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Credit Card Processing for Small Businesses

8-minute read

A cashier is using her credit card processor for small businesses
Mariah Bliss

Mariah Bliss

25 July 2018

As a small business owner, one of your major goals should be the satisfaction of your customer. So many factors go into ensuring satisfaction, from the quality of the products and/or services that you offer, to the customer service you provide.

Satisfaction also includes the ease of the transaction.

Think back over your last few purchases. When was the last time you used cash? These days, there are actually very few people who actually carry cash. Most point of sales (POS) transactions are using some form of debit or credit card. It might be “easier” to be a cash-only operation, but the truth is, by only accepting cash, there’s a good chance that you’ll be seriously restricting your potential sales.

Credit card processing for small businesses is all about convenience for the customer, and can help you to see a boost in the sales you make. However, choosing a credit card processing company involves more than just signing up. With the right credit card processing company, though, you can help your small business to flourish and grow.

What is a Credit Card Processor?

A credit card processor, or payment processor, handles credit and debit card transactions. When you swipe (or insert, if there is a chip) a credit or debit card, the credit card processor takes the information from the card and communicates it to both your bank and the customer’s bank. Along with facilitating the transaction, the credit card processor also works to provide security, including ensuring that the customer’s information is correct. Finally, credit card processors can take care of charge disputes for you. Instead of you issuing a refund, the credit card processor will return the funds spent to the customer’s account, resolving the dispute.

What Requirements Are There for Having a Credit Card Processor?

In order for you to use a credit card processor, there are a few things you need to have. First, you need to have a merchant account. This is a bank account that accepts credit and debit cards for payment purposes. Without it, you cannot accept cards as a form of payment. You also need a payment gateway, which is the connection point between your customer’s credit or debit card account and your merchant account. This can be done in your store with a credit card machine; however, if you sell products or services on a website, you will need credit card processing for small businesses online.

Benefits of Accepting Credit Card Payments

There are numerous benefits to why you should consider accepting credit card payments:

  • Meeting industry standards. There’s a good chance that your competitors are already accepting credit card payments. In order to stay relevant, and compete with them, you should offer to take payments by card as well.
  • Customer convenience. Let’s face it, fumbling through a wallet to find cash, counting coins, and then trying to put the change away can be aggravating. Credit cards offer a quick, convenient way to pay. Not only that, but many cards offer all kinds of perks (air miles, points, or other rewards) to encourage their use.
  • No more bad checks. If a check bounces, it is you who are slapped with the responsibility of paying back the amount that you received. On top of that, many banks charge a penalty. Then you have to waste valuable time tracking down the customer who wrote the bad check. With credit card processing, the card is screened during the transaction, not after, helping to reduce the risk of fraud.
  • You can do business online. Today, most businesses are operating a storefront and they are doing business online. There are even some businesses that run solely on the web. Taking your business online provides a way to broaden your customer base, and therefore increase sales and profits. Credit card processing for small business online makes taking your business online possible, opening up a whole new realm of possibilities.
  • Improve cash flow. All credit card transactions are processed electronically. The money you make is deposited into the bank quickly. There is no more waiting for checks to clear or billing and waiting to receive payment (both of which can make or break some small businesses when funds are tight and bills are due). Taking payments with a credit card also means that you have less cash to handle.
  • Reduce employee theft. No one likes to think that their employees will steal from them, but it can, and does happen. Small businesses typically lack the complex security systems that many larger operations have, making it easier for cash to go missing. By accepting credit cards, it becomes much more difficult for employees to steal. In the event of theft, the money is much easier to track.
  • Boost sales. When you only accept cash, your customer base is small. After all, there are not many people who still carry cash on them. By accepting credit and debit cards, you broaden your customer base.
  • Encourage impulse buys. When customers have to write a check, or run to the ATM to pull out cash, they tend to limit their purchases. Many studies have shown that when customers can use a credit or debit card, they tend to spend more, especially when it comes to impulse purchases.

What Keeps Some Small Businesses from Accepting Cards?

Many small business owners tend to shy away from accepting credit and debit card payments because they fear that the fees associated with credit card processing are too expensive. They think that the fees will eat away at their profits, and do more harm than good to their bottom line. The truth is, however, that accepting credit cards from your customers is actually very cost-effective. Credit card processing has become a highly competitive industry,with the different processing companies trying to compete with one another for your business.

Along with credit card processing companies being competitive, many small business owners quickly realize that the amount of revenue they bring in thanks to accepting credit card payments offsets the actual fees charged by the credit card processing companies. And, when you accept credit and debit cards, you will quickly begin to reap the benefits – increased sales per customer, more impulse purchases, gaining more customers in any loyalty programs you may offer. Credit card processing for small business owners actually provides a really good return on investment.

Considerations When Choosing a Credit Card Processing Company

So, now that you’re on board with credit card processing, what’s next? It’s time to choose a credit card processing company.

Sounds simple, right? Not quite. There are several different credit card processing companies. Choosing the right credit card processing for your small business should not be taken lightly. It is important that you take the time to consider all of your options. There are several factors that you should consider before signing up someone:

One of the first things you should think about are the fees associated with the credit card processing company. Fees can be scary, especially to a small business owner. The key is to understand what is being charged, why, and how much. Depending upon the credit card processor, fees may include such things as:

  • Interchange fees. These fees are the ones that are charged during each transaction. They typically range between 2% and 3% for each one, but the rates tend to vary based on the type of card being processed, the company it comes from, the size of the transaction, and if the customer is making a purchase in store or online.

  • Application and setup fees. Some credit card processors charge a fee simply for applying, as well as for setting up the necessary equipment.

  • Monthly minimum fees. With a monthly minimum fee, the credit card processor sets a minimum amount of fees that must be collected. If you fail to meet the minimum requirements, you get charged to remainder to meet the requirement.

  • Gateway access fees. Some credit card processors charge a fee in order for you to have access to their payment gateway.

  • Statement fees. This is a fee that is charged for mailing you your monthly statements.

  • Early termination fees. Most credit card processing companies require that you sign a contract. It may be for a year, two years, or whatever they choose. If you find that you want to get out of the contract, the company may choose to impose an early termination fee. The exact amount of the fee ranges from company to company, but it can reach into the thousands of dollars. This can often be an incentive to really do your homework before signing up with the first credit card processor you come across.

    While these fees can be scary, there are ways to do it for less, if you know where to look. Unfortunately, there really isn’t such a thing as free credit card processing for small businesses. For instance, some companies offer no transaction fees, but there are other fees that may still be associated with the service (monthly fees, compliance fees, etc.). And, instead of you being charged the fee, the fee is incurred by your customers. It’s important to read the fine print first. There are also credit card processors who charge lower transaction (interchange) fees, don’t charge for equipment, and/or have no application and setup fees.

    Cost is only one factor that needs to be considered. Other considerations you should keep in mind when choosing a credit card processing company include:

  • The types of payments that the credit card processor accepts. For instance, you may want to be able to accept all major credit and debit cards as well as prepaid gift cards, or even EBT (electronic balance transfer).

  • Whether or not it will accept newer types of payment methods (for instance, Apple Pay).

  • The type of customer support the company provides. Even once you get the hang of your new credit card machine (or your online payment system), it’s still possible to experience technical difficulties. Or, you might simply have a question about your statement. These issues can impede your business, so it is important to have them taken care of quickly. In order to do this, you may want to consider a credit card processor that offers round the clock customer support, during which time you can receive direct help.

What’s the Best Credit Card Processing for Small Businesses?

When it comes to choosing a credit card processor for your small business, there are a variety to choose from. So, how do you know which one is the best? Here are a few of the top credit card processors for small businesses that you should consider:

  • Square is a popular processor with restaurants and retailers alike. It’s extremely easy to use, and it’s affordable. All swiped transactions have a flat 2.75%. There are also fees for keyed transactions (3.5%) as well as online transactions (2.9% plus $0.30). Those are the only fees associated with this credit processing company. It also offers a mobile processing solution with no monthly fees attached.
  • PayPal is a great option for online credit card processing. It’s easy to use, and credit card processing can be up in running in very little time. PayPal does not require a contract (which also means no termination fees), and funds are available immediately. Fees range between 2.2% and 2.9% plus $0.30 per transaction.
  • is a good option for any type of business. There are low processing fees, and you don’t need to pay any money down to get started. You also get a free mobile credit card swiper (which works for both Apple and Android). Pricing is tiered and the options are flexible. Service is month to month, and there are no termination fees.
  • Cayan Merchant Services is another all-around good choice for just about any business, and the processor offers a wide variety of options. They have interchange-plus pricing, which enables their services to be very cost-effective. They also offer month to month contracts, no termination fees, and no application (or setup) fees.

Whether you are a brand-new small business or you have been around for a while, accepting credit card processing can be a major benefit to your operation. We live in a digital world, and carrying cash is quickly becoming a thing of the past. By accepting credit and debit cards, you can greatly improve your customer experience, making the checkout process fast and convenient. Not only that, but accepting debit and credit cards can help you to see a boost in your sales that will help you to grow.

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Mariah Bliss

Written by

Mariah Bliss

I love writing about the small business experience because I happen to be a small business owner - I've had a freelance copywriting business for over 10 years. In addition to that, I also head up the content strategy here at Simply Business. Reach out if you have a great idea for an article or just want to say hi!

This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs. Read our full disclaimer

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