According to a 2018 study by the U.S.-based Global Payments Innovation Group, consumer spending will be $5.2 trillion in 2021, and more than half of that amount will come from digital purchases — primarily through mobile devices — which are expected to account for nearly four out of every ten transactions made on credit cards worldwide. In 2021, the credit card industry will have changed. The new rules will allow consumers to accept credit card payments. The use of cash is gradually decreasing. More and more companies are being forced to take credit cards due to the cashless trend. According to a new poll, only 16% of Americans claim they always carry cash. Fifty-eight percent of respondents want to quit using money entirely in the foreseeable future. Accepting credit card payments has become critical in today’s world, whether you’re just starting or have been in a company for decades. Credit cards are the only appropriate payment method for internet enterprises and ecommerce retailers. Are you ready to begin? In just a few easy steps, I’ll show you how to start taking credit card payments for your company.
Accepting Credit Card Payments:
It’s simple to accept credit cards. However, choosing a processor and setting up your equipment will take up most of your time.
- Look for a payment processor.
- Make a deal with your partner.
- Get your gear together.
- Please accept payments.
The Good
Accepting credit cards is the most convenient option. Consumers are carrying less cash, as previously stated (if any). Therefore, you’ll appeal to a far more significant number of clients if you accept credit cards. Credit cards are also more efficient, particularly for in-person payments. They can assist in eliminating lengthy lines and reducing the amount of time each client spends at the register. It’s considerably simpler to swipe, dip, or tap than counting money and making the change. It also aids in the reduction of human mistakes, such as incorrectly estimated change. Employees who use credit cards are less likely to steal cash. The need for touchless payments has risen due to recent global events. With tap-to-pay capabilities, consumers often buy products and services using smartphones, wearables, digital wallets, and credit cards. This helps to keep viruses from spreading throughout the checkout process. In terms of accounting, modern credit card processing technologies also make life simpler. The bulk of these systems integrates with accounting software to reduce manual journal entries. These systems may also interface with software for inventory management and other tasks.
The Bad
The fees are the most aggravating aspect of taking credit cards. Several entities are involved in each credit card transaction, including the card network, processor, issuing bank (cardholder’s bank), and acquiring bank (your bank). Each partner charges a modest fee for their participation in the procedure, which is paid by the merchant at the end. Depending on your contract’s pricing structure, you may be charged various fees for each transaction, making it difficult to forecast your overall processing expenses. Even if the two consumers had the exact transaction total, an online purchase made with an American Express card might be more costly than an in-person purchase made with a Visa card. Fees for corporate credit cards, consumer credit cards, and debit cards may vary. In addition, credit card processing necessitates up-to-date and reliable technology and software. Certain transactions may be unavailable if you have issues with a terminal or unreliable internet connection. It might also take a long time to set up particular gear. Accepting credit cards comes with another drawback: chargebacks. When a cardholder challenges a charge with their card network or bank, this is known as a chargeback. During a dispute, credit card providers and banks are more inclined to side with the cardholder, which may be costly and irritating for businesses. Particular sorts of organizations may have difficulty obtaining credit card acceptance. “High-risk credit card processing” is the term for this. Tobacco, gambling, drug paraphernalia, vitamins and supplements, guns, multi-level marketing, life coaching, adult services, marijuana shops, and other high-risk sectors exist. Even company owners with imperfect credit may be seen as a greater risk. Merchants that fall under such categories are often charged additional credit card processing fees if they are accepted.
1. Look for a payment processor.
There are many ways to start accepting credit cards. Each method has its fair share of pros and cons. To get started, you need to Look for a payment processor. that accommodates your needs. Payment processors facilitate credit card transactions. They operate as a link between a company and the other financial institutions engaged in commerce. Here’s a quick rundown of the many jobs involved with credit card processing.
Processors assist the movement of money from the issuing bank to the merchant by authorizing transactions and facilitating the transfer of funds from the issuing bank to the merchant. On the other hand, payment processors come in a variety of forms and sizes. So let’s take a deeper look at the many kinds of payment processing firms available.
- Providers of Payment Services (PSPs)
The simplest approach for your company to begin taking credit cards is to use a PSP. These are sometimes called “all-in-one” solutions since they include everything you’ll need to get started. The payment service provider category includes companies like Square and Stripe. In recent years, PSPs have transformed the credit card processing sector. They make it possible for companies to take credit cards without having a merchant account. Month-to-month contracts and flat-rate pricing are common. Although flat-rate processing is simple to understand, it is not always the most cost-effective alternative. Rates are normally 2.9 percent, plus Flat-rate processing is easy to comprehend, but it’s not always the cheapest option. Rates typically cost around 2.9% + $0.30 per transaction. There’s not much room for negotiation here unless you’re a high-volume merchant..30 each transaction. Unless you’re a high-volume trader, there’s not much space for haggling here. On the other hand, PSPs are straightforward to set up and are becoming more popular among startups and enterprises new to taking credit cards.
- Providers of Merchant Accounts
Providers of Merchant Accounts are ideal for businesses that want to get the best possible processing rates. Payment Depot and Fattmerchant are two popular solutions in this category. Both of these businesses have pricing that is similar to that of membership. Companies may get “wholesale” credit card processing prices for a monthly charge, transaction fee, and interchange. To demonstrate what I mean, here’s an example from Payment Depot’s price page:
The fee imposed by the card networks is known as an interchange. So, with a merchant account provider, you may pay as low as An interchange is a cost imposed by the card networks. So you could pay as little as $0.05 + interchange per transaction with a merchant account provider, compared to nearly 3% per transaction with a PSP..05 + business per transaction, compared to over 3% with a PSP.
- Platforms for E-Commerce
For credit card processing, businesses having an online shop may consider employing an ecommerce platform. This sort of processor, like PSPs, may serve as a one-stop-shop or all-in-one solution for your processing requirements. In this field, Shopify is a market leader. They’ve effectively established the gold standard for administering an ecommerce website in recent years. I like Shopify because they offer integrated payment processing with every plan. So, you won’t have to worry about using third-party shopping cart software to Please accept payments. On your ecommerce site. Shopify even has POS (point-of-sale) solutions for ecommerce sites that also have a physical retail presence. This ecommerce platform also interfaces with over 100 different payment providers. So, in the future, if you discover a better processor, you may upgrade without having to update your online business.
2. Make a deal with your partner.
Shop around for the most excellent deal after you’ve decided on the sort of processor you want to utilize. Credit card processing costs, believe it or not, are negotiable. This is particularly true if you’re collecting quotations from some different processors. You may use those quotations as bargaining chips to acquire the most fantastic offer possible. However, to properly bargain, you must first grasp the origins of credit card processing costs. Credit card processing rates are made up of three primary components in general:
- The credit card network and issuing bank impose interchange.
- Assessment — A lower cost is paid to the card network directly.
- The processor charges a markup.
Interchange and evaluations are unavoidable. On the other hand, Processors may be prepared to negotiate their markup. The cost of an exchange depends on the card network and the transaction. Consider the following example of Visa’s interchange rates:
The prices are affected by the kind of card a consumer uses. Keep this in mind as we go on to the different types of credit card processing architectures. It would help if you additionally considered the following things in addition to the direct price of credit card processing:
- The duration of the contract
- Fees for setup
- Fees for early termination
- Fees for PCI compliance
- Fees for submitting statements
- Terminal charges
- Fees charged at the entry point
The list might go on forever. Some processors may attempt to bury these additional fees in your contract. Before you commit, go through everything in great detail. That is why it is critical to negotiate your terms. Let’s take a deeper look at the various contract formats used in the credit card processing industry:
- Pricing is set at a fixed rate
The most straightforward is flat-rate credit card processing. The most prevalent pricing model used by PSPs is this one. The interchange charges set by the card network are irrelevant with this configuration. Regardless of the interchange type, you’ll pay the same per transaction fee. The only thing that might affect the rate is how the card is handled (online vs. in-person).
- Pricing Plus Interchange
Flat-rate pricing is often more expensive than interchange plus processing. This is because this contract form entails paying the exchange rates plus the processor markup, as the name suggests. However, as previously said, processors may be ready to negotiate their prices, possibly allowing you to save money on credit card processing costs.
- Membership or Subscription Pricing
Subscription pricing can best be described as a hybrid between flat-rate and interchange pricing. Businesses pay a monthly fee to Providers of Merchant Accounts for access to lower flat rates. A $99 monthly membership fee, for example, may entitle you to a $99 monthly subscription fee that could give you access to a $0.07 plus interchange fee per transaction. The processor charges a lower markup but still collects a monthly membership fee..07 plus an interchange charge for each transaction. Although the processor assigns a reduced markup, a monthly membership fee is still collected.
- Differentiated Pricing
Differentiated Pricing is the worst. Stay away from this at all costs. The processor charges three different rates under this pricing structure: qualified, mid-qualified, and non-qualified. Each category has its processing speed (the cheapest and non-qualified being the most expensive). On the other hand, the processor decides which type each transaction belongs to based on largely unknown criteria. As a result, firms are more likely to pay for mid-qualified and non-qualified transactions than anticipated.
3. Get your gear together.
If you’re going to be processing transactions in person, you’ll need the right equipment. Many processors claim free kit. Home kits, unusually, this is indeed the case. Renting equipment is not a good idea. It may seem to be a cost-effective option in the short term, but it is always more costly throughout your equipment’s lifespan. It’s worth mentioning that specific processors have proprietary equipment. Let’s imagine you’re utilizing Square as your payment processor. You won’t be able to use any Square equipment if you decide to swap CPUs in a year or two. The many sorts of equipment you may need to take credit card payments are listed below.
- Terminals for accepting credit cards
This is a classic piece of countertop hardware for taking credit cards. They are neither registers nor POS stations, but relatively stand-alone pieces of equipment. Terminals for accepting credit cards typically look like this:
Make sure you get a terminal that’s up to date and can accept various payment methods. Legacy terminals with obsolete technology, for example, will not take chip payments, tap-to-pay, or mobile wallets.
- Integrated Point-of-Sale (POS) Terminals
POS systems with built-in Terminals for accepting credit cards are becoming increasingly popular. Clover has some of the best POS equipment on the market today.
These are useful in quick-serve restaurants and retail shops. Integrated Point-of-Sale (POS) Terminals are more expensive than a traditional standalone terminal, but they are user-friendly and offer more functionality.
- Card Readers for Mobile Devices
A mobile carder is an absolute must-have for businesses that operate on the go. But, they’re beneficial for food trucks or field-service jobs where technicians can Please accept payments. Directly at a customer’s home or job site. Square offers free Card Readers for Mobile Devices that can turn any smartphone or tablet into a POS station.
Customers may use mobile readers to pay without going to a checkout desk at retail outlets.
- Software
You’ll almost certainly need to purchase the required software and the hardware requirements for taking credit cards. To utilize the Square mobile reader (described above), for example, you’ll need to download the Square POS app. In addition, shopping cart software is required for online credit card processing. If you use an all-in-one ecommerce platform like Shopify, however, this is included in your package. Finally, virtual terminals are pieces of software that allow computers to act as payment processors. For example, this program is ideal for taking credit card numbers over the phone.
4. Please accept payments.
It’s time to start collecting credit card payments now that you’ve picked a processor, agreed to terms, and set up your equipment. Customers should be able to swipe, dip, tap, use mobile wallets, pay online, or pay over the phone for your products and services, depending on the option you choose. However, you do not get paid at the moment of the transaction. So there is an additional stage in this procedure.
- Put an End to Your Transactions
The last step of taking credit card payments is “settling” or “batching.” The authorization step begins with the first swipe, chip, or keyed entry. This is to approve or reject a transaction. However, the sale will not be completed until the settlement is achieved. Those authorizations must be provided to your processor once a day (usually at the end of the working day). The specific procedures to finish this operation can vary depending on the equipment and processor. Transactions not settled within 24 hours following a sale may be subject to increased exchange charges.
- Keep a close eye on your bank account and statements.
Finally, you should check to see whether you’ve been paid. After the settlement, funds should show in your bank within 24 to 72 hours. Always double-check that the deposit amount on your statements corresponds to the deposit amount in your account. As previously stated, specific credit card processors have a reputation for charging excessive and needless fees. As a result, make it a practice to check your statements each month for any discrepancies. If you’re not sure what a price is, phone the processor and ask. This will assist you in keeping your credit card processing charges to a minimum.
Frequently Asked Questions
Can I accept credit card payments as an individual?
A: No, because the credit card company requires that you are a business.
How do I allow customers to pay with my credit card?
A: You can set up your credit card payment in the settings.
How can I accept credit card payments without a machine?
A: The easiest way is to work with a company that does not require you to use the equipment. A company like Square or SumUp will allow for both credit card and direct payment processing without any physical machines.
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