Credit card payment processing for small businesses |
Credit card processing for small businesses

Credit card processing for small businesses

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Want to start accepting credit cards at your small business? Learn about the different credit card processing options available.

In this day and age, if your business isn’t capable of accepting credit cards, you’re certainly going to be missing out on sales. In fact, a 2018 study showed that 25% of consumers would be deterred from shopping at a store if it were cash free. Customers want convenience, and credit cards are the ultimate form of convenience when it comes to spending.

If you can give the customer an option besides a cash payment, allowing them to swipe a credit card for a purchase is certainly the way to go and it can be easier than you think to integrate into your business. We’ll outline the main options, potential costs and other relevant factors to help you find the right credit card processing system for your small business.

What is credit card processing?

When a customer presents their credit card, their payment info needs to be verified. That’s when your credit card processor goes to work to clear the transaction. This happens behind the scenes with your processor, your customer’s bank and the card networks.

Different types of credit card processing

This is probably the most familiar option. Credit card readers are secure and simple to use, allowing customers to swipe, insert or tap their cards against a reader for payments. A credit card machine accepts most cards, and there are different types for different kinds of businesses.

  • Countertop machines. These machines are attached to your Point of Sale (POS) computer system and allow you to process card payments from a fixed location in your store.
  • Mobile readers. These allow you to process payments wherever you go, which gives you a lot of flexibility. They are ideal for cafes and restaurants because you can process card payments where your customers are seated. They can also be convenient for delivery services or outdoor markets.
  • Integrated machines. This option is integrated with your POS system to help simplify sales reporting and the balancing of accounts. They are best suited for businesses with higher transaction volumes, such as supermarkets.

What are the costs of getting a credit card reader for my small business?

Depending on the vendor, you could be potentially charged the following fees:

  • Setup fee. Some vendors may charge this to cover initial support in getting your processing system off the ground.
  • Rental fee. What you pay to rent a credit card terminal.
  • Service fee. Your processor may charge a fee for ongoing support.
  • Printer cost. (most machines have internal printers). This will let you print physical receipts.
  • Interchange fee. Fees that issuing banks charge to merchants for credit card processing.
  • Monthly minimum fee. The minimum amount of processing fees you must pay to the vendor. If you don’t reach this amount, you’ll need to pay the difference.
  • Early termination fee. A penalty fee you pay if you end your Merchant Processing Contract (MPC) before it expires.

Fees and prices can always vary significantly between companies. For example, one vendor may charge a fixed monthly contract with no setup fees, while another may charge a setup fee plus monthly usage-based charges. It is important to factor these costs when making the decision to get a credit card reader for your business.

How long does it take to set up?

Setting up your credit card processing account can take anywhere from a day to two weeks. It may take less or more time depending on your business type, the volume of purchases you intend to process, your financial records and more.

happy credit card user

Smartphone and tablet credit card payment processing options

It’s becoming more simple to take a payment from mobile devices thanks to card readers that can plug directly into any phone or tablet and mobile apps that allow payments between users. Some popular smartphone and tablet payment processing choices include:

  • Square.
  • PayPal Here.
  • Intuit QuickBooks GoPayment.
  • PayAnywhere.
  • Shopify.

These products are compatible with iOS and Android devices and are convenient options that can suit sole traders and smaller businesses on the go, such as vendors at a market, food trucks, plumbers and electricians.

What are the costs for smart device credit card processing services?

Potential costs include the following:

  • Card reader cost.
  • Swiped transaction fee (usually a percentage of the transaction, e.g., 2.75%).
  • Keyed transaction fee (usually a percentage of the transaction, e.g., 3.5% and 15 cents for manual input of card).

Generally, you pay the fee for the card reader and then the processing service charges per transaction. However, some providers offer the card-reading device for free when you sign up for a monthly plan.

When considering this option for your business, it’s important to decide if a smart device payment system can meet all of your needs.

Online credit card processing for small businesses

E-commerce is incredibly convenient, as everything is online and available for purchase with just a few clicks. Online credit card processing works safely and efficiently via a secured Internet connection and allows shoppers to browse and buy from virtually wherever they are. It is ideal for any business operating on the Internet.

What are the costs of setting up online credit card processing for a small business?

A big advantage of online payment processing is that you can do away with set-up fees, monthly and annual fees, and contracts. Each online transaction usually attracts a fixed-percentage of the transaction amount.

  • Some providers charge an extra fixed fee on top of the percentage fee, for example 2.6% plus $0.25.
  • Some companies may charge a higher rate for processing international payments that need to be converted into another currency. For example, PayPal charges 2.9% plus 30 cents per transaction.

Depending on the type of business as well as the number of transactions, you may find that online credit processing is an affordable and flexible choice.

What credit card machine features should I look for?

  • Works without an app. Some machines can process transactions alone. Others need to be paired with an app (for example, the Square reader, which needs to be used with the Square app).
  • Magstripe swipe reader. This reads the magnetic stripe on the back of a card.
  • EMV reader. This allows a customer to use a chip card by dipping the card into the machine.
  • NFC payments. NFC (near field communication) lets customers pay with services like Apple Pay, Android Pay and Samsung Pay.
  • Built-in receipt printer. You can print receipt straight from the machine. If the machine doesn’t have the capability, you’ll print a receipt from another terminal.
  • PIN pad. This allows customers to enter PINs — for example, if they use debit cards.
  • Mobile. Usable with a mobile device. For example, you can plug the Square reader into your smartphone.
  • Works with most POS systems. Some readers work with many point-of-sale systems. Others work with just one POS system — such as the Square reader, which must be used with the Square POS.
  • Price. Some machines have monthly fees; others have upfront fees.
  • Free, 24-hour replacement. If there’s a problem with your machine, some providers will replace it quickly and at no cost.

What to consider when selecting a credit card processing option

Start by considering the needs of your business and do the math to weigh up the extra costs to decide if it’s worth the investment. Also, make sure with the processing company that you’ll be able to accept major credit cards.

The type of business

  • Businesses involving face-to-face customer service or high volumes may find conventional credit card readers are still best suited to their environment.
  • Mobile or seasonal businesses may prefer smartphone and tablet processing to give them the mobility and freedom they need.
  • Online businesses are most likely to appreciate the convenience of online credit card processing.

Software integration

  • Find out whether the processing service will integrate with your current software.
  • Look for devices that offer the most comprehensive solutions, such as accounting or sales reporting features.

Revenue and surcharges

  • Revenue should offset the cost of setting up a card payment service and any ongoing processing fees.
  • Consider whether you can realistically expect an increase in sales by offering credit cards as a form of payment.
  • Have clear signage to inform customers of any surcharges if they pay with a card.

How to save on credit card processing fees

  • Shop around. You don’t have to settle on the first processor you find. Compare rates between different vendors — the extra research can pay off in significant fees saved.
  • Negotiate with your processor. It never hurts to ask your processor to lower your rates. Your request is more likely to succeed if you do a lot of volume.
  • Switch your bank. You may be able to cut down on processing fees by using a bank that takes care of processing in-house. This means big banks such as Chase, Bank of America, US Bank and Wells Fargo.
  • Avoid manual transactions. Processors tend to charge higher fees for keyed-in transactions, because these come with a higher risk of fraud. Instead, swipe cards and pay the lower transaction fees.
  • Set a minimum on credit card sales. You could require customers to rack up a certain amount of purchases to use a credit card. This will incentivize them to use cash or check out with higher purchase sizes.
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Compare business credit cards

Great business tools can streamline operations and open new opportunities. Like credit card processors, business credit cards can help you grow your business.

Name Product APR for Purchases (Purchase Rate) Intro APR for Balance Transfer Annual Fee
None (Charge Card)
Earn 75,000 Membership Rewards® points after you spend $20,000 on purchases within your first 3 months of card membership.
$0 annual fee for the first year ($250 thereafter)
This Charge Card gives you the option to pay in full each month or to carry a balance for up to 60 days with no interest.
$0 annual fee for the first year ($175 thereafter)
13.99%, 18.99% or 20.99% variable
Earn cash back with buying power to help pay for business needs.
14.99% to 20.99% variable
0% for the first 12 months (then 14.99% to 20.99% variable)
$500 bonus cash back after you spend $3,000 in the first 3 months
17.74% to 22.74% variable
80,000 bonus points after you spend $5,000 on purchases in the first 3 months after account opening. That's $1,000 toward travel rewards when you redeem through Chase Ultimate Rewards®.
17.74% to 24.74% variable
75,000 Bonus points after you spend $3,000 on purchases in your first 3 months from your account opening with your Marriott Rewards Premier Business credit card.
24.74% variable
Get the credit you want for your business, and unlimited 1% cash back on every purchase, every day
14.74%, 18.74% or 22.74% variable
Unlimited 1.5X miles per dollar on every purchase, every day
18.74% variable
$0 annual fee for the first year ($95 thereafter)
Unlimited 2X miles per dollar on every purchase, every day
14.74%, 18.74% or 22.74% variable
Unlimited 1.5 cash back on every purchase, every day.
18.74% variable
$0 annual fee for the first year ($95 thereafter)
Unlimited 2% cash back from Spark Cash could mean thousands of dollars each year going back into your business. No minimum to redeem.
17.74% to 24.74% variable
$0 annual fee for the first year ($95 thereafter)
50,000 bonus miles after you spend $3,000 on purchases in the first 3 months your account is open.
17.74% to 24.74% variable
Earn 2x points on Southwest® purchases and 1x point on all other purchases. Plus 6,000 anniversary bonus points.
17.74% to 25.74% variable
$0 annual fee for the first year ($95 thereafter)
Earn 70,000 American Airlines AAdvantage® bonus miles after you spend $3,000 in purchases within the first 3 months of account opening.

Compare up to 4 providers

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Bottom line

Non-cash payments are only increasing, and your business’s revenue will likely grow once you start collecting credit card payments. Compare card processors and examine them based on cost and convenience. In short order, you’ll have a smooth-running card terminal that streamlines your payments.

Frequently asked questions

Kyle Morgan

Kyle Morgan is a writer and editor for who has worked for the USA Today network and Relix magazine, among other publications. He can be found writing about everything from the latest car loan stats to tips on saving money when traveling overseas. He lives in Asbury Park, where he loves exploring new places and sipping on hoppy beer. Oh, and he doesn't discriminate against buffalo wings — grilled or fried are just fine.

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