As a small business owner, it’s no secret that accepting credit cards is a major part of running a successful operation. Whether you are an entrepreneur with a new business idea you can’t wait to introduce to the market, or already have an established operation and are looking to incorporate accepting credit cards to processes purchases for your service or product offerings, there are some things you should know about how to start accepting credit cards and what to look out for to make sure you’re getting the most out of your merchant processing services.
A large majority of today’s customers prefer to pay with a credit or debit card, or their mobile device in-store when making a purchase, and each day more and more customers are choosing to do their shopping online. Having the ability to accept credit cards is absolutely crucial as it can attract new customers, and create more opportunities for the customers you already have.
In addition to an increase in sales, accepting credit cards provides many other benefits to your business such as giving credibility to your brand, enhancing the client experience by allowing them more options to provide payment and saving them time, makes accounting and balancing your books easier, minimizes the security risk of having large amounts of cash on hand, and allows for the expansion of your reach by offering services online.
How can your business can start accepting credit cards as payment for goods or services?
It’s helpful to first have an understanding of how payment processing works when it comes to accepting credit and debit cards for your business. In simple terms, accepting credit cards means being able to accept your customer’s credit or debit card data so that funds or credit from their account can be transferred as payment from a product or service you are offering. To do this, you will need either a credit card terminal for in-store purchases or a payment gateway for online transactions. You can also use a software service known as a virtual terminal, which turns your computer into a credit card terminal and allows you to either input the card data manually or read it using a compatible card reader.
Having the ability to capture your customer’s credit or debit card data will allow you to then have a way to send it to a processing system for approval or denial. A merchant services provider will have the ability to confirm the available funds for the transaction by communicating with the card holder’s bank or credit provider. Additionally, the merchant services processor will ensure that the transaction is legitimate as part of an attempt to safeguard the cardholder from fraud.
If sufficient funds are available and there aren’t any clear indications of fraud, the transaction is approved, and you can complete the sale. The data you collect from your transactions will be sent to your processor’s network for processing, which happens automatically through a credit card terminal or payment gateway. In exchange for providing this service to businesses, merchant service providers charge a fee, and your business will receive the remaining funds a few days after the transaction has occurred.
What is a Merchant Service Provider?
Merchant service providers give businesses the ability to accept debit and credit cards as payment for goods and services. A merchant service provider is a third party company that facilitates the transfer of funds from a cardholder’s account to the bank account of the business. In the past, credit card processing services were supplied by banks that were members of the Visa or MasterCard networks.
Today, very few banks issue credit cards and the industry is dominated by a few large issuers such as Citibank, Capital One, Bank of America, and Chase. Very few banks process credit cards because they found that it was too complicated and too costly to supply payment processing services to every small business looking to accept credit cards, and they began to outsource the selling of such services to small companies to a third party provider called an Independent Sales Organization (ISO) who sells this type of service to a merchant and also provides technical support, and transaction processing. In recent years, a new type of service has become available that allows smaller businesses to accept credit cards for a lower cost but provides while receiving roughly the same services.
Payment service providers (PSPs) allow you to accept credit and debit card transactions without a traditional merchant account, and while they are financially more appealing and easier for smaller businesses to set up, PSPs are more susceptible to sudden account freezes or terminations which can make them a risk for businesses that depend on being able to accept cards without interruption.
There are some important advantages to opting for a merchant service provider over a PSP. First, your merchant service provider will typically provide the point of sale terminals you need to begin accepting credit or debit cards in your stores. These terminals can be portable or stationary, depending on your specific needs. Second, many of these terminals allow customers to use their credit or debit cards to purchase with a cashback option. This allows customers to receive cash, which usually comes in a set amount and is added to their purchase total.
Also, a merchant service provider will typically provide eCommerce solutions, which will allow your business to be able to sell goods or services online through a payment gateway. A payment gateway system is a cloud based credit card processing software that facilitates credit card transactions through your business’ website, linking transaction information between the credit card network and the card issuing bank to authorize the payment. The payment gateway passes funds from your customer’s credit card into your merchant account seamlessly.
Because online sales deal with sensitive credit card information, it is important to ensure that data is being handled within a PCI compliant payment gateway which utilizes both tokenization and encryption technologies to meet all PCI specifications set by the Payment Card Industry. This ensures that credit card information is being protected throughout each stage of the transaction process, minimizing security risks and protecting your business from fines should a data breech occur. Lastly, a merchant services provider will offer anti-fraud measures to keep both you and your customers secure when making a transaction or accepting payment.
How can my business start accepting credit cards?
In order to start accepting credit cards, you’ll first need to select a trusted merchant services provider that can be integrated into your point-of-sale system, who will facilitate credit card transactions both in-store and online. You’ll also need an up-to-date and secure credit card reader to process the in-store transactions and an online payment gateway system to process online sales.
When choosing a merchant services provider, make sure you have a clear understanding of the fees they will charge you. For example, some banks will offer merchant processing services to their customers, but as was mentioned above, they outsource the merchant processing services to a third-party and charge you fees to do so. Some merchant service providers will charge unnecessary fees to allow you to accept credit cards, and if you’re not educated about the process, you could be paying for services you don’t need.
To avoid paying unnecessary fees, there are a few things you can to do make your business more viable in the eyes of a merchant processor. First, reduce the risk of fraud as much as you can by swiping cards as often as possible and making sure you’re asking for all of the necessary verification information online. Second, you’ll want to incorporate an address verification service which will verify a cardholders billing address with the card issuer to insure the card is not being used be someone other than its owner. By using this additional security step, you may be able to lower your interchange rate.
Lastly, you’ll want to ensure your account and terminal are properly set up to avoid providing incorrect information during transactions which you will then be penalized for. While these may seem like easy things to incorporate, many businesses find themselves in big trouble by overlooking simple steps like these that can end up costing them big in the end.
Ready to get started?
A good credit card processor should be transparent with their fee structure with nothing to hide. At Pinpoint Payments we offer simple, secure payment processing services to business all across the world and in just about every industry. We even offer payment processing services to companies who have been turned away from other merchant processors. We encourage our customers to do their due diligence before trusting us to meet their payment processing needs, and we pride ourselves on being an open book and helping to educate the business owners we work with, so that there is never any hassle or misunderstanding like many of our customers have found with Paypal and Stripe. If you have any questions about how your business can start accepting credit cards in-store or online, contact one of our representatives today, and lets discuss any questions you may have and let us show you how we can offer credit card processing and merchant services that are uniquely tailored to meet your individual company needs.