Nowadays, more people rely on credit and debit cards as payment methods. It’s simply because doing so provides benefits that cash payments can’t match.
For instance, responsible credit card use allows customers to build their credit score, earn significant rewards and cover unexpected expenses.
On the business side, it can make managing cash flow less stressful and improve sales and revenue. But while accepting credit cards as a payment option seems like a good idea, it’s a complex undertaking that requires a lot of work and planning.
To help you learn more about processors, below, we will discuss the four things you should consider before accepting online credit card payments.
Determine How You’ll Take Credit Card Payments
You can take credit card payments in three primary ways. Before accepting them online solely, it’s important to consider the type of business you run and how your customers use their cards.
- Online Credit Card Payment: This might be the best and only option if you have an e-commerce business or you’re a freelancer who mainly conducts businesses with clients remotely.
- In-Person Credit Card Payment: This might be the most suitable method if you have a retail store and most customers come into your physical location.
- Mobile Credit Card Payment: This might be the most convenient choice if you’re a contractor or landscaper working on-site for your clients.
Remember that determining how you will accept the payment can also help you figure out what type of credit card processing equipment you’ll need.
Understand How Credit Card Processing Works
Allowing credit card payments will help attract and retain customers. But what happens when a customer pays with a card? Understanding how it works can give you an upper hand at handling potential issues with transactions.
Regardless of whether you receive the payment in-person or online, credit card processing happens as follows:
- Authorization: When the customer submits their credit card details for payment, the card reader or payment gateway captures it. The payment processor will communicate the transaction to the associated card network for approval or denial.
- Settlement: If approved, the issuing bank charges the transaction amount to the cardholder’s account. The payment processor will then instruct the issuing bank to transfer the funds to the merchant account. It may take several business days for the merchant to access the funds.
Think About Credit Card Processing Fees
There are several fees involved in credit card processing, depending on the payment processor you choose or the company partner that handles these transactions. While some of them are necessary, you can negotiate or ask help with card processors to eliminate other fees.
Typically, credit card processing will cost a business 1.5% to 3.5% of every transaction’s total. Highlighted below are the components where these fees go.
- Interchange: The bank that issues the credit card collects interchange fees. Note that this comprises the largest portion of the merchant discount rate. One way to save money on these fees is to settle your batch every day or increase security measures, especially every time the payment is captured.
- Assessment: These fees go to the credit card networks, such as Mastercard, Visa, American Express, and Discover. Like interchange fees, there’s no way to negotiate the assessment cost. However, you can shop around payment processors, and pricing plans to lower your fees.
- Payment Processor: These fees are paid to the company you decide to work with to handle your credit card payment transactions. Note that its markup depends on the payment processor you choose. So make sure to always do your research and compare plans.
Select The Best Credit Card Payment Processor
The bank you work with is essential and the credit card processor you choose. Note that it’s not only about the fees or cards you can accept. Besides the costs, make sure to consider the following factors when selecting the best credit card processor.
- Fraud Protection and Security: You’ll need a processor that provides enough security for your transactions. Make sure they have additional safeguards like encryption and tokenization features. Also, check out if they are PCI-DSS compliant.
- Multiple Payment Methods: Customers would always prefer to have several payment options. Thus, always ask about the payment methods the processor accepts and ensure credit cards, debit cards, and digital wallets are on the list.
- Customer Support: You will be needing help with your payment processing system now and then. You run into some technical difficulties or decide to upgrade. See to it that the credit card processor offers good customer support. It’s also best if they offer onboarding and activation.
Final Thoughts
Offering an online credit card payment option to your customers would be an excellent decision. Although it can be overwhelming at first, you will get used to it with the help of card processors. Also, be sure to choose a reliable and secure credit card processor. Remember that you’ll be held liable for every transaction your customer makes in your business.