Benefits of accepting credit card payments

Credit cards and debit cards are some of the most common and convenient payment instruments. The use of cash has been declining steadily, making accepting credit card payments essential. Brick-and-mortar businesses that want to successfully sell off and online should provide the option in both environments.

There are a few other reasons why it pays to receive credit card payments.

Encourages repeat purchases

As a matter of convenience, existing customers would be able to save their card details on your website after making their initial purchase. Along with seeing a thank-you page and being emailed a receipt, they could be added to your customer communication network, allowing you to regularly encourage them to make repeat purchases.

Easier purchasing

In-person sales are also made easier with card payments because people who don’t carry cash can make purchases on the spot. In a busy world, not having to run to the ATM to get cash can save customers’ time and frustration.

Better cash flow

When you accept card payments, it can improve your cash flow. Card transactions can be deposited into your bank account in as little as 24 hours depending on how the payment is processed. Receiving payments for invoices is faster, and you can avoid the waiting periods associated with cashing checks.

Attracts new customers

Credit cards are ubiquitous today. Not having the infrastructure to take card payments is not only a turnoff for existing customers, but it could also negatively affect your business reputation and your ability to attract new customers. You can attract customers by providing them with the option to pay using their preferred method, whether it’s cash or a debit or credit card.

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Credit card transaction fees

The costs associated with accepting credit cards are known as interchange fees. They vary depending on your card type, bank and other factors. These fees typically include a flat rate for authorization and an ongoing per-transaction charge.

You may also pay a percentage or a flat rate to whichever payment processing company you choose. Some companies may negotiate on the exact amount for this fee while others charge the same rate for all customers.

How to get started with credit card payments

To get started, you’ll need the appropriate software and hardware for taking credit card payments. Introducing credit card payments to your physical store or ecommerce site can be a simple process.

Follow these steps to begin accepting credit and debit card payments at your business:

1. Decide on a payment processor

To successfully accept credit card payments for your business, sign up for an account with a credit card processing company. These companies manage your holding account that collects payment information from customers and processes transactions before the money is moved to your bank account. Depending on your needs, you have two main options for payment processing:

• Independent sales organizations: If you have an established business, an independent sales organization (ISO), also known as a Merchant Services Provider (MSP), can set you up with a secure business bank account with low transaction fees. ISO accounts can be good for businesses that process more than $10,000 per month because merchant account providers use pricing models based on sales volume and membership. ISOs require a contract negotiation and a more complex application process in exchange for affordable rates.
• Payment service providers: Small- and medium-sized businesses often use a payment service provider (PSP) to manage their merchant accounts. PSPs, such as PayPal, aggregate your business transactions with payments to other companies to create an accessible and affordable way to accept card payments. PSPs usually don’t have account minimums, monthly fees or require applications like ISOs.

2. Choose a POS system

A point of sale (POS) system manages customer transactions and tracks inventory. In person, a POS can be a simple cash register or a tablet with access to a cloud-based database. Businesses that sell online might use digital ecommerce platforms to run a virtual payment terminal on their website and process changes to inventory with each purchase. POS systems can also provide basic business analytics like daily sales reports that categorize payments.

3. Set up a payment gateway

A payment gateway authorizes the transfer of customer funds to your business account, secures customer information and either approves or declines each payment. Many payment processing companies offer payment gateways along with their other account services, but some require a separate, standalone gateway to securely process transactions.

4. Get a card reader

If you want to complete sales in person and online, you’ll need a card reader. Your POS system might have a card reader integrated into its hardware and software, but you can also get a swipe or tap card reader that connects to a phone or tablet. Many payment processing companies offer easy-to-use hardware for small businesses that need a simple, inexpensive payment setup for a brick-and-mortar store or for accepting payments at a booth.

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How to take credit card payments in person

Once you have all the necessary software and hardware, you can start accepting credit card payments. Connect your POS and card reader to the internet to facilitate payment processing, then swipe, tap or insert your customer’s card into the payment terminal. The customer may have to enter a PIN or provide a signature to validate the payment. The POS should notify you whether the payment was approved or declined. Successful transactions will deposit funds into your holding account and eventually transfer them to your connected bank account.

How to accept card payments online

For your online store, you need an accessible and secure checkout option for customers. Some payment processing companies only accept certain forms of payment, like a credit card, while others have integrated services that allow customers to pay through PayPal, cryptocurrency and other digital wallets.

On your website, you can create a separate checkout page or integrate your secure payment gateway somewhere on your website. Some website builders have plug-ins to add a checkout and shopping function to your page, or you can choose to use third-party shopping cart software.

Refunding card payments

Sometimes you may need to issue a refund for a customer purchase through a credit card. Whether online or in-person, you should be able to issue card refunds through your POS. Payment processors can have limits on when they’ll issue a refund and may not be able to return a credit payment for a few months. Learn your payment processor’s policy on refunds and chargebacks, so you can create a reasonable refund policy for your customers.

Understanding PCI compliance

Established in 2006, the Payment Card Industry Data Security Standard (PCI DSS) is a set of rules that every merchant that accepts credit cards must follow to protect their customer’s personal information. Credit and debit cards transmit sensitive financial data, and you have a responsibility as a merchant to protect that data. The PCI DSS isn’t a law, but all major credit card companies require PCI compliance.

Every year, you’ll need to submit a self-assessment questionnaire to confirm that you meet the requirements for strong passwords, firewalls and other protections for customer data. Some payment processors validate your PCI compliance for you, but if you use in-store Wi-Fi for transactions, you’ll need to submit your own assessment forms to confirm your network security.

Not adhering to PCI DSS guidelines could result in data breaches and expensive fines of up to $100,000 a month until you achieve compliance. If your business is consistently non-compliant, your bank could limit or revoke your ability to accept credit card payments.

FAQs about how to accept credit card payments

Can you accept credit card payments without incurring fees?

All credit card payments have associated fees to pay credit card companies for their services. Some payment processors pass these fees along to customers by adding a service charge to each purchase, but most charge a transaction fee to the merchant by default.

Is there an app to accept credit card payments?

Some payment processors have apps that will let your business accept payments through a card reader that plugs into your phone or tablet. Square and Shopify are two of the leading mobile apps for accepting credit card payments.

How long does it take to process a card payment?

Credit card payments can be processed within seconds when your payment terminal uses the internet to automatically verify the transaction. It typically takes between one and three days for those funds to transfer from the payment holding account to your business’ bank account.

What are the risks of accepting cards?

Payment fraud and data breaches are the biggest risks of accepting credit cards at your business. Even though credit card companies usually take responsibility for fraudulent charges, your business may have to pay chargeback and processing fees.