How to Take Credit Card Payments as a Small Business: Detailed Guide 2022

If you are a new ecommerce provider, you will want to know how to accept credit card payments for small businesses.

As a small business owner, your main priority is keeping your customers happy so that they will keep purchasing from you and you will earn a healthy profit. One of the things you must consider is the best way to accept credit cards for a small business. It’s common knowledge that the vast majority of people - especially when purchasing online - will want to pay using a credit card. As a seller, the more payment options you can provide for your customers, the broader the customer base you can attract and the happier and more loyal those customers will be. 

Surprisingly, a good number of businesses don’t offer credit card options, and perhaps this is because they do not know how to set up credit card payments for a small business or the importance of doing so. In this article, we will explain how to take credit card payments as a small business and why it’s important for your business growth. 

So What if You Are a Small Business?

You may think that not accepting credit cards is a good way to keep your costs down, but, in fact, the opposite is true. Yes, there are costs involved in accepting credit card payments online, but there are greater costs to NOT letting your customers use their preferred payment methods.

Regardless of the size of your business, without customers you will cease to exist. And, accepting credit card payments as a small business will actually make it easier for you to manage your cash flow and keep track of your income. 

How to Set Up Credit Card Payments for Small Online Businesses?

Setting up credit card payments for small businesses is not difficult. Following is a quick run-down of the steps you need to take, which include: finding a credit card processor, opening a merchant account, setting up payment terminals and understanding the fees you will need to pay. 

Find a Credit Card Processing Provider for Your Small Business

In order to be able to take payments online, you need to set yourself up with a payment processor or a credit card processing provider who will handle all of the behind-the-scenes logistics from when the customer enters their credit card information until the money arrives in your bank account. 

The type of processor you choose will depend on your exact business needs, including the number of transactions you expect to process and whether people will be paying online, in person, by phone or some combination. You should also consider which credit card types you will accept, such as Visa or AmericanExpress, and whether you will also accept payments via mobile apps. 

Depending on your business needs, you will be able to prioritize the specific features that are most important to you and you can then search for a payment processor accordingly. It’s definitely worth shopping around to find the best deal. Look for the balance between the features that you want at a price that you can afford. 

Open a Merchant Account

The next step is to open a merchant account, which is a bank account that is designed specifically for business use and without which you cannot accept credit card payments. Setting up a merchant account is just another bureaucratic step in the process of running a business. It is fairly straightforward and involves applying directly to the bank. 

It’s worth noting that there are some payment processors that do include merchant accounts as part of their services eliminating the need for you to open your own account. 

Set Up Payment Terminals

The hardware and software required is slightly different for a brick and mortar store as compared to an online store. If you have a physical location at which you will accept payments, you will need a card reader and point-of-sale device. Given today’s advances in technology, it makes sense to purchase (or lease) a terminal that works with contactless payment methods. 

For an online only store, you will need an payment gateway or other online payments system that will enable you to accept credit card payments online. You can choose to use a full ecommerce platform that is capable of both hosting online stores and accepting credit card payments for small businesses. Or, you may use a completely separate payment infrastructure that can integrate with your online store. 

Beware and Pay Attention To Credit Card Payment Processing Fees

Regardless of what type of processor you choose, anytime you accept credit card payments online you will incur some sort of fee. Transactions that take place in-person tend to have lower fees due to the lower risk as compared to online transactions. You should definitely look into several credit card processing companies to compare fees and get pricing quotes in order to find the best way to accept credit card payments for your small business. 

You will want to consider how much the fees will cost you and what that adds to your operating costs. If the fees will be higher than you expected, you may need to raise your prices or add a surcharge for some transactions, such as if they are under a certain limit, to try to balance out your costs. 

How Do You Start Accepting Credit Card Payments Online?

The steps described above are the general framework involved in setting up credit card payments for small businesses. Below is more detail about some of the specific issues that you need to think about when answering the question of how can a small business accept credit cards. Of most importance is choosing the right payment processing provider and ensuring that you have a solid understanding of the fees so that there will be no surprises later on. 

Decide Which Type of Processor Will be the Best Fit for Your Business

There is no shortage of payment processing providers, many of which offer the same services. It’s up to you to do the research and find the one that is the best match for your business. To determine this, consider how many credit card transactions you expect to process and, of those, approximately what percentage will be in-person vs. online or even over the phone. Also, because the credit card company fees vary so widely, you need to decide which types of cards you are going to accept and make sure you add up the right fees for each card type. 

Some providers may offer volume discounts, so if you intend to have a lot of transactions in a given time period, check with each provider that you are researching to see whether you would be eligible for discounts. If your business is online, you will need a payment processor that can easily integrate with your web host.

Identify How You Plan to Accept Credit Cards Online 

It’s easy enough to say that you plan to take payments online, but even within that sphere, there are decisions to make. Bottom line, you want to accept whatever methods that your customers most opt to use. If they want to enter in their card numbers directly, then you want to enable that. If they prefer to use a mobile app like PayPal or Apple Pay, then you should facilitate that as well. The best way to accept credit cards for a small business is to listen to what your customers want and accommodate them. 

Once you know exactly which cards and how you will be accepting them, it will help you narrow down which providers to look at. 

Measure Fees Vs. Service Quality

As part of your process of choosing a payment services provider, you should very carefully consider exactly what services you are getting for the fees that are being charged. Credit card fees can be complex especially as each provider may have their own way of calculating and determining rates, so it can be hard to make direct comparisons. 

The three most common fees that you are likely going to have to pay include:

  • Transaction fees - usually a percentage of the sale plus a flat fee, this is a fee that you pay on each transaction that is processed. The pricing models used by each provider can vary significantly. 
  • Service fees - monthly and/or annual fees that are meant to cover general account maintenance and compliance.
  • Incidental fees - fees charged as one-offs under certain circumstances such as chargebacks. 

Some providers offer flat rate models, where the rate will vary from what other merchants pay depending on your specific situation, but once the price is locked in it will stay the same for you. Others offer a tiered model in which the price will change as the volume or other conditions of your transactions change. If you have a tiered plan, you need to be careful that your fees do not increase without you realizing it. 

Read the Contract Before you Sign it With the Processor

Remember that accepting credit card payments online for small businesses is key to keeping the business solvent. That means that you need to take your agreement with a credit card processor very seriously. It should go without saying, but make sure you read the contract thoroughly before signing it or else you are risking locking yourself into an agreement that might not be what is best for you and your business. 

The ideal situation is a month-to-month plan that allows you to end the contract at any time with no penalties. 

Create a Credit Card Processing Account

The last step takes place once you’ve finished researching all of the options, have chosen the provider you want to use and have very carefully read over the contract and ensured that you have a full understanding of all of the fees that you will be charged. All that is left is to fill out the application form and sign up with the provider. 

This process may also differ depending on who the provider is, but most likely will include providing details about your business as well as some personal information. The application is reviewed and approved and then your account will be set up. Another thing to check when researching potential providers is how long it will take to set up the account as this can vary from one day to a week or more. 

Best Credit Card Processing Service to Offer for Small Business

In addition to offering customers a variety of ways to pay for your goods or services, including cash, credit cards, checks, etc., even within those payment methods there are different ways the transactions can be processed. These ways include in-person, over the phone, via an app or using third-party authorization platforms. 

In-Person Payments 

In-person payments are only relevant for those with a brick and mortar store or other situation in which you are face-to-face with your customers. If that is the case, then you will probably want to have a card reader that can be used to swipe the customer’s credit card and a point-of-sale system to process the payment. 

Over-the-Phone Payments

In some cases, you may want to accept card payments on the phone. This is most commonly done by restaurants for takeout orders, but could also be useful for some online sellers in certain situations. To make a payment by phone, the customer would tell you their credit card information and you would then manually enter it into your card processing system. 

Keep in mind that phone payments tend to incur the highest fees because they are the most at-risk of being fraudulent. 

App Payments

Today, there are many apps that facilitate credit card payments such as PayPal, Apple Pay, Google Pay and others. For an ecommerce merchant, that means integrating these apps with your site so that customers can choose to use their payment information stored in the app in order to make purchases on your site. 

Third-party Authorization Payment Providers

This is probably the option that most online sellers will choose. Third party authorization payment providers (i.e. the credit card processors discussed above) can integrate with your existing website and allow for customers to enter credit card information and then process the transaction. 

Why Should Small Businesses Accept Credit Card Payments?

Accepting credit card payments is crucial to the survival of any business in today’s day and age, big or small. Although the small fees can add up to be quite a large percentage of your monthly costs, especially for small businesses, it is still worth absorbing this hit to your profits in order to continue drawing in new customers. Eventually, you will hit and pass the tipping point where you will be earning more from credit card purchases than you are paying in transaction fees (and, if not, then you should reevaluate your business strategy). 

Following are the main reasons why it is worthwhile for small businesses to invest in offering credit card payments:

Boosts Sales

Most people prefer to pay using a credit card, so offering this payment method is an easy way to attract new customers. People also tend to spend more per transaction if they are using a credit card as compared to cash or check. 

Improves the Client Experience

Customers will return to your store if they have a positive experience. If they are able to pay easily and smoothly using their credit card of choice, that is points in your favor and will foster customer loyalty. 

Increases Cash Flow

Credit card payments are processed quickly so that you will see the funds in your bank account usually within 24-48 hours of the transaction. This is much better for your cash flow than checks, for example, which can take up to 10 days to clear. 

Saves Time

Processing credit cards is done online and remotely and is a huge time saver as compared to having to go to the bank to deposit checks or chase customers to pay invoices due. 

Improves Payment Security

Credit cards are often more secure than cash because there is a paper trail so it is easier to track where payments have come from and who has paid and who hasn’t. 

Provides Useful Reports

Along the lines of the paper trail that increases security, your payment processor should also offer you reports that show exactly who your customers are, how much they have spent, what they have bought, etc. These reports are also very useful when it comes time to file taxes. 

Why Some Small Businesses Do Not Accept Credit Card Payments

Some small businesses may choose not to accept credit card payments if they have customers that primarily pay via cash or check. In this case, it really may not be worthwhile for them to pay the credit card processing fees if so few customers actually choose to pay in this way. This is probably a very rare and unlikely scenario, especially in the ecommerce world. 

Using Credit Cards Safely

While the advantages of taking credit card payments for small businesses are clear, there are also certain risks to be aware of, including the following:


  • Fraud - hackers abound and while there are safeguards in place to protect credit card users and systems, it is important to always be aware and investigate any questionable transactions.
  • Processing fees - when margins are already thin, processing fees can add up and be a significant business expense. It is usually worth it in order to offer customers the option to pay via credit card, but you should keep a close eye on your expenses so that you can avert any crisis situations.
  • Chargebacks - a customer will initiate a chargeback if they think they have been charged wrongly or - sometimes - if they are not satisfied with the product. Although it is possible to dispute a chargeback if you think the charge was legitimate, it is a costly endeavor and the law is generally on the side of the customer. 

How can Pay.com Help You Accept Credit Card Payments

Pay.com is a payment infrastructure that can help ecommerce providers of any size accept online credit card payments (and all other types of payments). Pay.com takes care of the entire process for you - from connecting the different payment methods to your site to processing the payment information to ensuring that the funds are transferred to your bank account as quickly as possible. 

For more information about how Pay can help you, please be in touch.


FAQs

What is credit card processing?

Credit card processing refers to the actions that take place in order to transfer funds from a customer’s credit card to the seller’s bank account. There are a few players involved in this process including the credit card companies, banks and payment processors. Each one may charge their own fees.

How does credit card processing help my business?

Accepting credit card payments, for a small business as well as a larger one, is an easy yet important way to keep customers happy. Especially when it comes to shopping online, most customers expect to be able to pay using a credit card and if you do not provide that option they may take their business elsewhere.

How can I personally accept a credit card payment?

There are some credit card processors that will allow for individuals to use their mobile phones to accept credit card payments without having to be registered as a business or have a business merchant account.

How do small businesses accept payments?

As a small business, you can sign up with the payment processor of your choice in order to accept as many or as few payment method options as you would like.

What's the cheapest way to take card payments?

While it is impossible to avoid paying anything at all in order to be able to take credit card payments, you can shop around and compare prices from different service providers in order to find the best deal that works for your business.

How much does it cost to be able to accept credit cards?

Credit card processing fees can vary rather significantly depending on the provider and whether there are any associated fees in addition to those charged by the credit card company. It’s safe to assume that fees are likely to be in the range of 1.5% to 3.5% of transaction totals.

Can I accept credit card payments without a merchant account?

If you use certain third-party processors, you do not need to also set up your own merchant account. These processors use aggregate merchant accounts and then transfer the money directly into your business account. This could be a good option for very small businesses who are not yet ready to open their own merchant account.

Can I use PayPal to accept credit card payments?

You can integrate PayPal to your own website so that your customers can use their PayPal account (which is connected to their credit card) to purchase from you. Be aware that there are fees involved in doing this.

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