To Accept Credit Cards or Not!
- Doc Worley
- Mar 20, 2014
- 6 min read
How will we get paid? We have to eat...we have to live! Going into business is great, but if you are not focusing in the realistic aspect of going into business...providing goods and/or services in exchange for value, which equivalates to profit or cold hard cash!
Many questions asked, but one option is addressed today...accepting credt cards, who the major players in the industry are AND the pros and cons of this option. Nothing is for everybody... but there is something for everyone! You know what I mean!
Please read and know...take it away David!
Accepting Credit Cards: The Ultimate Guide For Small Businesses
By David Waring
There are many services available that will allow you to start accepting credit cards, and choosing the right one will depend on where you do business. Some businesses will need to accept credit cards in a brick and mortar location, on the go, and online. Others may only need to sell online.
There are comprehensive services that will allow you to accept credit cards everywhere, and piecemeal services that let you avoid paying for services that you don’t need.
This guide is organized in two parts:
The first part covers the “Comprehensive Solutions,” which will let your business accept credit cards anywhere and everywhere.
The second section outlines “Piecemeal Solutions,” which are designed for businesses that only accepting credit cards in one or two locations. In other words, if you only do business online, or only sell through a brick and mortar shop, you can purchase just those services.
Accepting Credit Cards Part 1: Comprehensive Solutions
There are two main types of comprehensive credit card solutions – a full Merchant Account Service Provider, or a hybrid Online/Mobile Payment Service. Both will let you begin accepting credit cards in person and online, but the prices and user experience will vary.
Merchant Account Service Providers
There is a good chance that the last time you bought something with a credit card, the payment was processed through a merchant account service provider. This is by far the most conventional and widely used method of accepting credit cards, but it can also be the most expensive.
Merchant account service providers are generally banks or financial institutions that provide the services and equipment necessary to connect your business bank account with your customer’s credit card company. Most providers will include a “Merchant Account” as part of their service, which acts as a temporary holding account for payments waiting for approval from the credit card company. Once the payment is approved, the merchant will transfer the payment, minus their commission.
Merchant Account Service Pros:
The advantage of using a merchant account service provider is that they provide a seamless user experience for both brick and mortar and Internet stores. Most providers will sell or rent all the equipment you will need, including point of sale terminals, card readers, and an online shopping cart that integrates with your website. Also, the name of your business will show up on your customer’s credit card statements, which is not always the case when accepting credit cards through mobile or online payment systems.
Merchant Account Service Cons:
The main drawback for merchant account service providers is the cost. There are a number of fees associated with these services, which makes it extremely important to shop around and read the fine print of all contracts. Make sure to identify and compare the monthly statement fee, monthly minimum fee, monthly gateway payment, transaction fee, and transaction commission. Also pay attention to the contract duration and rate hikes. Some services come with three-year contracts and fees that increase over time.
Consider a Merchant Account Service Provider If:
You sell a lot of products in a brick and mortar location.
You sell a lot of products online.
You want a single, integrated user experience across all platforms.
Top Merchant Account Service Providers
Here are three of the top merchant account service providers:
Hybrid Online/Mobile Payment Services
Some services, such as PayPal and Square, offer payment services that allow you to start accepting credit cards both online and in person using a mobile device. These services do not require a merchant account, and can be a more affordable option than a full Merchant Account Service.
Hybrid Service Pros:
It may be less expensive than a full Merchant Account Service Provider, while giving you the ability to accept credit cards in all the same locations. The online nature of these services also makes it easy to monitor your account, transfer funds, and track analytics. Some services also have very straightforward fee structures, and no contracts, which you may find appealing.
Hybrid Service Cons:
While hybrid payment services will let you accept credit cards in all the same places as a full Merchant Account Service Provider, the user experience may not be as seamless. For example, unless you pay for PayPal’s premium service, your online customers will be rerouted to PayPal’s website when they go to enter their payment details. Likewise, Square does not integrate with your online store, and only allows you to accept credit card payments through your shop page on their Square Market.
Consider an Online Payment Service If:
You sell a lot of products in a brick and mortar shop, online, and on the go.
You want a cheaper solution than a full Merchant Account Service Provider
Cost is more important to you than a seamlessly integrated user experience.
Top Hybrid Payment Services
Piecemeal Solutions
Not everyone needs to accept credit cards in person and online. Depending on your business, you may be able to cut costs by avoiding paying for services you don’t need. If you do all your sales in a brick and mortar location, you may find that a Mobile Payment Service is perfectly adequate. Likewise, if you run an online business, an Online Payment Service can provide an inexpensive and quick solution.
Mobile Payment Services
Mobile payment services are a relatively new way to start accepting credit card payments through a smartphone or tablet. The mobile payment service that you choose will provide you with a card reader that connects to your smartphone/tablet, and an app that allows you to process the payment, take a signature, email or text a receipt, and track analytics.
How it works:
In some cases, the only major difference between a mobile payment service and a conventional Merchant Account Service is that you will use a smartphone/tablet to process the order instead of a conventional card swipe or point of sale terminal.
Mobile Payment Services that set up a dedicated merchant account generally have pricing schemes similar to conventional Merchant Account Services. Other services, such as Square, do not require a merchant account and have eliminated many conventional fees in exchange for higher transaction fees. It is important to evaluate the different fee structures to see which one fits your business the best.
Mobile Payment System Pros:
The major benefit of mobile payment systems is the flexibility they offer in terms of payment location. A mobile payment system can give your business the ability to accept payments on the go, at places like markets and fairs, or allow your brick and mortar sales associates to individually process credit cards away from a cash register.
Mobile Payment System Cons:
There are a number of drawbacks to Mobile Payment Systems that you should consider before committing to accepting credit cards through this option. First of all, they require smartphones or tablets to operate, so if you do not already have this technology, you may be facing high startup costs. Second, the fee structures for mobile payment systems can vary widely, so they can end up being quite expensive. Third, many mobile payment systems do not include online shopping cart integration, so you should go with a hybrid mobile/online payment service if you want to accept credit cards online.
Consider a Mobile Payment Service If:
You sell a lot of products and want to accept credit cards on the go.
You want all your sales associates to be able to independently process credit cards.
You do not sell anything online.
Find a Mobile Payment Service Here:
Online Payment Services
Online Payment Services allow you to accept credit cards online. The most well known example is PayPal, but Google and Amazon also offer payment services. Most services offer different payment levels that will determine how much they integrate with your existing website.
Pros:
The major benefit of an online payment service is that they allow you to accept credit cards online with minimal cost or setup time.
Cons:
The major drawback is that the user experience may be branded by whatever service you use. In some cases, this means that the customer is rerouted to the service’s website, which can bother some customers. In some cases, you may be able to pay to remove this branding.
Consider an Online Payment Service If:
You only need to accept credit cards online.
You want to avoid paying for services that you don’t need.
Find an Online Payment Service Here:
Thanks David for the great information!
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