How to Accept Credit Card Payments | Business 101
Every modern consumer understands the convenience and importance of credit cards. Just about every major retail chain has to accept them as a form of payment if they want to grow their customer base . In fact, there are only so many businesses that can thrive using a cash-only foundation. If you’re a small business owner, you need to seriously consider adding credit cards to the payments you accept. While we are likely still a ways off before becoming a cashless society – if that even happens – there is no denying that more people are switching to digital payments. Plus, in the face of the pandemic, there is less of a desire to risk even touching physical money. In short, you will be doing your business a great disservice if you don’t accept credit card payments. Not sure where to start? We have you covered! Today, we’re going to be exploring what it takes to accept credit cards. After you’ve read this handy guide, you should have a better understanding of what you need to do in order to implement credit card payments into your business.
How Do Credit Card Payments Work?
When we think about paying for goods and services with a credit card, it seems like a pretty straightforward process. We swipe our card through a slot or insert the chip-side into a reader and – presto! – our payment is completed. However, what goes on behind the scenes is far more complex. Every time that a credit card is run through for payment, there is a series of processes that take place to ensure the validity of that payment. Not only is every cardholder’s bank/lender checked to verify that there are sufficient funds available, but there are fraud checks that take place, as well. All of this occurs within a matter of seconds, ensuring that credit card payments are quick and easy. And once the card has been verified as being legitimate and there isn’t a concern for fraud, another process will need to take place. This time, the credit card processing company will make sure that the correct amount of money is taken out of the cardholder’s account and transferred to your financial institution’s account.
The Need for Outsourcing
When you look at retail giants and the number of customers that they get each day, you can see why it’s so important to have efficient credit card checks with every transaction. Even if you only serve a dozen customers a day, you don’t want to make your customers wait for you to verify their purchase. That’s why you will need to outsource the credit card verification process to a company that specializes in this service. Having fast and efficient service will give your customers an incentive to return. In the fast-paced world that we live in, it’s more important than ever to have great customer service . That’s why business owners are more than happy to pay fees to have credit card checks performed on their behalf.
Paying for Outsourcing
For every credit card transaction that takes place in your store, the processing company will receive a small payment from that purchase. What’s more, credit card companies and banks are going to want their fair share, too. Fortunately, your credit card processing company will take care of these deductions before they transfer each payment to your account. It’s a seamless process that takes the pressure off of you so that you can focus on your customers and business. It’s become a common practice for business owners to offset the cost of credit card processing fees by increasing their goods and services ever so slightly. It also pays to shop around and compare fees among different processing companies. Obviously, you want to ultimately pay as little as possible for these services. How you go about reducing your expenses is entirely up to you, but you definitely want to find a balance that works for both you and your customers.
Should You Invest in a Merchant Account?
Whether you actually need to set up a merchant account largely depends on the number of credit card transactions that your business sees each month. Merchant accounts are a bit pricey to establish and there are additional monthly fees that you will be responsible for. However, doing so can ultimately save you a sizable amount of money in the long run. The general rule of thumb is that if you generate more than $10,000 in credit card sales each month, you will likely benefit from setting up a merchant account. Having a merchant account will help reduce the total amount of credit card processing fees that you’re responsible for each month and will pay off by the end of the year.
Options for Smaller Businesses
If your business makes less than $10,000 in credit card sales each month, you may be better off going with a PSP (Payment Service Provider). Whereas merchant accounts are costly to establish, PSPs are usually free. While you can expect to pay slightly higher credit card processing fees, there are monthly service costs associated with a PSP. If your monthly credit card sales don’t justify setting up a merchant account, you should seriously consider opting for a Payment Service Provider.
Taking Credit Card Payments
Unless you have an online store available to your customers, you may only see a small percentage of credit card sales each month. With that being said, there are plenty of people who strictly use plastic to pay for their purchases. As such, not accepting credit or debit cards could cost you a lot of business. If you’ve decided to proceed with credit card payments, there are a few things that you’re going to need. Let’s first look at the necessary equipment for taking credit card payments in a physical store.
In-Store Payments
Credit/Debit Card Processor This is the unit that your customers will use to run their cards through. You can invest in a traditional processor, like those found mounted to counters and check-out lanes. Or, you can buy a special attachment that connects to your smartphone. Regardless of which you prefer, having a processor will allow your customers to make credit card payments quickly and easily. Virtual Processor You don’t necessarily need to invest in a physical unit if you have the right software to accept payments. To take a credit card payment, you will instead type in the credit card information manually using your smart device or computer. This process is a bit slower if you’re solely using it to take credit card payments. However, you may want to consider using both, as this will give you greater versatility in serving your customers. With a virtual system, you can take payments over the phone, while a physical unit will expedite credit card sales in-store. Point-of-Sale System POS systems vary wildly among businesses, but they all serve the same purpose in allowing you to have greater control over your sales. Many of these systems include marketing services, such as collecting emails and sending out coupons to customers. You can also keep accurate sales data on each customer so that you can better strategize your business. Older Point-of-Sale systems included both the required software and a computer terminal. Today, most POS systems are simply software that you install on your own computer.
Online Payments
Online Store If you’re going to sell items online, you’re going to need a catalog of your items that customers can browse through via your website. Virtual Shopping Cart This is another must-have for any online store. As customers browse through your website’s catalog, they can add items to their virtual shopping cart for purchase. When they are ready to check out, the virtual shopping cart will tally up the total of the items they’ve selected. Payment Gateway When a customer is ready to check out, a payment gateway will serve as a secure way to pay for the goods in their shopping cart. Credit card information is protected during this transaction, giving your customers peace of mind when they shop with you.
Summary
By accepting credit cards, you can increase your customer base exponentially. With more consumers relying on this form of payment, it makes sense to implement credit cards into your business. It’s important to remember, though, that you should compare service fees among the different credit card processing companies, and if you see a high number of credit card sales each month, a merchant account could benefit you greatly. Now that you know what you need to accept credit card payments, you will have a much easier time getting set up to where you can provide the best customer service experience. If you’re interested in making the most of your business, be sure to explore the rest of our helpful articles for more information! Sources https://medium.com/makingofamillionaire/are-we-heading-towards-a-cashless-society-5068d8b3a834 https://www.business.org/software/point-of-sale/best-pos-systems-for-business/ https://www.paypal.com/us/brc/article/what-is-a-payment-gateway