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How to Accept Credit Card Payments | A Practical Small Business Guide

Small businesses can accept credit card payments by using an online merchant gateway like Stripe or PayPal, by setting up a POS system with a merchant account or by using a mobile card reader to accept credit card payments through a smartphone app. Learning how to accept credit card payments can help small businesses boost their sales, improve cash flow and provide a better experience for their clients. But a recent study found that 55 percent of small businesses in the US don’t accept credit card payments.

These topics will show you how to accept credit card payments as a small business:

How to Accept Credit Card Payments for Small Business

How to Accept Online Credit Card Payments

How to Accept In-Person Credit Card Payments

How to Accept Mobile Credit Card Payments

Why Should Businesses Accept Credit Card Payments?

What Are Credit Card Transaction Fees?

How to Accept Credit Card Payments for Small Business

Small businesses interested in accepting credit card payments first have to do some research and decide what credit card payment methods work best for them. These are the steps to follow to start processing credit card payments:

Decide How You’ll Accept Credit Card Payments

First, decide how you’ll allow your clients to pay by credit card. There are three primary ways you can accept credit card payments:

  • Online credit card payments
  • In-person credit card payments
  • Mobile credit card payments

If you’re a freelancer who mostly conducts business with clients remotely via email and phone, accepting online credit card payments might be the only method your small business requires. If you have a physical store that sells products to customers, you’ll want to accept in-person credit card payments within your store. And if you’re a contractor or landscaper working on-site for your clients, a mobile card reader might be the most convenient payment method since it allows clients to pay from the job site using a card reader powered by your smartphone.

Choose a Merchant Service Provider

Once you know how you’ll process client credit card payments, you’ll need to choose a merchant service provider. Merchant service providers are companies that provide businesses with the products and services needed to process credit and debit card payments. When evaluating merchant service providers for your business, it’s important to ask yourself the following questions:

  • What fraud protection do they offer?
  • Do they offer other related services, like payroll solutions?
  • What kinds of payments can the MSP process: online, mobile, in-store?
  • What fees does the MSP charge the business owner?

Choose a merchant service provider that suits the specific needs of your business and charges fees you’re comfortable paying.

Open a Merchant Account

When you’ve selected the merchant service provider best suited to your particular business model, you’ll need to open a merchant account with them. A merchant account allows your business to accept and process credit card payments and receive those payments in your business account. Opening a merchant account through a reputable MSP is the simplest way for small businesses to accept credit cards, although it’s also possible to open a merchant account through a local bank.

How to Accept Online Credit Card Payments

To accept online credit card payments, you’ll need to sign up for an online payment gateway such as Stripe or PayPal. These services work by processing your client’s online payments for you and charging a processing fee for each credit card transaction your business accepts. If you use a cloud-based accounting solution, you probably already have access to online credit card payment solutions through app integrations within your online accounting software.

How to Accept In-Person Credit Card Payments

To accept in-store credit card payments, you’ll need to purchase a point-of-sale (POS) system. A POS system includes hardware (like a credit card reader) and software to process credit card payments in person. Customers can insert or swipe their credit or debit card using the card reader and the transaction will quickly either be approved or declined. If a transaction is approved your merchant account will then receive the funds and transfer them to your business bank account within a matter of days.

How to Accept Mobile Credit Card Payments

To accept mobile credit card payments, you’ll need a mobile credit card reader, such as Square. A mobile credit card reader is a portable device that plugs into your smartphone and pairs with a credit card app to accept credit card payments anywhere, as long as there’s an internet connection.

Why Should Businesses Accept Credit Card Payments?

Accepting credit card payments offers flexibility and convenience to your clients and can also benefit your business. The benefits of accepting credit card payments for small businesses include:

Boosts Sales

Accepting credit card payments is a benefit that can help you attract new clients to your business, improving your sales. If you are a business that sells products, accepting credit card payments can translate into increased sales because people tend to spend more when they’re using a card. A recent study found that people spend between 12 and 18 percent more when they use credit cards rather than cash.

Improves the Client Experience

Offering flexible payment options that include credit card payments gives your clients a better experience and encourages loyalty. Many clients prefer to pay using a credit card because they can quickly and easily process the payment online, rather than having to fill out and mail a check.

Increases Cash Flow

Unlike checks, which often take between five and ten business days to clear through your bank, credit card payments are processed relatively quickly. Often, credit card payments are cleared and the money appears in your business bank account within a day or two of the transaction.

Saves Time

Most credit card processors allow you to accept credit card payments with a few simple clicks, saving you time. You won’t have to go to the bank to deposit checks or spend as much time requesting payment for invoices.

Improves Payment Security

Accepting credit card payments can mean your business has less cash on hand, which lowers the risk of theft or loss. Although there are security risks with accepting credit cards, in many cases fraudulent charges can be recovered when you use a merchant service provider.

Provides Useful Reports

Most credit card payment processors provide robust sales reports based on your transactions. You’ll be able to gather useful data about the types of payment clients use, how long it takes them to pay and the average payment amount your business receives. Credit card reports also include information that’s useful when you file your taxes.

What Are Credit Card Transaction Fees?

Credit card transaction fees are charged by the processor every time a business accepts a credit card payment. There are two types of fees charged for every credit card payment that’s processed: the processing rate and the transaction fee.

The processing rate is a percentage charged for every payment that’s based on the business’s average transaction amount. The transaction fee is a flat rate that’s charged every time a business accepts a credit card payment.

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