How to Start Accepting Credit Card Payments for Small Business

As a small business owner, you might be put off by the cost of accepting credit cards. But, accepting credit card payments for small business can open the door to more customer traffic, increased loyalty, and larger sales.

You might wonder, how can my small business accept credit card payments? Though there’s a setup process, accepting credit cards for small business might not be as difficult as you think.

The benefits of accepting credit card payments for small business

You might accept several payment options, including cash payments, checks, debit cards, gift cards, mobile payments, and credit cards.

Why accept credit cards? Accepting credit cards:

1. Validates your business

Displaying the logos of the credit cards you accept creates a sense of trust for your customers. And, it establishes your business as a legitimate entity.

2. Boosts sales

By offering options outside of cash payments, you attract more customers to your business, which potentially leads to an increase in sales.

3. Makes you competitive

Chances are your competitors are already accepting credit cards. Don’t give your customers a reason to purchase from them instead of you.

4. Encourages buying

Unlike other forms of payments, credit cards are revolving lines of credit. Users can borrow up to their credit limit, giving them more freedom to make large and/or impulsive purchases.

5. Enhances customer experience

Not all customers carry cash on them. Offering payment options like credit cards, debit cards, and mobile payments makes the purchasing process simple, easy, and convenient. And, it increases the probability of customers returning to your business.

6. Improves cash flow

Credit card payments are processed electronically, which means you can receive payment as soon as the next day. If you mail invoices or only accept checks, it could take days or weeks to receive payment or wait for checks to clear.

7. Saves time

The software you use to run your business may be integrated with payment technology. With just a few clicks, you could be on your way to accepting credit cards quickly, not manually preparing invoices or making trips to the bank.

8. Eases reporting and reconciliation

With all your credit card payments processed on one interface, reporting and reconciliation is a snap, which simplifies your responsibilities come tax time.

9. Streamlines online business

If you plan to take your retail business online, the only efficient way to run your eCommerce store is to accept credit cards or other alternative payment methods like mobile NFC payments.

10. Minimizes security risks

Although accepting credit cards comes with its own set of security concerns, it’s a safer alternative to keeping large amounts of cash at your small business. Fraudulent credit card charges may be recovered, which isn’t always the case with cash.

Patriot Software is pleased to bring you the above information from collaboration with BluePay. 

How to accept credit card payments in-store

As a business owner, you should already have a point of sale (POS) system to handle transactions. You also need a merchant account and a credit card reader to accept credit cards. The account makes accepting credit card payments possible.

Screenshot of Patriot Software's Accounting Overview page in the software. Also pictured: A Capterra 'Best Value' badge for Patriot's accounting software.
Accept credit card payments with Patriot’s accounting software.

Make life convenient for your customers (and you!) by accepting credit card payments. Simply set up a merchant account to get started. You’ll love how easy it is to get paid with the click of a button!

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A credit card reader works with your POS system so credit card sales are recorded. Typically, your credit card reader also accepts debit cards. Customers should be able to swipe or insert their credit cards into the credit card reader.

Once the customer swipes or inserts their credit card into the machine, the purchase will be approved or denied. The purchase is denied if the customer does not have any credit left to spend.

If the card is approved, you can finish the transaction. Your merchant account receives their fees and deposits the funds into your account within a few days.

How to accept credit card payments online

You can accept credit card payments online by using an online payment gateway system.

The payment gateway is your POS credit card processor. Customers can enter their credit card information from anything with an internet connection, including mobile devices. Your online credit card processing system should be secure.

If you have a physical storefront and sell products online, you might be able to use the same merchant account for both, depending on your provider.

Credit card transaction fees for small business

To accept credit card payments, you need to pay fees. Fees change based on your merchant account provider, the customer’s credit card company, your business industry, and how you collect the payment.

Here are some fees you might face when accepting credit card payments for small business:

  • Percentage of the sale (e.g., 2%)
  • Fee per transaction (e.g., 25 cents)
  • Setup fees
  • Monthly, quarterly, or annual fees
  • Card processing equipment purchase or rental

Some companies charge both a percentage of the sale and a fee per transaction (1.5% + $0.20). Others choose to charge only a flat percentage of the sale (3%).

Let’s say you have a merchant processor who charges 2% of the sale and a 30 cent fee per transaction. A customer charges $40 to their credit card. Your merchant processor would receive $1.10 [(40 X .02) + .30].

The average credit card processing fees for MasterCard, Visa, Discover, and American Express range from 1.35% – 3.35%.

Credit card processing fees are typically higher for online businesses because there is a greater chance of credit card fraud.

You might require customers spend a certain amount to use credit cards to avoid fees for small purchases. For example, you might have a $10 minimum for credit card payments.

Some businesses charge customers a surcharge fee for paying with credit cards. Don’t pass a fee on to your customers until you check with your merchant processor, as their policies might prohibit this. You also need to check state laws on surcharges. For example, California, Colorado, Florida, and Maine are just some of the states that prohibit passing credit card fees on to customers.

Shop around before choosing a provider. By doing some research, you could save time and money.

What to expect when customers want refunds

Refunds can be common when you sell products. Depending on your small business return policy, you must know how to refund the money onto the customer’s credit card.

In some cases, the customer needs to swipe or insert the card they made the purchase with into the machine. Then, you can reverse the sale on your POS system.

Your merchant account provider will subtract the refund from your account, and the customer will receive their refund within two to four business days.

Just like there are processing fees each time you sell a product, there might also be fees when you refund a sale to a customer. Some providers do not have fees for refunds. And, some providers will refund the original processing fee to you.

Steps to accepting credit card payments for small business

Accepting credit card payments can increase revenue and customer satisfaction. And, it doesn’t need to be costly or stressful. To recap, here are the steps you need to take to accept credit card payments:

  • Research providers
  • Set up a merchant account
  • Understand your processing fees

Once you understand your responsibilities, you can begin accepting credit card payments at your small business.

Being able to accept different kinds of payments is great, but do you have a system to track that incoming money? Patriot’s online accounting software lets you easily record payments. Try it for free today!

This article has been updated from its original publication date of October 19, 2017.

This is not intended as legal advice; for more information, please click here.

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