In the latest trend in the business world, accepting credit card payments has become a vital part. Today’s consumers are using credit or debit cards more than ever. Researchers have found out that, on average, purchases with cards are also on a larger scale than purchases with cash. A survey by U.S. Bank found that about 76 percent of consumers keep less than $50 in cash on hand. About 46 percent of these researchers have said they use cash lesser than eight days a month. Accepting credit cards payments gives your business the capacity and capacity to reach more potential customers, making it a very profitable business regime. And if you think to start an E-Commerce business, whether as a new business or for an existing one, accepting credit card payments is a must. Are you ready to take the upcoming step? Below, we discuss everything you should know to set up credit card processing for your business.
Steps to Commencing Accepting Credit Card Payments
5 Steps to Start Accepting Credit Card Payments
Let’s look at the five steps required to set up your business to start accepting credit card payments.
Step 1: Call a merchant service provider
First, you will need to have a communication with a merchant service provider. Some providers permit you to sign up online, while others make ask you to contact a sales representative. After that, you will be able to break down the contract. Some may need you to print out an application and scan it with a wet signature.
Once you’re in the process of accepting credit card payments, you have to take a decision on which payments methods you have to use. With a merchant service provider, your options should include accepting credit card payments online, in-person, with a mobile device, and over the phone.
Online credit card payments are a crucial part of any e-commerce platform. To enable online payments, you need 3 things:
- An online storefront – This allows you to show your products and/or services to browsing customers. To sign up for a digital storefront, many businesses simply sign up for accounts through an e-commerce platform.
- A virtual shopping cart – This gives customers a place to keep their items. Online shopping carts ensure hassle-free transactions for your customers.
- Online payment gateway provider – A payment gateway provider enables your business to coordinate a cart and storefront. Thus, you can process payments through a safe and secure, cloud-based solution. With this software, it’s simple to start accepting credit card payments.
With a tangible business location, it’s a great idea to accept credit card payments. It gives your customers another way to pay for your goods. Data from the Federal Reserve Bank of San Francisco shows that customers use cash for just 35 percent of in-person transactions. Contributing in-person card payment options gives you surety that you can cover most of the consumer transactions. To complete in-person transactions, you have to have a good and amazing point-of-sale (POS) system. This system incorporates all the important hardware, like a credit card reader, as well as the software that processes the credit card data.
For an in-person customer, after insertion, clearing it, or tapping their card, transactions take a fraction of seconds. For this process, you can utilize a tangible card reader or an online virtual terminal. A virtual terminal requires a software installation on a smartphone or computer. This allows you to take card payments when the card is not present, such as over the phone, by typing in the card information. After going through the card, funds from the transaction are given to your business account in days.
In-person payments also come with smartcard payment options. Many businesses use card readers with near-field communication (NFC) technology. This permits a business to take credit card payments using a contactless method, such as Apple Pay and many more.
Mobile card readers give you the possibility to accept payments with a tablet or smartphone. This is ideal for businesses on the go that are detached from a brick-and-mortar location. For example, mobile payment capabilities are necessary for a business like a taco truck, music festival vendor, or animal stylist that makes house calls.So, how can you set up mobile payment processing? You’ll need a mobile reader and an application. Thankfully, this technology is broadly available. Many POS providers, like Square, Shopify, or PayPal, offer the software and hardware you require. The majority of card readers on the market take swipe or chip cards. Many of them also take tapped cards. For example, Merchant Stronghold offers many mobile card readers that are put to work with near-field communication or tap payments.
A benefit of choosing this is that in-person mobile transactions tend to have lesser processing fees when done through a phone or tablet.
Over the phone
Your business can ask to take payments over the phone. This option is commonly a must for restaurants that want to give their customers the choice to pay for takeout orders over the phone. This is usually done through an online user interface known as a virtual terminal. With the virtual terminal, one transaction, as well as recurring billing functionality, is accessible.
The merchant can also send or start invoices from the interface. Transactions where the business owner has the customer’s credit card details, but the cardholder is not present practically, are referred to as a card-not-present (CNP) transaction. It is necessary to note that these sorts of transactions typically take place with slightly higher credit card processing fees due to the inflamed risk of fraud.
Here are some suggestions on how to smartly handle CNP transactions to alleviate fraud. According to the U.S. Payments Forum, CNP transactions made up about 45 percent of all credit card fraud in 2014. These fees that occur with association and over-the-phone transactions are a must budgetary consideration for your business to chew on.
Step 3: Apply for a merchant account
You’ve now inspected the ready payment options and are ready to affix the right merchant account for your business. So, what do you expect to know?
Applying for a merchant account may seem knotty but there are helpful guides on how to get a merchant account that gives you all the perspicuity needed to direct the application process with peace. Here is a general outlook of the important steps to take before smacking “submit” on your merchant account application:
- Get your business license
- Fix a business bank account
- Affirm your business structure
- Consider separate processors
- Add terms of service and refund policies
- Ensure PCI compliance
- Collect required documents
Once you fulfill your application, which is the most frequent digital, a merchant services provider will go through your documents to permit your approval. At this point, there are a few ultimate steps to baking your business for its new processing characteristics.
Step 4: Set up hardware and/or software integrations
Leaning on what payment options you select for your business, you’ll have unique equipment and software requirements. For example, for online credit card processing, you will not need the counter credit card terminal and POS system with physical hardware that you would with in-person transactions. Your new processing may define that you have to upgrade and combine your existing hardware and/or software. If your business is a brick-and-mortar, you might have to buy checkout software or install an EMV chip-enabled card reader. Your payment service provider may provide this equipment for you to set up in your store.
Step 5: Maintain good processing and avoid chargebacks
As the final step in your credit card processing journey, it’s a great idea to have great chargeback prevention and management tools if you’re payments in online or card-not-present surroundings. Because chargebacks can be a bit expensive to your business, it’s a great idea to be proactive about securing and managing them. To do so, you will want to make sure you invest in useful transaction recordkeeping, quality customer service, and chargeback management solutions. With useful systems in place to look after all your processing needs, you can set your business up for financial full bloom and credit card processing success in the future.
How to Accept Credit Card Payments Online
Accepting credit card payments online is pivotal for any e-commerce business. The first step, asserting you’ve already held a merchant account, is to integrate a payment gateway into your online shopping cart. Most websites and e-commerce platforms make it super easy to integrate the gateway in the backend with just a few steps and clicks. It is important to note that you must initially cross-reference gateway compatibility with your specific content management system (Shoplift, Woo Commerce, Magneto, etc.).
Popular gateways like Authorize.net and NMI both have high-level fraud settings that should be pre-designed before going live. Your merchant service provider should know how to set this up properly.
Once set up, the gateway effortlessly handles transactions on the backend and deposits the funds into your merchant account without your interference. Ultimately, the funds are then moved to your business bank account less any transaction fees.
What’s the Excellent Way to Accept Credit Cards for Small Business?
The amazing way to accept credit cards depends on the unique aspects of your small business. That said, you’ll want to consider every element before making your judgment. First, you’ll need to look out which method or combination of the below methods is most favorable to your needs:
- In-person swiped transactions – This contains POS systems, standard plug-in EMV terminals, and wireless swipes
- Mobile on-the-go transactions – This contains phone dongles/adapters, apps, and wireless terminals
- Over the phone MOTO transactions – This contains virtual terminals and mobile invoicing methods
- Online e-commerce transactions – This contains shopping cart and payment gateway integrations
This is where your merchant service provider comes into a role and plays their character; they can assess your needs and wants budget and third-party integration harmony. Your merchant account representative will be able to present a comprehensive product match of terminals that will comfort all of the above requirements and meet your needs.
Economic way to accept credit card payments
Most imagine the economic way to accept credit card payments is to spot a payment processor serving low processing fees. Although this is to a degree true, it is a must to consider several factors that conduce to your total expense. These factors include:
1. Merchant services provider (MSP) vs Payment service provider (PSP): If you’re are about to start and don’t have knowledge about how much you are going to be processing, but are fairly certain it’s going to be near about $5,000 per month, it would make the cheapest sense to use a PSP like Square. If you need anything more confusing or are processing more volume, it is more profitable to go with a constructed approach through an MSP.
- PCI-compliant payment gateways: A PCI-compliant gateway lessens credit card fraud, possibly saving you from security hazards and fines.
- Payment integrations: Reduce your back-office expenses by integrating and automating our payment systems and processes.
- Personalized customer services: Depend on a merchant services provider who evaluates customer service, giving you the chance to talk with a live agent who can provide pricing comparisons to get you the best rates.
- Pricing structures: Take a look at the many pricing structures to see which would save you the most money based on your card mix.
- Hidden fees, transaction fees, subscription fees, and chargebacks: Certify your credit card processor is transparent, listing all fees assault. Some common hidden fees to watch out for include:
- Support fees
- Mandatory long-term contracts
- Monthly or annual minimums
- Installation or upgrade fees
- Application and setup fees
- Fraud prevention services: By deducting fraud and risk (for example, through Level 2 and Level 3 processing), you diminish the fees and other capability costs mingled with fraud.
The easiest way to accept credit cards
Small and acceptable credit card readers make it easy for businesses to accept credit card fees. Some card bookworms can also work without Wi-Fi. To automate processes, integrate your payment platform with any other software, like customer management, QR codes, and text-to-pay invoicing.
Merchant Account vs Payment Service Provider
To accept credit card payments, your business has two main ways. You can get a merchant account or go with a payment service supplier. But, what are merchant accounts and payment service providers? Let’s look into the main varieties between the two options.
What is a payment service provider (PSP)?
A payment service provider, or PSP, is a company that gives your business the intelligence to accept credit card payments without beginning a merchant account. Examples of streamlined payment service providers include PayPal, Stripe, Square, and Braintree. Using these PSPs, businesses can accept credit and debit payments with few problems, however, there are many restrictions with these accounts.
A merchant account is a channel set up with a bank through which to process electronic credit card transactions. This has been the traditional way in which businesses accept card payments. How exactly do merchant accounts work? They function much like a bank account for your business. Money from card purchases goes into your merchant account, which is then transferred to your bank account once the transaction is complete. Merchant service providers range from banks and payment processing companies to independent sales organizations. Hundreds of providers sustain in the market.
PSP vs MSP
Payment service providers and merchant service providers each have their benefits and downfalls. PSPs are often chosen by newer businesses or businesses with smaller card processing densities. Merchant accounts tend to be a better choice for established businesses, as well as those directing a large volume of credit card sales. Furthermore, with a traditional PSP, you are subject to one valuing model and rate without any movability. On the other hand, MSPs can arrange and select the perfect pricing model that makes the most sense for your business.
The Fees Related to Accepting Credit Card Payments
While accepting credit card payments comes with an increasing profit margin and benefits, it also comes with numerous fees to consider. The average credit card processing fees range from 1.5% to 3.5%. There are some different pricing plans served by your payment processor that you’ll want to consider. In this section, we’ll cover four different kinds of fee pricing structures that you might undergo when accepting credit card payments:
- Interchange pricing
- Tiered pricing
- Flat-rate pricing
- Surcharge pricing
It’s necessary to note that this pricing will differ by the payment method used, whether it’s in-person, online, over the phone, or through a mobile device.
Some credit card companies, including the big four, charge a huge fee known as an interchange rate. The big four refer to Visa, MasterCard, Discover, and American Express. Each of these card companies charges different interchange rates. These rates will also differ by the level of risk of the transaction the person takes. For example, an over-the-phone transaction is considered riskier than an in-person transaction because, without the card present (known as card-not-present transactions), it’s tough to verify the customer’s oneness. Card networks consider transactions in a few industries riskier than others as well.
Interchange-plus pricing is the payment processing plan that sums up your card company’s interchange rate and the processor’s markup fee into a single fee.
With a flat-rate pricing plan, you’ll plan a permanent processing fee for each of your transactions. PSPs have flat-rate payment plans.
Let’s look at an example of a processor that uses a flat-rate payment plan. Square charges:
- 2.6% + $0.10 for in-person transactions
- 3.5% + $0.15 for manually-entered payments
- 2.9% + $0.30 for online payments
Given their consistency, flat-rate plans make processing fees simple to budget. But, for businesses with huge credit card transaction amounts, this can be more lavish.
Another kind of pricing, one that’s also practiced by merchant accounts, is tiered pricing. With a tiered plan, you will pay an unlike fee based on the “tier” allotted to the transaction by the processor. The riskier the transaction, the more the fee will be. The risk level is based on the payment method and the kind of credit card being used.
The three tiers used for this pricing structure are:
- Qualified: Transactions with fewer fees, like non-reward credit cards and debit cards, receive the qualified rate.
- Mid-qualified: Middle-of-the-road transactions receive a slightly higher rate than that of the qualified rate. The standard bank-issued credit cards and low rewards cards fall into this tier.
- Non-qualified: The most valuable transactions, like those in which a high-tier rewards program or corporate credit card is used, receive a non-qualified rate.
An internal element of tiered pricing is its variability. You won’t always know what tier different transactions they will fall under, so your transaction fees will be tough to predict.
To offset fees cutting into your profits, businesses typically address this issue in one of two ways. You could higher the prices of your products and/or services across the board or you could add a surcharge fee to your credit card transactions. This surcharge, or convenience fee, can be applied to transactions under a certain lower limit amount.
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With this sort of pricing, you will need to be aware of regulations related to credit card surcharges to ensure your business quashes any illegal practices.
Secure Safety When Receiving Payments
When considering accepting credit card payments, it’s important to be proactive about the risks involved so you can keep your business safe. Here are the main risks when receiving card payments:
- Fraud – Credit card fraud can affect and damage a business. It’s necessary to discard the fraud risks in your business with a credit card system that values security.
- 2. Chargebacks – A chargeback is a payment that comes to a customer’s card due to due to a charge dispute or a return. Chargeback fees are a bit expensive and challenging to dispute, even if you’re in the right.
- 3. Processing fees – Fees involved with credit card processing can targets businesses with small margins especially tough.
To lower these risks, as well as ensure the safety and financial health of your business, we’ll cover some amazing practices you can use to safeguard your business in the next section.
Here are some best practices for businesses planning to establish credit card payment systems:
- Depend on software and equipment with strong reputations. With a large market of payment processors, it can be tough to select a trustworthy, efficient one, but be sure to check that the company with which you partner is known for its credentials.
- Invest in training your employees. To smartly invest your time and resources in the long term, it’s an amazing idea to educate your staff to tackle credit cards, manage data, and find out fraud, such as e-commerce fraud, BIN attacks, and credit card testing.
- Avoid storing your customers’ credit card data. While not illegal, storing card data opens your business up to potential risks. To avoid any issues, instead, utilize a use-and-delete process.
- Verify your customers’ shipping and billing addresses. This verification step cuts down on the potential for your business to experience fraud and thus be liable for losses.
How Can I Accept Credit Card Payments?
By now, you should have a good knowledge of how to accept credit card payments for your small business. When you accept cards, your business can enjoy these benefits:
- Your business will be more comfortable for your customers. Customers without cash on their person, aren’t forced to find a nearby ATM to pay for the transaction.
- Customers will view your business as trustworthy and legitimate. Cash-only businesses have a reputation of being “shady” or, at best, inconvenient.
- Consumers spend more when using non-cash transactions. In 2016, the average cash transaction was $22 while non-cash transactions were $112.
Accepting credit card payments immediately enriches your business by assisting you to reach more customers. In this world, the average consumer is looking for fast and easy ways to shop. By accepting credit card payments, your business can ask for modern consumer behavior and increase your sales.