How to Accept Credit Card Payments
Whether they’re used in person, on a computer, or via mobile phone, credit card purchases are a popular payment method for consumers. According to 2022 research conducted on behalf of Fiserv, using a credit or debit card was the most preferred payment by 67% of respondents. That’s a considerable number of potential customers, as 83% of adults had a credit card in 2020, according to research shared by the Federal Reserve.
Accepting credit card payments provides obvious benefits for consumers, from the convenience of not carrying cash, to better expense management, plus the extra incentives like cash back and rewards points.
But for small business owners, it’s not always obvious what accepting credit and debit card payments will mean for their businesses. Many small business owners say that accepting credit card payments is essential to serving their customers, building trust, encouraging repeat business, and increasing their bottom line.
Below are answers to some of the most common questions from business owners about diving into the world of accepting credit card payments.
How can I get my business to accept credit cards?
The process of accepting credit card payments differs depending on whether customers pay in person or online.
First, however, let’s take an overall look at what you’ll need to start accepting credit cards: a merchant account and payment gateway.
What is a merchant account?
A merchant account gives small businesses the ability to accept card payments. It’s connected to a payment processor and service provider that obtains authorizations for the transactions. Merchant accounts receive the funds and then transfer them into your business bank account according to a predetermined payout schedule.
When you partner with a credit card processing platform or payment facilitator, this type of account will be included in their services. You will want to consider any fees associated with the processor.
What is a payment gateway?
A payment gateway is necessary for e-commerce businesses that want to accept online credit card payments on their own website with a shopping cart. The payment gateway connects your online store with your merchant account and serves as a mediator for all the third parties involved, including your bank and your customer’s bank.
Just like merchant accounts, there are fees associated with payment gateways. Some payment providers specialize in online payments and can handle this feature for you and other services, like secure payment processing and customer account storage.
How can I accept payments by credit card in person?
To accept credit card payments in person, you’ll need a point of sale (POS) system, which will connect to your payment processor.
A POS system usually includes a card reader and a tablet or interface for displaying costs and completing transactions. In-store, your POS system can play a central role for your business, making it easy to process payments and collect data about customer sales.
More specifically, your POS system might include these pieces of hardware:
Swipe credit card machine
Swipe payments, which occur in person and use the card’s magnetic stripe, are the traditional way for customers to use their credit cards in stores. Most card reading equipment allows you to accept swiped payments.
Chip reader
The chip feature of modern credit cards has become popular in recent years because chip payments are less vulnerable to fraud than magnetic strip payments when processing in-person transactions.
If you want to offer this option to your customers, you’ll need a card reader with an EMV chip card payment terminal. Note that if you accept in-person payments with chip cards and do not have an EMV chip card reader, you will be responsible for any fraudulent transactions that a chip reader might have caught.
Mobile wallets and tap payments
One downside of chip cards is that the process can take longer than a swiped card.
Mobile wallets and tapped cards offer a speedier alternative by using NFC (near-field communication) to quickly translate payment information from a phone app or physical card. With mobile wallets, such as Apple Pay, customers can pay through an app connected to their credit cards.
Tap-to-pay cards, where the customer just holds the card near the reader, is another NFC option that also avoids the need to insert a card into the reader. In order to accept these payment options, you’ll need a reader equipped with NFC.
How to accept credit card payments online
It’s usually necessary to accept credit card payments online, whether you’re a brick- and-mortar business with an online shop or strictly an e-commerce retailer.
To process payments online, you’ll need a payment gateway and merchant account, described above, as well as some type of digital storefront—either on your website or a third-party e-commerce platform.
Here’s a closer look at the different ways to accept and process credit card transactions online:
Electronic invoicing
If you are a mobile business or accept payments based on jobs completed, the ability to send invoices that can then be paid with a credit card is still crucial. Electronic invoicing options ease the process by allowing businesses to send invoices from their computer or a mobile app, enabling customers to pay with their credit card.
New credit cards on e-commerce sites
Accepting “new” credit cards, in this context, means requiring customers to input their card information during each checkout on an e-commerce site. It is a standard option with most payment gateways and merchant services.
Stored credit cards on e-commerce sites
Online stores can also store payment information for repeat customers. Also known as a “card-on-file payment,” customers create an account on your website or with a third-party platform and enter their payment information only once. This information is then stored for later use.
This payment feature offers a more seamless experience for repeat customers, who don’t have to re-type their information each time they pay. It also can enable automatic recurring orders and invites your customers to put their trust in your business.
To offer a stored credit card option, you will need to work with a secure third-party platform as part of your payment gateway.
Accepting credit card payments FAQs
Now let’s dive into some of the most common questions about getting started with credit card processing.
What are the benefits of accepting credit card payments?
Accepting credit card payments offers many benefits for small businesses. If you’re a cash-only business, you might be hurting your business and missing out on valuable opportunities to increase revenue.
That’s why it’s important to consider the following benefits of accepting credit card transactions:
- Improve customer experiences. Most customers prefer to pay with credit or debit cards because they’re convenient and Make it faster and easier for them to complete a purchase by accepting credit card payments.
- Boost Studies show that credit card users spend more on each transaction than cash users.
- Make accounting Payment gateways and POS systems can help you automatically track sales, making it easier to analyze, optimize, and report your financial progress.
Getting started with credit card payments doesn’t have to be overwhelming, either. Check out our guide to reducing stress with payment processing.
What types of credit card fees should I expect?
The average processing fees accessible to small businesses range from 2-3% for cards swiped in person, while payments accepted online or via invoice typically have a higher average processing fee.
Common fees that come with accepting credit card payments include:
- Transaction Each time a customer makes a payment, a merchant might have to pay a transaction fee. These fees might be set at a flat rate or a percentage of each sale.
- Service Payment processors might charge annual or monthly fees for using their platform.
- Interchange Merchants pay these fees to customers’ card-issuing banks for handling each payment. Interchange fees are typically set as a percentage of your monthly transactions.
- Assessment fees. Like interchange fees, assessment fees are paid to credit card brands, such as Visa and Mastercard, and based on your total monthly
What’s the best credit card payment processing option for your business?
When thinking about how to accept credit card payments—whether it’s the various fees, account set-up, or security considerations—it can be overwhelming. The process itself doesn’t need to be painful, but it’s important to choose a payment provider you can trust. A good vendor should be transparent about all fees, explain exactly what’s required of your business, and help you address your company’s unique needs. Take the time to find a reliable partner for the long haul.