Accepting Credit Cards – 3 Methods for Your Business
If your business includes one or more brick and mortar locations, you are probably aware by now that people prefer to pay with credit cards—by a wide margin.
And it’s easy to understand why: cards offer a level of convenience that cash just can’t match. Consumers prefer the small footprint, durability, and ease-of-use of cards.
And any business with an online component must be able to accept credit cards online.
For business owners, however, credit cards mean processing fees and other inconveniences that they must either absorb or pass on to the customer. Of course, your business will only suffer if you resist credit cards and other cashless methods of payment, but it is your prerogative to find a system for accepting credit cards that works for your business and your budget.
Finding the right solution to process credit card payments means considering the characteristics and distinguishing features of your business, such as size, number of credit card payments made, and average credit card payment amount.
This article focuses on three central concepts in the credit card payment process, each of which you should consider before making a final decision. These are:
- Merchant accounts
- Point of sale systems
- Payment gateways
Each of these solutions offers different advantages and disadvantages for accepting credit card payments. Read on to determine which option will work best for your business.
1. Merchant accounts
The first credit card payment concept you should understand before diving into research is the merchant account.
A merchant account is a bank account that allows your business to accept payments from credit and debit cards. A merchant account is required in order for you to accept credit cards on your website or at your restaurant POS. In order to open a merchant account, you must agree to a binding contract that ensures you will deliver all promised payments and obey all regulations regarding credit card transactions.
When deciding on a card payment solution, you have two major options for how to get access to a merchant account.
The first of these options is to set up your very own merchant account directly through a big bank.
This approach offers a variety of positive and negative features, most of which favor large, established businesses over smaller ones. Traditional merchant accounts cater to businesses with larger than average transaction sizes by offering better security, quicker processing, and the ability to tailor rates to individual businesses.
Acquiring a traditional merchant account for your business requires a lengthy application and approval process that favors large businesses as smaller staffs rarely have extra time or manpower to spare for such a process.
A business with a large number of locations, or that processes a large number of transactions every day, is likely to find success working with a bank to open a traditional merchant account. For smaller and younger businesses, read on to learn about a different option for payment processing called aggregators.
If you are viewing this page, however, chances are you are involved with a younger, smaller business and exploring your credit card accepting options before taking the plunge. If this is the case, a merchant account aggregator is likely the right choice—at least for now.
An aggregator is a company that allows a large number of businesses to use its merchant account, in exchange for fees. You have likely made purchases through aggregators yourself—PayPal is one of the largest. Some of the advantages offered by payment aggregators are:
Easy application. Compared to traditional merchant accounts, aggregators offer an extremely quick application process with minimal requirements, so an involved application won’t prevent your business from getting off the ground and running.
Flexibility. Most payment aggregators, unlike big banks, won’t require you to sign a contract, allowing for greater flexibility and less stress.
Small business-friendly fee structure. Aggregators typically take lower percentages of each transaction but add fixed dollar-amount-per-transaction fees. This will be to the advantage of smaller businesses, such as restaurants, that charge ten or more dollars for most transactions. This type of fee becomes less advantageous as your business grows, however.
Like with the transaction fees detailed above, aggregators do involve some drawbacks that will become more cumbersome the larger your business gets. First, aggregators typically have processing limits, which means your business can only process so many dollars worth of transactions per year.
Second, aggregators usually take longer to actually get your money into your hands than a traditional merchant account would, which can be a problem depending on your business model.
2. Point of sale systems
The next major point to consider when examining how your business accepts credit cards is what point of sale (POS) system you are using.
The term point of sale refers to the device or set of devices your business uses to complete transactions in person. There are two major types of POS systems: traditional and mobile.
A traditional POS system is what most people would refer to as a cash register—a computerized system connected to a cash drawer and card reader that digitizes every transaction and calculates tax and change. This type of POS system is suitable for establishments with one or two counters and no real need for employee mobility, such as small retail stores.
But mobile POS, or mPOS, systems offer a dynamic and flexible way to accept credit card payments. For businesses such as restaurants, bars, and coffee shops, mPOS systems allow for a wide range of efficiency-boosting and customer-pleasing features, such as:
Tableside credit card payments. With mobile POS, the servers at your restaurant or bar can give the check, take payment, and receive a tip—all in a single visit. By using an iPad ,or another tablet device with an attachment for credit cards and other cashless payments, mPOS lets servers take and process orders from anywhere, which leads to less rushing back and forth to the kitchen and more time serving customers.
Quick tips and signatures. You can also hand your mPOS tablet to your customer so they can easily sign for their order or select from several convenient tipping options. Less time spent calculating tips means higher table turn rate, an important metric for restaurants and bars.
User friendliness. A mPOS system offers high customizability so you can modify your interface and features to work for your operations. Also, since a mobile POS system works on your preferred tablet, troubleshooting will be an easier process than with traditional, Linux- or Unix-based POS systems.
Because the features differ so widely between these two credit card payment methods, it is worth considering which one would work best for your business before you commit. POS only deals with brick and mortar purchases, however—for online credit card transactions, there is a range of other services to consider.
3. Payment gateways
A payment gateway is an online service that sends payment information to the credit card network to be processed, then brings back results and transaction details to your website.
There are two primary considerations when it comes to choosing a payment gateway provider: ease of use and security.
One way to address both these points is to purchase a mPOS system that integrates with your website for online orders. Integration means there is no need for a third party such as Amazon or UberEats to be involved in the online checkout process. It also makes it easier to keep customer information encrypted from end to end, for better security.
This is called an all-in-one solution, and in addition to being better for security, it usually results in lower payment processing fees across your whole system. Finally, having a payment processor that integrates with your POS and your website means that all three work harmoniously together, with no errors or redundancies.
A good way to check for a secure system while researching payment gateway providers is to look for PCI compliance. The Payment Card Industry Data Security Standard, or PCI DSS, has outlined specific security standards that it recommends for any company that accepts credit card payments.
For more information on how to protect your customers’ credit card information, see Swoop’s steps to protecting yourself from a password breach.
In this day and age, every business needs to be able to accept credit card payments, but people don’t often consider the different steps and processes that go into making those transactions work.
Explore the methods in this guide to make an informed choice and to start accepting credit card payments smart and efficiently.