A large number of U.S. citizens use credit cards for their everyday financial needs. So, if you are running a small business, you can start accepting credit card payments from your customers. Accepting credit card payments can increase your in-store sales by up to 40 percent compared to cash payments alone. It is also necessary for businesses selling online. This guide shows you how to accept credit card payments in a brick-and-mortar store, on a website, and with a mobile device.
Businesses are often scared of taking credit cards due to complicated processing fees. Payment depot is a payment processor that provides transparent pricing with no hidden fees, surprises, or cancellation fees. Convenient monthly pricing also makes it easy to opt for the right plan based on how much you process in credit card payments each month.
The methods you use to accept credit card payments will depend on where you are making the payments. To accept payments through credit cards in-store, you need a card reader and a merchant account. To accept credit cards online, you need an e-commerce site and a payment gateway and so on. All businesses, small or big, can choose between two options for accepting credit cards.
(i) An all-one-one provider that has a solution for each step of the process like Square
Choose individual providers for separate point of sale (POS) systems, and
(ii) Merchant accounts like Payment Depot
A point of sale (POS) system is a software system that serves as the central hub of your business. POS systems manage transactions, track inventory as well as provide business analytics. It is crucial to choose a POS system first because some systems have built-in payment processing to accept credit card payments. If you are selling in-person, you will require a POS to help manage customer interactions.
If you are selling online, you will need a digital or e-Commerce POS platform that will let shoppers purchase from your site. In either case, you can opt from an all-in-one solution that has built-in payment processing or a POS that will require third-party payment processing.
If you are a small business and for the sake of simplicity, we suggest you choose an all-in-one solution that has POS, payment processing and merchant services built-in. However, if you are a larger business or have a higher sales volume, for instance, $20,000 or more per month, then you may want to consider using a separate merchant account, such as Payment Depot.
We recommend that most small businesses use an all-in-one system. However, here are the pros and cons of using an all-in-one system so that you can decide if it is right for your business.
Cons of All-in-One System
The whole credit goes to credit card companies for making an easier process to accept credit cards for business. An all-in-one, like Square, offers hardware that makes processing credit cards a seamless process, plus every card you charge is managed in one central account.
Most all-in-ones use their own branded readers and POS hardware so that you tend to have fewer technical or connectivity issues. They also work with many online shopping carts or, like Square, include a free online store. Sign up process is just like a piece of cake to get a free account from Square.
Traditional merchant services usually contract with third-party providers for readers and POS equipment. This can lead to a more difficult setup and getting tech support when needed can take longer. Also, for online sales, you will need to connect your merchant account to your online store using a payment gateway, which can add yet another fee.
To add it up, if you sell in-store, mobile and online, an all-in-one like Square can be the better choice. And if you sell in high volume in a retail location, the savings from an interchange plus or membership model merchant services provider can be worth a little-added work to set up.
If you opt for an all-in-one solution, you can skip down to Purchase the required equipment. If you are a high-volume brick-and-mortar retailer interested in learning more about traditional merchant services, move on to Select a Merchant Account.
Traditional merchant services providers are considered a quite good option for higher-volume sellers since their credit card processing fees tend to be lower than all-in-ones. Generally, you will see worthwhile savings when your sales reach about $20,000 per month for in-store sales.
If you want to go this route, it is important to understand the different fees they charge because they are not as straightforward as the all-in-one providers. Along with the credit card processing and transaction fees, you may have an account fee, a gateway fee, fraud prevention fees and more. Therefore, always make sure you are clear on both the processing fees and any added fees when considering a traditional merchant services provider.
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(a) Interchange Plus Merchant Services Providers
(b) Membership or Subscription Merchant Services Providers
(c) Tiered Pricing Merchant Services Providers
Major credit card issuers, such as Visa, MasterCard, American Express and Discover often charge a base processing rate to use their service called the interchange rate. These rates differently based on card types like rewards, corporate cards, and debit card and sale types like retail sales, business equipment sales and so on.
What you need to understand is that interchange rates are what card issuers charge payment processors to run each charge. The payment processors, in turn, mark that up and call this plan interchange plus. This fee structure can be much cheaper for higher-volume sellers compared to all-in-one services.
Many of the interchange-plus merchant services that are popular with small businesses operate with a membership model. With membership models, businesses are paying a flat monthly fee in exchange for much lower fees for each transaction. For example, Payment Depot merchant service provider charges a $49 monthly fee for small businesses, who then just pay interchange fees, plus 15 cents on each transaction.
Here providers charge a different markup for every single type of card you process. Credit and debit cards each have different fees, but that is not all. Rewards cards, corporate cards, and even airline miles cards have different fees as well and you never know how much you are being charged until you receive your bill.
This makes it quite hard to understand how much you are paying to process credit cards. Plus, this makes it very easy for the merchant account provider to overcharge your business since tiered billing is very confusing to sort out.
However, we do not recommend tiered pricing providers for small businesses since there are many better options with all-in-one and interchange plus providers.
When a customer puts their credit card information in your online store’s checkout page, the payment gateway encrypts, or secures the information and sends it over the internet for approval via your processor. The purchase is approved or declined instantly. If you get approval, your online store completes the sale automatically and your merchant account provider deposits the funds into your account, generally within one to two days.
Many payment processors like Square, PayPal and Payment Depot use a payment gateway with their service. Others require a separate payment gateway account.
The type of equipment you need will vary based on where you are selling. If you plan to sell in-person, whether it is over mobile or in-store, you will need a card reader. If you are selling online, you will not need any physical hardware and equipment.
Here are the details on what equipment and hardware you will need in order to accept credit card payments for your small business.
Credit card payments require card reading equipment that makes card swiping an easy-going process. Square comes with a free mag-stripe credit card reader that can be used for accepting credit card payments on smartphones and iPads. Businesses can also purchase additional credit card readers in order to accept tap and chip payments.
Credit card payments use a payment gateway that allows customers or sales staff to enter credit card information into a secure online form. So, no physical hardware purchases are necessary.
There are two major types of merchant accounts to choose from: an all-in-one service like Square and traditional providers like Payment Depot. All-in-one providers provide simplicity for small businesses by acting as the POS, merchant and payment gateway.
Whereas traditional merchant services perform a function but can offer lower rates for larger businesses. Both offer security by following the Payment Card Industry Data Security Standard (PCI DSS) so that your transactions are protected, but you may need to do more to achieve PCI compliance.
Here are a few top merchant account service providers that are very popular among several businesses and of all sizes.
Square: All-in-one solution for small and startup businesses.
Shopify: All-in-one solution for multichannel sellers.
PayPal: All-in-one solutions for online businesses.
Payment Depot: Traditional merchant services for most small businesses.
First Data: Traditional merchant services for established high-volume businesses.
Chase Merchant Services: Traditional merchant services for businesses that want to work directly with the best bank.
Fattmerchant: Traditional merchant services best for medium to large businesses.
We have explained these top merchant account service providers a little more in detail below.
Square Payments is a free account that allows businesses process payments in-store, mobile payments, online, through a virtual terminal and even invoice payments with flat rates. The standard card processing fee is 2.75%, online is 2.9% plus 30 cents and keyed-in payments are 3.5% plus 15 cents.
once you signed up for a free Square Payments account, Square provides you with a free magstripe card reader for in-person payments. Square is easy to use and it is one of the best choices for mobile payments.
Square is a great choice for small businesses, start-ups, and people who sell only occasionally. There are no start-up or monthly fees and no monthly transaction requirements. Businesses pay the flat rate whenever they make a sale. Funds are deposited in roughly one to two business days.
Shopify is a POS and e-Commerce solution that allows retailers to sell in-store, online, over mobile and through social media. It offers also a built-in payment processing solution. And is an all-in-one solution like Square but, unlike Square, businesses pay a monthly fee for Shopify software, so it is a good choice for serious retailers that a robust e-Commerce platform. Considered a super-efficient and helps streamline the process of running an e-Commerce business.
Overall, Shopify is a great option for retailers that focus on e-Commerce or multi-channel selling and want an all-in-one POS and merchant services, provider. Shopify is offered for a free 14-day trial.
PayPal provides an all-in-one credit card processing solution for online and in-person card payments. Like Square, PayPal offers flat-rate processing. PayPal’s fees for in-person payments are 2.7%, online sales are 2.9% plus 30 cents and keyed-in payments are 3.5% plus 15 cents. However, PayPal does charge a fee for basic card readers, starting at $25 for a basic mag-stripe reader to plug into your smartphone. Many businesses like having the option of accepting PayPal payments.
Just like Square, PayPal does not have any monthly fees or minimum processing requirements, so it is a good fit for small businesses that want a simple solution. The big benefit of using PayPal as your merchant services provider is you can accept PayPal payments in addition to credit and debit cards, which is a preferred payment method for some shoppers.
Payment Depot is a membership or subscription model merchant services provider. That means businesses pay a flat monthly fee and a very low fee for each transaction. Payment Depot contains some of the most competitive payment processing rates available for small to medium-sized businesses.
The one flat monthly fee allows businesses to accept credit card payments in-person through an in-store terminal, mobile payments, e-commerce, and virtual terminal payments. It also has four plans for different-sized businesses.
Payment Depot’s membership pricing model is considered an ideal for businesses processing more than $20,000 per month. Payment Depot provides some of the lowest interchange-plus rates available to small businesses. All Payment Depot plans have free equipment reprogramming and a gateway for online payments.
Unlike most merchant account providers, Payment Depot makes no distinction between online and in-person payments. The pricing is the same and both kinds of payments are included with every membership.
First Data provides traditional merchant services with a variety of rate options, including some interchange-plus options. It does not disclose specific pricing on their website.
However, according to First Data user reviews, businesses can expect to pay 2% to 3%, plus 25 cents to 40 cents per transaction. Like all traditional merchant service accounts, businesses need to apply for an account with First Data.
As one of the largest credit card processors, First Data is better suited for growing and high-volume businesses that can use their size to negotiate a low rate.
First Data also have requirement of a contract, whereas many all-in-one providers like Square and some traditional merchant providers like Payment Depot are month-to-month. This means that First Data is best for established, high-volume businesses.
Chase Merchant Services is part of JPMorgan Chase, one of the largest banks in the country. It offers traditional merchant services, including flat-rate payment processing and interchange-plus pricing. Unlike Square and the all-in-one services, businesses need to apply for a merchant account with Chase.
All of the payment processing rates are quote-based, so there is room to negotiate. And is a great option for businesses that prefer to work directly with banks, especially if you have business checking or credit accounts with Chase.
Many people like the simplicity of having all their financials run through the same institution. Chase Merchant Services provide quick online transactions with no hidden fees or long-term contracts. You also get 24/7 customer support and next-business-day funding with a Chase business checking account.
Fattmerchant is a traditional merchant services provider that has some of the lowest pre-sale credit card processing rates. This is because Fattmerchant passes the actual card issuers’ interchange and assessment fees on to you with no percentage markup at all, a flat 6 cents or 8 cents transaction fee. However, Fattmerchant has hefty monthly fees: $99 per month for less than $500,000 in annual sales and $199 per month for more than $500,000 in annual sales.
Fattmerchant’s direct-interchange model can be a money-saving option for sellers processing around $20,000 per month or more in credit cards. Fattmerchant is one of few merchant services providers that specializes in offering a direct-interchange fee structure to smaller businesses. This model gives you the lowest possible interchange rate since there is no markup on card issuer fees at all.
Honestly speaking, if your average credit card revenue is less than $30,000 per month, a flat-rate provider like Square is the best choice. Payment Depot’s membership model pricing provides very competitive rates for most small businesses. The only other thing to keep in mind is that Square comes with built-in point-of-sale software. With Payment Depot, you will have need to purchase that separately.
Square is more economical if you are charging $10,000 per month in credit card payments. However, Payment Depot is more economical at $30,000 per month. This is because Square charges slightly higher processing fees of 2.75% but does not have any monthly charges.
Payment Depot includes lower rates, but you need to pay for a POS system separately. The takeaway here is that at a certain revenue point, Payment Depot’s lower rate beats Square’s flat-rate. But, for very small and new businesses, Square is the more affordable option.
Overall monthly charges are part of the equation. Your average sale amount also plays a crucial role in your credit card fees. Square charges the same rate irrespective s of the sale value. Because they charge a fixed fee of 2.75% for in-person sales.
Since Payment Depot charges a percentage rate plus a per-transaction fee such as 15 cents, this makes Payment Depot costlier for selling high volumes of low-cost items. However, Payment Depot can be cheaper for high-value purchases.
Accepting credit card payments for your small business can create uncertainty and take up a lot of time and energy if you do not know what you need. Hopefully, you now have a good idea of whether you need an all-in-one solution like Square, or if you need to process transactions with a more traditional merchant services provider. Below are some additional tips that can help you get set up quickly without all the hassle that can come with this process.
When selecting a credit card processor, or any software or service provider for your business, it is important to know what kind of customer support they offer. The provider you choose will have free 24/7 phone support. However, some companies only provide e-mail support, phone support during certain hours, or businesses have to pay extra for dedicated support.
When selecting a credit card processor or any software or service provider for your business, it is important to know what kind of customer support they offer. Ideally, the provider you choose will have free 24/7 phone support. However, some companies only provide e-mail support, phone support during certain hours, or businesses have to pay extra for dedicated support.
Small businesses rely on having funds quickly. A large percentage of your cash flow comes from credit card payments, so it is important to be able to get help right away if something ever goes wrong.
Some merchant accounts charge higher fees for different types of cards, such as American Express. This is important to ponder when comparing providers and why many businesses opt for a flat-rate provider.
Credit card fraud is another harsh reality you face when you accept credit cards, but there are ways you can protect yourself. Most top merchant account providers let you avail more powerful fraud detection tools and you should put these in place per their direction.
Many providers are willing to negotiate volume discounts for credit card processing. If you are a larger business, definitely ask about any discounts or tiered pricing structures available.
No matter where and how you would like to accept credit cards, you first need to be familiar with certain industry terms. These include
Merchant account: This is the account that you use to process credit card payments; you can get a merchant account from your bank, from an all-in-one provider like Square, or through traditional processors like Payment Depot
Processing fees: These are what merchant account services charge and are figured as a percentage of each sale plus a per-transaction fee; some merchant account providers also tack on monthly fees
Retail POS system: These handle credit cards, cash, and check payments for in-store sales; most also contains business management features.
Payment gateway: This connects your website’s checkout page your payment processing solution; many payment processors like Square, PayPal and Payment Depot include a payment gateway with their service; others require a separate payment gateway account
In-store sales usually have the lowest processing fees since the risk of fraud is relatively low as you can see your buyer, confirm their identity and physically process their card. With online payments, because the risk of fraud is higher, online sales have higher processing fees than in-person sales as you cannot see your buyer, confirm their identity in person, or physically process their card. Here is an overview of how each process works.
In order to accept credit card payments in an in-store retail setting, a credit card reader lets customers swipe, insert (for chip cards), or tap (for e-wallets like Apple Pay) credit cards physically to complete their payment. Your card reader is connected with the internet directly or through your POS system. After swiping, inserting, or tapping the card, the payment information is sent for approval via your merchant account processor.
Within a moment, you receive a confirmation message that the transaction was approved or declined. When you get approval, you complete the sale and your merchant account provider deposits the funds into your account, generally within one to two days.
In order to accept credit cards online, you will need an e-Commerce platform that, ideally, supports a secure checkout. For instance, if you choose Square for your credit card processing, you get a free Square online store with your account. Square and other payment solutions also work with most top-rated, low-cost e-Commerce platforms, including BigCommerce and Shopify.
Depending on your merchant account solution, you may have need a payment gateway to accept and process payments in your online store. However, all-in-one solutions like Square, PayPal and Stripe include a built-in gateway with their service, so they are often the simplest choice.
When an online customer enters their credit card information in your online store’s checkout page, the gateway encrypts (secures) the information and sends it over the internet for approval via your processor. The purchase is instantly approved or declined. After getting approval, your online store completes the sale automatically and your merchant account provider deposits the funds into your account, generally within one to two days.
Most people find the subject of credit card processing sophisticated and difficult to understand. However, you must keep in your head the basics to avoid putting the wrong solution in place and paying more than you should when you accept credit cards.
If you are starting up, your monthly card sales are less than $30,000 per month, or most of your purchases are low value, such as less than $25, then we recommend using Square. It is quick and easy to set up, comes with many free features like POS software, an online store, business management tools and works anywhere you want to sell. Plus, each free Square account comes with a free mag-stripe credit card reader to accept credit cards anywhere.