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Credit card processing for small businesses

Everything shopkeepers need to know about facilitating transactions — and sealing the deal.

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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. Customers want convenience, and credit cards are the ultimate form of convenience when it comes to spending. Still, be wary of long-term contracts that come with hidden fees, and make sure you choose a processor that meets the unique needs of 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

Credit card readers are secure and simple to use, allowing customers to swipe, insert or tap their cards against a reader for payments. The three key types include:

  • 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. Countertop machines are typically best for any business with a permanent location, like a retail shop or salon.
  • Mobile readers. These allow you to process payments wherever you go, and offer a lot of flexibility. They’re ideal for cafés and restaurants because you can process card payments where your customers are seated. Mobile readers are also a great option for businesses that move, including food trucks, merchants that sell at outdoor markets and contractors that perform work on-location — like auto mechanics, plumbers and renovators.
  • 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 because they come with cash drawers, a large display screen, a handheld scanner and more. Integrated machines are typically used by supermarkets and big box stores.

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, and 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.
  • Keyed card fees. Some mobile card readers will charge extra for credit card payments.

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’s 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.

Our top pick:

Square’s all-in-one processing service is well suited to small businesses that process transactions in person and online.

  • Get a free card reader when you sign up
  • Pay 2.6% + $0.10 for all tapped, dipped and swiped payments
  • No cancellation fees

Our top pick: Square

Square’s all-in-one processing service is well suited to small businesses that process transactions in person and online.

  • Sync POS and e-commerce sales
  • Access money faster with a Square debit card
  • Send custom invoices from the app
  • Issue and redeem Square gift cards

Smartphone and tablet credit card payment processing options

happy credit card userIt’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:

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 market vendors, 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, such as 2.75%
  • Keyed transaction fee — usually a percentage of the transaction, such as 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 a few quick 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.

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 monthly and annual fees, set-up 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 25 cents per transaction.
  • 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.

Credit card processorPer-swipe transaction fee for mobile (US)Manual transaction fee for mobile (US)
Square2.75%3.5% + 15 cents
PayPal Here2.7%3.5% + 15 cents
Intuit QuickBooks Go Payment2.4% + 25 cents — pay-as-you-go plan3.4% + 25 cents — pay-as-you-go plan
PayAnywhere2.69%3.49% + 19 cents

What credit card machine features should I look for?

Aside from the basics like a magstripe reader, here’s what you should keep in mind when choosing a credit card machine:

  • EMV compatibility. This means that the machine has a chip reader, so customers can dip their card in to pay. Technically, EMF stands for electromotive force.
  • NFC compatibility. Near-field communication (NFC) enables contactless payment, which means you can accept Apple Pay, Google Pay, Samsung Pay and digital wallets.
  • Mobile app. Some credit card readers, like Square, are designed to be used in tandem with a mobile app, while others don’t have that option.
  • Receipt printer. Not all credit card machines are capable of printing receipts. Determine whether this is a feature you and your customers require.

What small businesses should consider when selecting a credit card machine

Start by considering the needs of your business, then do the math to weigh up the extra costs to decide if it’s worth the investment. Also, check 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.

Which type of pricing works best for small businesses?

It depends on your monthly processing volume. Businesses that process less than $10,000 may prefer a flat-rate processor like Square or Toast. But if you process more than $10,000 monthly — or hope to soon — you might want to choose a credit card processor like Fatmerchant that uses interchange pricing, even though you’ll have to pay a monthly subscription fee.

To break it down for you, we compared Square and Fatmerchant below.

Note that Square does have a paid plan, called Square for Retail Plus, which includes extra tools for inventory management and costs $60. In the table below, we compared Square for Retail Free.

Seafood restaurant: $10,000/month
Trophy icon Winner: Square

Catering business: $25,000/month
Trophy icon Winner: Fattmerchant

Retail boutique: $50,000/month
Trophy icon Winner: Fattmerchant

Marketing company: $100,000/month
Trophy icon Winner: Fattmerchant

Compare payment processors

Data indicated here is updated regularly
Name Product Monthly fees start at Processing fees start at Processing time High-risk merchants accepted?
Chase Merchant Services
None
2.6% + 10¢ per swiped credit card
Next day when you deposit into a Chase business checking account
No
Accept, process and deposit customer payments in your store, online or on-the-go.
Fattmerchant
$99/month
$0.08 + interchange per transaction
Next day for qualified businesses
No
Businesses that process more than $10,000 monthly can save with Fattmerchant's interchange+ pricing.
Square
None
2.9% + 10¢
Next day
No
Square is a one-stop shop with both e-commerce and in-person solutions.
Helcim
$20/month
1.92% + $0.08 per transaction
Two business days
No
Conveniently packaged into three service tiers for in-person and online sales.
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Compare up to 4 providers

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 have 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.

Compare business credit cards to help cover any unexpected costs

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Bottom line

When you’re choosing a payment processing service for your small business, weigh the costs associated with each plan before making your choice, and make sure the features are suitable to your needs. You may also want to research POS systems, to ensure your chosen processor is compatible with the hardware you want to use.

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