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How Your Small Business Can Accept Online Credit Card Payments

Trying to figure out how to accept credit cards online doesn’t have to be as complex as it seems. It is really as simple as finding the least expensive and most convenient route between your customer’s credit card and the bank account.

At its core, it is really just a 2-step process as illustrated below:

  1. First, figure out on how you want to carry out business with your customer. Do you plan to do it in person - via traditional credit card swipers, a POS system or a mobile device — OR do you want to do it remotely via phone or the Internet.
  1. Once you decide on that, you can then determine whether you’ll need a merchant account. This is essentially a financial middleman who approves transactions and also deposits the cash in your bank account. You should also determine whether the method you want to use to accept credit cards can connect with your bank account directly without the need for the merchant account.

After you’ve known what you need, you should choose the best credit card processing service available. However, if you are still not quite sure about what method of accepting credit cards online is best for you, then you need to understand how every method works. Below are 4 basic ways of accepting credit cards. We will fill you more thoroughly on all the details of each way down below, but let’s just start simple.

Point-of-sale (POS) systems

  • This is a complete checkout terminal which can include an NFC reader, touch screen, credit card swiper, barcode scanner, printer, cash register and other equipment.
  • Usually requires one to have a merchant account.
  • Best suited for businesses with a physical location that would like to connect multiple locations or the cash registers to one other and to the other business systems like accounting or inventory.

Mobile credit card processors

  • This is usually a dongle or app that lets you accept credit cards online anywhere using a tablet or smartphone.
  • Usually requires credit card readers that attach to your phone. However, it doesn’t usually require the merchant account.
  • Best for businesses that sells in a variety of places and they want to process transactions anywhere within the store.

Credit card terminal

  • This is a piece of hardware that’s used to swipe credit cards in person or, in some instances, to manually enter the credit card numbers from phone or the Internet orders.
  • Requires the merchant account and it’s usually provided by the merchant account providers as part of their services.
  • Best for businesses that do not need their credit card processing system to do anything other than accepting payments.

Online payments

  • This is a shopping cart software, e-commerce solution or third-party marketplace like eBay, Etsy or Amazon that enables Web-based businesses to accept payments at their blog, website or online store.
  • Most e-commerce websites hosted by a third party don’t require merchant accounts. However, stand-alone e-commerce websites that use the shopping cart software might need a merchant account.
  • Best suited for businesses that usually conduct most of their business transactions online.

Now that you have the basics, you may be ready to make some decisions so as to use the best picks for credit card processing systems. Are still not sure? There’s no problem. Here’s everything that you need to know about the different types of credit card processors as well as how they all fit together to be able to accept credit card payments online.

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Merchant Account Services

What is it?

Merchant account services usually act as middlemen between businesses and the customer’s credit card bank or company. They process payments and ensure the money is appropriately withdrawn from the credit card account and placed in the business’s merchant account. After the money clears all the credit processing protocols, it can be transferred from the merchant account into the company’s regular bank account.

Who should use it?

Merchant services providers are considered an option for almost all kinds of businesses including mobile, online and brick-and-mortar businesses. However, certain methods of accepting credit card online do not require the use of merchant services.

There are different types of the merchant accounts:

  • Retail merchant account
  • Internet merchant account
  • MOTO (telephone or mail order) merchant account

Equipment

Merchant services providers usually offer businesses a wide range of equipment required to accept credit and debit cards including simple swipers, point-of-sale terminals, wireless terminals and PIN-pad terminals. Most merchant account services providers give businesses the options to buy or rent the equipment. The business owners can also buy the equipment from a source instead of the merchant service provider.

Cost

Merchant accounts are generally more costly as compared to the other types of credit card processing techniques. Business owners should also expect to pay numerous fees monthly and per transaction costs.

Security

Blum said that the providers should be EMV-compliant and they should also adhere to the PCI (Payment Card Industry) Data Security Standard. These are the credit and debit card industry’s regulations and rules governing how credit card information ought to be handled, used and also stored. The standards have set the framework to prevent, detect and react to security incidents.

Pros and cons

The benefit of using merchant services providers is that it can fulfill the business’s credit card acceptance needs just on its own. The merchant services providers also provide necessary tools like fraud protection and merchant account management. However, being an all-in-one solution, the main drawback is the costs, which is among the reasons why some businesses do not accept credit cards. Businesses should always do their research and ensure that they get the most cost-effective merchant account service providers that are best suited for their own needs.

Credit Card Processing, Online Credit Card Processing, Accept Credit Card Online, Accept Credit Card, Accept Credit Cards Source: Thinkstock/Alexander-Cherepanov

Mobile Credit Card Processing

Who should use it?

Mobile credit card processing services are best suited for the merchants who want to be capable of accepting credit cards anytime, anywhere. Some examples are food trucks, street vendors and repair people, as well as the brick-and-mortar stores that need the option to accept debit and credit cards away from the cash register.

Merchant account

Just like the merchant services providers, the mobile credit card processors also have their clients set up a merchant account so as to receive credit and the debit card payments. The only difference is the fact that these accounts are capable of receiving and processing payments wirelessly.

Equipment

Mobile businesses require their own equipment so as to swipe credit cards in the same way that retail stores do. In order to accept credit cards through mobile devices, you’ll need a compatible tablet or smartphone — typically Android or iOS — a card reader that is able to plug directly in the device and the accompanying application from the provider. The tablet or smartphone then becomes the credit card payment terminal, complete with the swiper and many other tools that are found on the regular registers.

Cost

Mobile credit card processors usually have a fee structure that’s similar to that of the regular merchant services providers.

Security

Besides obeying PCI Data Security Standard, the top mobile credit card processors use sites that have both encryption keys and Secure Sockets Layer (SSL) protocol. In addition, individual apps that the business owner uses when accepting the debit and credit cards are often password-protected and they include added safety measures just in case the mobile device is stolen or lost.

Pros and cons

The ability for one to accept the credit cards anywhere usually benefits both consumers and businesses. Besides promising significant revenue streams, the convenience also enables businesses to offer faster and better customer service. By having the mobility options, they are free to collect their payments from anywhere within the store. The major drawback of the mobile credit card is that there are fees. As such, business owners have to weigh their need for accepting debit and credit cards wirelessly versus the cost of doing so.

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Point-of-Sale System

What is it?

Point-of-sale systems usually use a combination of the merchant account, equipment and software to process the checkout transactions, accept cash and credit card payments, manage customers, manage inventory, and generate sales reports and many more. POS systems can either be stationary or mobile by using a smartphone or tablet.

Who should use it?

POS systems are perfect for the businesses that have physical locations with medium- to high-volume sales like retailers, restaurants, salons and spas.

Merchant account

Most POS system vendors generally require the merchant account, but some don’t. For instance, providers who process through gateways like Flagship Merchant Services that uses Authorize.net credit card processing usually require merchants so as to apply and get approved for the merchant to account.

Equipment

There are 2 types of POS systems: mobile and traditional. Traditional POS systems normally come with some combinations of credit card swiper, receipt printer, cash register and terminal with a screen. On the other hand, mobile POS systems typically come with a tablet terminal or a stand that will include a credit card swiper and a dongle which attaches to the smartphone’s headphone jack.

Cost

The cost of Point-of-sale systems varies based on the type of POS systems that you choose sales volume and type of credit card processing.

Security

Like other credit cards processing services, POS systems also come with the PCI compliance. Mobile POS systems usually have more stringent security like encryption and SSL for transactions and the password protection for applications. In addition, they also have remote wiping and data backups in the event that the devices are stolen.

Pros and cons

The biggest benefit for using POS systems is that it normally offers an all-in-one solution to process transactions, manage sales and run the back and front end of your business. Furthermore, there are point-of-sale systems that are designed for specific kinds of businesses — whether you own a shop, salon, spa or restaurant, there’s always a POS system just for you. However, there are a few drawbacks of using POS systems. As with some merchant accounts and credit card processors, you might have to sign a long-term contract which comes with a large early-termination fee.

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Online Credit Card Processing

Who should use it?

Any kind of business — including mobile, e-commerce and brick-and-mortar businesses — can always use third-party providers. These re best suited for the businesses that have low credit scores or those that do not carry out many debit and credit card transactions every month.

Cost

As with the other credit cards payment processors, the cost of using third-party online credit cards payment processors varies greatly. One of the reasons why many small businesses like using third-party processors is the low monthly and setup fees. However, the transaction fees are typically higher as compared to those charged by the merchant services providers. Majority of the third-party processors have tier systems in which the transaction fees are higher on small amounts of the monthly sales and go down as the monthly sales go up.

Security

Like most mobile credit card processors, the third-party providers also abide by the PCI Data Security Standards and use sites that feature the SSL encryption. This provides an additional layer of protection for debit card and sensitive credit information.

Equipment

The only equipment that’s needed for the brick-and-mortar stores that want to use third-party processors is a mobile card swiper which can easily connect to a tablet or smartphone. E-commerce businesses just require a website with a shopping cart, the necessary payment buttons and checkout systems for customers to make their purchases.

Pros and cons

The major benefit for using third-party processors is that businesses do not have to get the approval of merchant services. For entrepreneurs who have bad or no credit at all, finding merchant services providers that will accept them can be a difficult process at times. This makes online credit card processors an ideal alternative.

Setup process is also fast and it can be ready within one or two days. Nevertheless, there are also some disadvantages. In addition to the transaction fees that are higher as compared to those of merchant services providers, there’s an increased chance that customers will dispute the charge. This is mainly because the names of the third-party processor and hot the business shows up on their monthly debit or credit card statement. For some online businesses, third-party processors re-routes the customer to their site—an additional step that often dissuades the customers from continuing with their purchases.

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