How To Accept Credit Card Payments For Your Business
Accepting credit card payments at your small business can help clients pay you faster and more easily. However, doing so isn't free. You'll have to pay for payment processing at the very least. Obtaining the appropriate point-of-sale software and hardware may further add to the costs.
What do you need to accept card payments?
You'll need the following to accept card payments in person:
Processor of payments. A payment processor is the service that actually begins and completes the transaction with the card networks (such as Visa or Mastercard) and the banks. Every time a payment is accepted, the payment processor charges a transaction fee.
A POS (point-of-sale) system is a device that allows you to make purchases. This is the program that is used to track inventory, ring up transactions, and examine your sales history. A terminal, card reader, bar code scanner, and cash drawer are examples of hardware. Although there is free POS software available, POS systems with additional capabilities need a monthly or annual membership price.
Reader for credit cards. If your POS system doesn't have a card reader, you'll have to go out and get one that works with your setup. Some companies give free card readers. The cost of a more complex arrangement might exceed $1,000.
The hardware and services required to process credit cards are frequently packaged together by a single vendor. Toast's POS system, for example, is only compatible with Toast's payment processing. In other circumstances, you may be able to put together a system using components from several manufacturers. Vend POS, for example, works with a variety of card readers and payment processors.
Make sure your payments are reasonable.
Find the proper payment source for your specific company requirements.
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What are the requirements for accepting online payments?
Payment gateway: A payment gateway is a secure digital interface that allows clients to submit their credit card information. Stripe and Braintree are two companies that provide online payment gateways. Many point-of-sale systems also allow retailers to take payments online, either directly or via interaction with an e-commerce system.
Payment processor: A payment processor originates and completes online transactions with credit card companies and banks, much as it does with in-person payments. Every time a payment is accepted, the payment processor charges a transaction fee. Payment processing services are included in many payment gateways.
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When a consumer pays using a credit card, what happens?
When a consumer swipes, taps, or dips their card into a card reader, a series of activities occurs among intermediaries:
The card information is securely captured by the card reader or online payment gateway, and the payment processor sends it to the relevant card network (such as Visa) for authorisation.
While this is going on, the payment processor sends a request to the card's network, which then sends it to the card issuer (such as Chase or Bank of America).
The request is evaluated by the issuer, who either authorizes or rejects the payment.
You can accept the money and finalize the transaction if the transaction is approved.
The payment processor informs the issuing bank to send funds after the transaction has been accepted.
The money are made available to the merchant (less fees).
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Merchant account providers vs. payment service providers
When a card transaction is completed, the money are sent to a merchant account, which is a type of bank account. The funds will be deposited to the business's account in one to two working days in most situations.
If you're working with a payment service provider, also known as a third-party payment provider, payment facilitator, or processing aggregator, the merchant account technically belongs to them; they aggregate all of their customers' funds into one or more merchant accounts, which can then be transferred into individual accounts. Payment service businesses such as Square and PayPal are examples.
The procedure of getting paid is generally the same whether the proceeds from card transactions go in a dedicated merchant account or one that belongs to a payment service provider. However, each approach has its own set of benefits and drawbacks.
Pros of payment service providers
It's simple to set up.
For businesses with modest sales volumes — often less than $10,000 per month — this is the most cost-effective alternative.
Cons of Payment Service Providers
Account interruptions are more likely. Because the payment service provider owns the merchant account, you're more likely to have account holds or termination than with specialized merchant accounts if the provider suspects any transactions are in violation of the terms of service.
High-risk businesses, such as those with a high rate of fraud or chargebacks, or those selling things that are restricted at the state or federal level, such as weapons or cannabis, are generally not eligible.
Experts in merchant accounts
For enterprises with bigger sales volumes, it is more cost-effective.
Generally not bound to a particular POS system manufacturer.
In general, you'll have more access to support personnel who are familiar with your particular business and activity.
Cons of a merchant account
When compared to a payment service provider, the approval procedure and setup might take longer.
The charge structure, which is generally interchange-plus pricing, might be confusing.
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What else should you think about before you start collecting credit card payments?
What further services do you require?
Do you want a complete solution that includes a POS system, credit card processor, report generating, and staff management, among other things? This approach is convenient since everything works together right away. However, those additional benefits come at a price. You can choose a merchant account through a firm like Payment Depot, which is compatible with many POS systems.
Where will card payments be accepted?
Consider how you want a consumer to feel during the checkout process. A modest retail store, for example, could require one or two big countertop terminals, such as those provided by Clover. Customers can pay at their table using a portable card reader at a café. In such situation, a tough portable POS device like Toast's could be the best option.
Businesses that do some or all of their business online will require a digital payment system. Some businesses, such as Shopify, provide tools to assist consumers establish an online presence, including a payment page. Others, such as Stripe or PayPal, specialize in developing digital payment solutions that can be integrated into any website.
How much will it set you back?
The cost of accepting card payments varies based on the services required and the supplier selected, but the charges you'll encounter are quite consistent.
Hardware is expensive.
For in-person companies, the physical equipment that reads card data is a must-have. The cost of a card reader can range from nothing for a simple reader to hundreds of dollars for a complete POS system. When weighing your alternatives, make sure to ask:
Will you buy or rent the equipment?
Is the cost of the gear included in the membership fee, or does it have to be paid separately?
Fee for subscription
You'll normally have to pay a predetermined monthly cost, which is determined by the quantity and types of services you utilize. Many payment service companies have different pricing levels, each with a different range of features. Some firms charge a price to upgrade a lower-tier membership to a higher-tier service (such as loyalty program administration).
Fees for transactions
You'll be charged a fee every time someone pays with a credit card. This tax is usually calculated as a percentage of the sale price plus a certain sum, such as 2.9 percent + 15 cents. Because the danger of fraudulent conduct is higher online, you'll pay more for online transactions than in-person ones. Other factors, such as the type of card used, may impact the cost of the plan, depending on the plan.
Other details to think about
Some businesses need a contract, and breaking the contract before it expires might be expensive. Other businesses provide month-to-month memberships that may be cancelled at any moment.
Installation, setup, and training may be required for more complicated payment solutions, particularly POS systems that allow for fully personalized menus.
The quality of customer service varies. Will you want to talk to someone right away if there's a problem?
Contact Us Today
Conclusion paragraph: We know that not every business is in the same place. That’s why we work with a variety of payment processing platforms to ensure you have access to the best technology for your specific needs and goals, whatever they may be. If you want help finding out which platform might fit your organization best, contact our team today!
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