If you never have accepted credit cards before, and depending on the complexity of your business, it can be fairly simple and quick to get started. Read on as we go over what to expect when preparing to accept credit cards.
For smaller businesses, the process is straightforward. Sign up with a merchant, such as Paypal, Stripe, or Square. These companies are called fintechs and they make the process of accepting credit cards incredibly easy.
To get set up, create an account with one of the above companies. After your account has been created, link your checking account to it. Depending on how you want to accept credit cards, there are a few options available.
Mobile credit card acceptance allows you to take customer payments at a remote venue such as a trade show, fair, or holiday event. All you need is a mobile phone or tablet. A device will be provided to you by the merchant. Plug this device into your phone or tablet and install the merchant’s credit card processing software. When it’s time to take a payment, swipe the customer’s physical credit card through the attached device. Once the payment has been processed, you can text or email the receipt to the customer.
You can also run cards by phone using a virtual terminal. A virtual terminal lets you skip the steep cost that can be involved with POS or hardware terminals. Just log into your credit card processing account, type in the customer’s credit card info, and process the payment.
There is also the web payment option, which lets you take credit card payments through your website. This is a more complex setup and may require a web developer. In the simplest case, it’s only a matter of configuring a product in your credit card processing account and adding a related button next to the item on your website. Once it is set up, the payment workflow is automated since you don’t need to interact with the customer to process the payments. In more complex configurations that require access to the merchant’s API (web programming interface), a web developer will be needed.
Depending on which merchant you know, all of the above payment options may not be available. Make a list of the different payment options you plan to accept and then confirm that the merchant offers them.
Processing fees for the above merchants will all be very similar. Expect to pay just under 3% of the transaction plus $0.30 to $0.40. There aren’t any monthly fees. This arrangement works well for companies that don’t process large volumes of credit card payments each month since there’s no minimum monthly required amount to process.
Once you do begin processing larger volumes, you may consider switching to a less expensive merchant that can also handle large monthly volumes.
Once your monthly credit card processing volume begins to become large, the merchants mentioned in the previous section will become cost prohibitive. You’ll need to seek out a merchant that discounts based on volume. Larger volumes mean reduced transaction cost. Volume-based transaction fees are usually under 2 percent.
There are additional fees associated with merchants that process large volumes of credit card payments, including a monthly fee and a one-time setup fee. However, compared to smaller credit card processors, you’ll still save on fees. There may also be a monthly minimum fee if you don’t reach a minimum amount in payments processing.
B2Bs who have customers, such as governments, schools, and other businesses, generally pay some of the highest credit card processing fees. They pay a rate similar to that mentioned above for smaller companies, plus an interchange fee.
These fees can be reduced by getting level 3 approval, negotiating on the interchange fee, and applying a surcharge to larger purchases.
Chargebacks occur when a customer disputes your credit card charge. Chargebacks can quickly eat into profits both in the form of fees and lost customers. It can be difficult to win a chargeback dispute. The best defense for chargebacks is a great offense. In other words, it all starts with excellent customer communication.
A few examples of communication that help avoid chargebacks include:
- Disclosing all fees related to a purchase.
- If the charge is recurring, send notices to customers that they will be charged on X date.
- Maintain good relationships with customers so they may be more willing to come to you first rather than initiating a chargeback.
Accepting credit cards is a great way to increase growth. It opens the customer base to far more customers and potentially larger purchases per customer. After all, swiping a card is extremely easy from customers’ point of view. They never see money leaving their accounts or wallets at the time of purchase.
Accepting credit cards also reduces the time associated with processing payments such as cash or paper checks. While credit card payments do require a fee, this can be offset in savings from labor cost.