How to take credit cards: What your business needs to know
The following is a guest post (contributed article) by John Rampton, founder and CEO, Due.
Understanding how the process works for taking credit card payments from customers at your business, is a method that is good to get the basics down, first.
This post is designed to provide pointers on what you need to know to take credit cards in your place of business, online, or through a mobile environment.
How to take credit card payments
Accepting credit cards first involves making your plan on how your will be doing business with your customer with the cards. If the credit card use will always be in person, then you will use point-of-sale (POS) equipment, a credit card swiper or one of the new EMV/chip readers, or a mobile device.
The other way you can accept credit cards is remotely where you take the payment information through your website or by phone. You may even opt to accept credit cards all of these ways if you have a physical storefront and a website.
Once you decide how you will take credit cards from your customers, then the next decision involves determining if you need a merchant account or you will connect directly to your business account to complete the credit card transactions. If you are not sure which method of accepting credit cards works best with a merchant or bank account, here is a quick breakdown:
POS systems, which can include a swiper, NFC reader, barcode scanner, touch screen, cash register, printer and other equipment typically requires a merchant account.
A credit card terminal requires a merchant account.
If processing credit cards through a mobile device, you don’t necessarily have to get a merchant account.
Online payments typically do not require a merchant account but those that use shopping cart software may need one.
The benefit of opting for a merchant processing company that supplies you with a merchant account is that you can access tools that ensure compliance with the current and future regulatory environment as well as the technology that continues to add further layers of security to protect you from fraud and data breaches.
If you most likely will be getting a merchant account, it’s good to understand what a merchant does for your business. Essentially, any merchant account services you use become the middleman in the equation between your business and the customer’s credit card company. The merchant account service provider processes the payment and makes sure that the money is transferred correctly.
You can get a regular merchant account, which typically allows you to accept debit and credit cards; a retail merchant account for a business with a brick-and-mortar location; an Internet merchant account for an e-commerce business; or a mail or telephone order merchant account, which takes payments over the phone or direct mail.
The merchant services company provides you with any equipment that you may need. In return, credit card processing providers will charge a certain amount of fees that often vary by company. These fees can include a monthly statement, monthly minimum, gateway, and transaction fees.
There are some fees that cannot be negotiated, but many can be reduced or eliminated so it pays to shop around for merchant services. Be sure to also pay attention to any contracts or upfront fees because these may not be necessary either.
Security is another important aspect of accepting credit cards that you need to pay attention to along with compliance related to regulatory issues. This includes switching to EMV/chip reader processing as well as ensuring you adhere to the Payment Card Industry (PCI) Data Security Standard. These standards are important because they are focused on preventing and detecting any security issues, which can help increase the likelihood of secure transactions.
However, not complying with these standards can result in fines, so it’s critical to find a credit card processing company that can partner with you to make credit card processing transparent, convenient, secure and low cost.
Parties involved in credit card processing
There are more people involved in the credit card processing environment than you may realize. There’s the merchant bank that provides merchant account services in terms of facilitating card transactions and getting money into your business bank. There’s the processor, which is that middleman previously discussed that handles the responsibilities of managing the merchant account. The issuing bank is the financial institution that issued the credit card that is involved in a particular transaction.
Finally, there is the card payment brand listed on the issuing bank’s credit card.
Credit card processing terms
There are also a number of terms that you will have to familiarize yourself with if you plan on accepting credit cards at your business:
Batching involves sending in a bunch of completed transactions at once for processing versus doing so one at a time. This tends to give you a better transaction rate than sending in individual transactions.
Chargebacks are becoming an increasingly critical issue. Within 60 days of a transaction, the cardholder can dispute a charge on their credit card account, which leads to an investigation that can cause you to rack up additional fees as well as lose the transaction revenue from that particular charge. Unfortunately, many chargebacks are fraudulent, requiring you to have better security measures in place to ensure these chargebacks don’t drain your business.
Payment gateways are used to electronically transmit payment data from you to card associations and credit card processing companies. Typically, these payment gateways can work with a range of banks, POS systems, merchants and processors.
Factors for finding the best credit card processing partner
Because of the increase in the amount of businesses using credit card processing, the number of processing companies and merchant account providers has grown steadily. That leaves you with many options to choose from, but it also means that it can be more difficult to decide which one is right for your business.
Factors should include identifying the credit card processing partner that offers the equipment and payment channels you need; has the ability to handle the volume of credit card transactions your business does now and the increased number you will do in the future; and that delivers competitive rates, fees, and terms that you can afford as well as that are fair and transparent.
Other important factors to consider include how fast you can access the funds, which means it’s better to find a credit card processing company that can get your money in a couple of days versus a week. How your processing company handles compliance, data security, refunds and disputes are other criteria that you must research to make sure you’ve found the right credit card processing partner.
It is a good idea to visit review sites and get referrals from other business owners like yourself, which can also shape how you select a company to help you with your credit card processing needs
About the author
John Rampton is an entrepreneur, investor, online marketing guru, and startup enthusiast. He is the founder of the online invoicing company Due. John is best-known as an entrepreneur and connector. He was recently named #2 on Top 50 Online Influencers in the World by Entrepreneur Magazine and a Blogging Expert by Time. He currently advises several companies in the San Francisco Bay area.