In a digital world where most people are moving their daily activities online, it’s become necessary for small businesses to offer flexible payment options. The 2019 Diary of Consumer Payment Choice reported these findings:
As you can see, unless your business only deals with small transactions, you’ll need to offer different modes of payments. In today’s world, convenience is the main criteria for customer experience. Make sure you offer convenience throughout the customer life cycle.
There are pros and cons to each type, and some are better suited for small businesses, freelancers, or contractors, such as yourself. Depending on the number of credit card transactions you expect to process and if you need in-person payment processing, online transactions, or both, there is a method of credit card payment processing right for you. Don’t worry if you are not technologically savvy — getting these set up is a lot easier than you think.
In this guide, we discuss the different modes of payment you can utilize in your small business.
As a consumer, the process of paying with a credit card seems simple — you swipe or tap the card, and voila! The transaction is complete. But the back end is a bit more complex, involving monitoring credit card balances and checking for fraud. And since small businesses lack the infrastructure required to monitor and verify every transaction, most prefer to work with payment processing companies.
Every payment method has fees associated with it. This includes application fees, startup fees, monthly fees, per-transaction fees, and cross-border fees. That’s why you need to shop around. Look for a payment processing provider who can accommodate the transactions your business will deal with conveniently and inexpensively, if possible.
A merchant account allows businesses to accept credit and debit card payments. It makes authentication and other technical aspects of transactions flow between the customer. the business, credit card companies, and banks.
To set up a merchant account, you’ll have to go through an underwriting process similar to a mortgage application. You may also have to provide the following:
Merchant accounts are generally more expensive and time-consuming to set up, but the convenience of a fast transaction and the promise of improved cash flow through payment deposits of one to two business days make up for it. If you expect to process monthly transactions of $10,000 or more, a merchant account may be the best option for you.
If you have a smaller volume of transactions but want to offer a higher level of customer service, a merchant account may be right for you, as well. To cover your bases, you might want to start with Visa and Mastercard. A merchant account setup process may include:
Payment service providers like Square, Stripe, and PayPal let businesses accept credit card payments without the hassle of applying for a merchant account. These third-party credit card processing services are free to set up with no monthly fees or long-term contracts, although they generally charge more to process transactions.
Payment service providers may be the best starting point if you expect to process a low number of credit card transactions per month. However, be warned that since the application process of payment service providers does not involve a risk determination process, potential account terminations and funding holds tend to be common.
These are the most popular payment service providers:
If you’re planning to sell products online, e-commerce platforms like eBay, Etsy, and Shopify may be the best route for you. These platforms have built-in payment processors and point-of-sale features that you need to run a business, which allows you to accept all major credit cards and gift cards. You only need to set up your store and activate your payment methods.
The products that can be sold on these platforms run the gamut, from food and drink to jewelry and furniture. Shopify offers a basic plan of $29 per month, plus 2.9% and $0.30 per online transaction or a flat 2.7% per in-person transaction. Etsy opts to charge a $0.20 listing fee and take commission and a standard payment processing fee per sale. Explore each site and take advantage of the free trial periods to get a feel for the platforms.
As a self-employed tradesperson, freelance photographer, or house cleaner, offering different types of payments could streamline the functionality of your invoicing process. If you have a website or an e-commerce store, you could easily integrate an online payment option for monthly cleaning invoices or a booking payment for a wedding package, for example. Meanwhile, in-person payment could be easily accomplished with a card reader or a point-of-sale system.
Below are in-person payment systems great for small business owners, contractors, and freelancers.
To accept online credit card payments, you will need to create a website, store, or both on one of the e-commerce platforms.
Don’t worry if you or your customers have very little experience with online credit card payments; payment gateway providers typically handle the security that goes into accepting transactions and many e-commerce platforms come with prebuilt storefronts so you don’t have to start from scratch.
To choose the best way to accept credit card payments for your small business, consider:
A merchant account can take a while to set up and will probably cost more upfront, but it’s more stable and reliable. On the other hand, payment service providers are free to set up but may cost more per transaction.
At ZenBusiness, we understand the process of starting a new business. There’s so much that needs to be done, which could leave you overwhelmed instead of excited. Let us take care of the details so you can focus on what matters — growing your business and choosing how you want to accept payments.
There’s not really a “cheapest” way to accept credit card payments as a small business because your needs will depend on the number of transactions you process each month, the level of customer service you need, and how you want to present your brand to your clients.
There are several apps that allow small businesses to accept credit card payments, such as PayPal, Square, Venmo, and Stripe. Even POS software like QuickBooks can be accessed through an app.
A merchant account is recommended for businesses expecting to process upward of $10,000 in credit card payments a month. It’s also recommended for businesses that would prefer to have a high level of customer service support.
It’s unlikely that you’ll find a product that will allow you to accept credit card payments without paying fees because banking institutions and payment service providers need to assume risks for their services. Credit card payments are complex and require infrastructure and credit card processing fees.