As the owner of a small business, you know that you need to make smart decisions to ensure that you are successful in being profitable and appealing to your customer base. While there is more that goes into it than it seems, making the decision to accept credit cards can be a good move for your business. Not only is it more convenient for customers to be able to quickly swipe their card when purchasing from you, many people have chosen not to even carry cash on their person anymore. It is beneficial to set yourself up to make every sale by accepting credit card payments, too.
What You Need to Accept Credit Card Payments Within a Small Business
You will first need a way to retain the credit card information, whether it is through a register, a gadget attached to an electronic device, or a capable website. Then, you will need a payment processing company to partner with to serve as a liaison between your company and the credit card networks and banks.
How a Credit Card Processing Company Works
A payment processing company will facilitate the card transactions that come through your small business. The process consists of the following steps:
- Authorization. The customer gives you their credit card information via swipe or typing it in online. Your processing company contacts the network and bank associated with the card to determine if the transaction will be approved or denied. If approved, you will receive an approval message and the purchase is completed for the customer. If denied, you will receive a declined message. This happens when there are insufficient funds in the account, the card is invalid, or there is some kind of hold on the account but you will not usually be given that specific information. The authorization status generally takes seconds to be determined.
- Settlement. The processing company will have a schedule set up for you to submit your transactions for payment. They will contact those networks and banks again to go through a funds transfer.
- Funds. After they receive the payment amounts, the processing company will transfer those funds to your account. The transaction is then complete for you.
Fees for Credit Card Processing
As a small business, the fees that are associated with taking credit card payments can seem intimidating as they add up. When you look into an account for payment processing services, pay attention to the different kinds of charges that you will incur and how much money a transaction will potentially cost you to put through. The best credit card processing companies for small businesses will be those that have a reasonable fee plan that doesn't negatively affect your profits.
The types of fees that might be included in your contract are:
- A scheduled or flat rate that is recurring and doesn't change.
- A percentage-per-transaction charge.
- An amount-per-item charge.
- An incidental charge, such as a fee for chargebacks.
Adding the ability to accept credit card purchases will likely increase your foot and online consumer traffic but must be set up in a smart way that benefits your books. The best credit card processing companies will be those that partner with you to ensure that your business needs are met while providing a protected service for both the merchant and the customer.