How to Accept Credit Card Payments – Forbes Advisor


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A lot of the people starting a new business today are too young to even remember the old school days of credit card printing – you know, that clunky plastic device that has a charcoal print on a credit card next to you handwritten Receipt?

Fortunately for us, over the past 30 years, payment processing technology has made it much easier to accept credit card payments, even for small start-ups. In fact, most of today’s leading credit card processing services bundle payments with other features like e-commerce and inventory management. Here are some convenient and effective ways to accept credit card payments.

How to accept credit card payments

Accepting credit cards is relatively quick and easy for any type of business, and you can do purchases in person or online.

Credit card processing steps

Whether you receive card payments in person or online, the transaction process usually includes these basic steps:

  • The customer swipes, inserts, or taps their credit card or mobile device, or enters their credit card number to enter their information into the payment processor.
  • The payment processor communicates with the card’s issuing bank to ensure funds are available or the credit limit is reached and to detect possible fraud.
  • If the bank approves the transaction, the payment processor will debit the customer’s account and credit the transaction amount to your merchant account.

The difference between the different ways of accepting credit card payments is mainly how you enter card information in the front end.

In-store credit card payments

To accept credit card payments in a retail store – like a restaurant or store – you need a point of sale (POS) system with a card reader or credit card terminal that can process transactions on its own.

Modern point of sale systems like Square and Clover include hardware and software that you can use to process both card and cash transactions.

If required, customers can typically enter a personal identification number (PIN) for a debit card or sign the transaction to authorize the transaction on the screen or on a receipt printed from the credit card terminal.

Online payments

To accept online payments for e-commerce or other businesses, you need an account with a payment service provider (PSP) such as PayPal, Stripe, Square or Shopify.

You have to connect it to your online store, which is usually pretty easy with the right website builder. Many modern website builders like Squarespace, Kajabi, and Shopify, as well as marketplaces like Etsy, are designed to make online purchases easier and to integrate easily with payment processors. While most website builders come with a Security Sockets Layer (SSL) certificate to keep your customers safe, you may need to use a stand-alone service if you want to accept payments over the internet. For more information, check out our guide to the best SSL Certificate Services.

If your existing website is not doing well with payment providers, you may need to simply link to your account – for example, with a PayPal “Pay Now” button on your website – and allow customers to pay through the third-party site. This process will be less seamless and may require more manual work on your part to keep the orders going.

Mobile payment processing

You cannot accept physical cards anywhere with any equipment other than your mobile phone via mobile payment processing apps. These lightweight solutions are great for on-the-go sales in places like farmers markets, art fairs, trade shows, and parties.

Square is the most popular and easiest to use mobile payment processor. Its card reader is a tiny attachment that fits directly into the headphone jack (including Lightning connectors) on your smartphone.

You can simply download the Square Point of Sale app on your Android or iOS device, enter the customer’s order, or enter the total amount and swipe the card to complete the transaction, just like at a POS in a store. If necessary, customers can sign directly on the screen to authorize the transaction.

Credit vs. debit card transactions

Credit and debit card transactions look similar, but differ in the backend. Both are facilitated by credit card networks, so the point-of-sale process looks the same: enter information, communicate with the bank, and process the transaction.

On the customer side, the difference is that in the case of a debit card transaction, money is immediately withdrawn from their bank account and in the case of a credit transaction, it is not.

The payment looks different on your side. Debit card transactions are usually processed faster and the money ends up in your merchant account the same day. With credit card processing, the payment processor has to deposit money into your account (and later settle it with the customer), which can take up to a few days.

Debit and credit card fees can also differ depending on the type of account you have with the payment provider. And a credit card network can restrict transaction minimums for debit cards, but allow them for credit cards (due to regulatory requirements).

Merchant account vs. payment service provider

Traditionally, you had to open a special bank account called a merchant account to accept credit card payments. You sign up with a bank and negotiate a fee agreement, then get or buy the hardware needed to process payments.

Payment service providers such as PayPal, Square, Stripe and Co. make this process much easier and in many cases also cheaper. They are similar to merchant accounts, but you can easily sign up online and manage the account. And it’s easy to transfer funds to your PSP account to make refunds, make purchases, or add funds to your bank account.

If you’re starting out, a payment processor will likely be the easiest, most affordable way to accept credit card payments for a small business.

Credit card processing fees

When you accept a credit or debit card payment, the typical fees that apply are:

  • Exchange rate: This is a percentage of the sale that goes to Visa, Mastercard, or another credit card company. Prices can range from 1.5% to 3.5%, generally higher for premium cards.
  • Transaction fee: This is the reduction you pay to the payment service provider or processor on top of the exchange rate. Some processors charge a flat rate per transaction that covers their cut and the interchange rate, and others use an interchange plus model where you are charged the interchange rate plus their own varying fee.
  • Service fee: Depending on the provider, you may pay a monthly or annual subscription fee to use the service. Most small business PSPs, like Stripe and PayPal, waive this fee and only charge flat-rate transaction fees.

frequently asked Questions

What is the best way to accept credit card payments?

The most convenient and affordable way to accept credit card payments for your business depends on several factors including what you sell, where you sell it, your sales volume, and how your customers prefer to pay. Flat-rate payment service providers are best for businesses with less than $ 5,000 a month in revenue, while more complex models may be better suited for larger businesses.

How can I accept credit card payments for free?

They cannot accept credit cards with no fees because this is how credit card networks are paid for their services. However, you can bypass the fees by adding a surcharge to credit card payments or by increasing prices. You could incentivize cash payments by offering a discount to customers who pay with cash.

Is there an app for accepting credit card payments?

There are several mobile apps to accept mobile credit card payments including Square, PayPal Here, Payanywhere, Clover, and QuickBooks. Square is the easiest to use and carry around as its small card reader fits right in your pocket.

How can I accept credit cards on my mobile phone?

To accept card payments with a smartphone, you need to download a mobile payment processing app such as Square, PayPal Here, Payanywhere, or Clover. When you sign up, they send you a card reader that plugs into the headphone jack on your phone so you can accept physical cards and do entire transactions from your phone.

What is the cheapest way to accept credit card payments?

Payment processors with flat transaction fees are typically the cheapest option for businesses that have less than $ 5,000 in revenue per month. Processors with Exchange Plus models are best for larger businesses with higher sales volumes.

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