee collected by the credit card issuer/network .Price: Also varies greatly but can be in the range of 0.10% to 0.13%.
In terms of exactly how much you can expect to pay to process credit cards, thats tough to put a number on. It hinges not only on the credit card network and the issuing bank, but also on things like:
- Your payment processors fee
- The type of credit card you need to process
- How youre processing the card
If youre looking for a rough estimate, expect to pay somewhere between 1.5% and 2.9% for swiped transactions and 3.5% for online transactions. QuickBooks Payments does not charge monthly or setup fees, but charges 0.25 cents per transaction and:
- 2.4% for swiped card payments
- 2.9% for invoiced card payments
- 3.4% for keyed transactions
Cheapest Credit Card Processing Companies For 2021
Meaghan has provided content and guidance for indie retailers as the editor for a number of retail publications and a speaker at trade shows. She is Fit Small Businesss authority on retail and ecommerce.
This article is part of a larger series on Payments.
Based on our evaluation, the cheapest credit card processing for small businesses is:
- Payment Depot: Cheapest credit card processing for most businesses
- Stax by Fattmerchant: Best overall value for small businesses
- Square: Cheapest for individuals and new small businesses, including no monthly fee
- Helcim: Cheapest interchange plus processing with no monthly fee
- PayPal: Cheapest credit card processing for occasional sales
- Stripe: Cheapest online credit card processing
- Dharma Merchant Services: Cheapest credit card processing for storefronts and restaurants
If you have a high-risk business , youll need to apply for a specialized high-risk merchant account. We recommend PaymentCloud for low processing fees. Otherwise, see our choices for the best merchant accounts for small businesses.
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Open A Merchant Account
After choosing your credit card processor, create a merchant services account with them. While you may already be using popular providers like PayPal for personal transactions, youll need to establish a separate business account to enable your company to accept credit card payments.
Creating a merchant account typically involves providing some information about your business and setting up a connection with your businesss bank account where money will be deposited.
Why Should Businesses Accept Credit Cards
Heres the biggest reason: Because theyre the most common type of customer payment.
Credit cards were the most prevalent payment method in the United States in 2020, with 38% of point-of-sale payments being made by credit card.
Most customers will expect that your business is able to accept credit cards, and cash-only businesses could lose out on those customers altogether. Only 41% of Americans say they regularly carry cash. And those that do typically only have $25 in their wallets at a time.
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Ways To Process Credit Cards
As far as whats happening behind the scenes, the nuts and bolts of processing credit card payments is the same across the board.
However, there are a number of different ways a customer can get their payment information to you. Maybe theyll insert their card into your card reader. Or perhaps theyll scan a digital wallet. Or maybe you need to take down their information over the phone.
Each of these methods has its own nuances, so lets go into a little more depth on each of them.
How To Accept Online Credit Card Payments
To accept online credit card payments, youll need to sign up for an online payment gateway such as Stripe or PayPal. These services work by processing your clients online payments for you and charging a processing fee for each credit card transaction your business accepts. If you use a cloud-based accounting solution, you probably already have access to online credit card payment solutions through app integrations within your online accounting software.
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Choose A Payment Processing System
When a customer gives you their credit card to pay, theres more to it than simply swiping or inserting the card. The customers card and account details have to be reviewed and processed electronically so that the payment to you can be authorized. All of this happens digitally behind the scenes in a matter of seconds, but you need to hire a payment processor to make it all work.
If you want to accept credit card payments, you can do it one of two ways: merchant accounts or payment service providers. A merchant account is an account that you open with a bank to accept credit card payments. Payment service providers are companies that allow you to accept credit card payments without setting up a merchant account.
Of the two, a payment service provider may charge lower processing and transaction fees. So it may work well for you if you have a newer business or relatively small credit card payment volumes. But if you do a large volume of sales from credit cards, then a merchant account could be an easier way to manage your credit card payments.
In Person At A Fixed Location
This is when you have a brick-and-mortar business such as a retail store or medical office. You accept payments at one or several cash registers at your business location.
Equipment needed: A point-of-sale system that includes functions such as inventory management and loyalty/gift card programs, or a hardwired countertop credit card terminal
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What Do You Need To Accept In
To accept card payments in-person, you need the following:
Payment processor.The service that actually initiates and completes the transaction with the card networks and the banks is called a payment processor. Payment processors charge a transaction fee for every payment accepted.
Point-of-sale system. This is the software used to ring up sales, track inventory and view your sales history. Hardware can include items like a terminal, card reader, bar code scanner and cash drawer. Free POS software exists, but POS systems with more features charge monthly or annual subscription fees.
Card reader. A card reader might come included with the POS system if it isn’t, you may have to shop for one that’s compatible with your setup. Some providers offer free card readers. More elaborate setups can cost over $1,000.
Often, the hardware and services needed to accept credit cards come bundled together from a single provider. For example, Toasts POS system works only with Toasts payment processing. In other cases, you can assemble a system with components from different providers. For example, Vend POS is compatible with various card readers and payment processors.