Best Ways for Small Businesses to Accept Credit Card Payments Online
September 2, 2022 | Last Updated on: September 2, 2022
September 2, 2022 | Last Updated on: September 2, 2022
If you run an online business today, a likely big concern for you is finding a way to accept credit cards and other payments online thatâ€™s safe, secure, and cost-effective. More and more people are conducting all types of business on their computers, tablets, and mobile devices. Apple Pay and Google Pay have even made it unnecessary to input card information when making mobile payments. People buy online and want to conveniently pay for things online.
This article explains what you need to know to find the best credit card payment option and payment service provider, depending on your unique business situation.
Although not technically a credit card transaction, ACH (automated clearing house) transfers are typically the most cost-effective way to accept payments online. If you have ever received a direct deposit from your employer or tax authority or paid your bills online using your bank account, youâ€™ve taken advantage of ACH payments. Social payment apps like Venmo also use ACH to transfer money from person to person for free.
For businesses, ACH payments often come with much lower transaction fees than credit or debit card payments. Itâ€™s a popular option for businesses that invoice customers or have recurring payments, such as subscription meal services.
The downside of using ACH is that the card payment approval process isnâ€™t instant and can take time to process. (People have less tolerance for processing delays, especially since chip cards have made real-world transactions effortless and almost instant.) They also require the customer to enter their bank account and routing numbers, which is cumbersome and time-consuming. This step is less than ideal for transactional businesses like retailers.
Some popular ways to accept ACH payments online include:
Retailers and most other transactional online businesses must be able to accept traditional credit and debit card payments because consumers are unlikely to put in the effort of providing their banking information for one-time or occasional purchases.
Thereâ€™s no way to accept major credit cards and debit card payments for free. However, choosing a credit card processor with reasonable fees can save your business a considerable amount of money. Letâ€™s take a look at some of the possibilities.
If youâ€™re a retail business and you need to accept credit and debit cards online to complete sales, the simplest and most cost-effective way to do it is to run your company through an e-commerce platform or website builder that comes with built-in payment processing. Choosing an e-commerce store with integrated payments simplifies setting up and managing your operation. Another benefit: It allows you to collect a great deal of information about your customers and act on it without using additional software.
The two most popular and cost-effective online retail solutions that include payment processing are:
Square and Shopify include tools that allow you to set up recurring billings or subscriptions.
If you have an established online business that consistently processes more than $20,000 in monthly transactions, accepting credit card payments via a traditional merchant account could be the best and most cost-effective option for your business.
A merchant account is a type of bank account. That makes it a more formalized â€” and time-consuming â€” application and approval process than Square or PayPal. The extra time could be worth it because established higher-volume businesses could earn more competitive rates from a merchant account provider than from an e-commerce platform.
In short, existing brick-and-mortar businesses already processing in-person transactions through a merchant account could negotiate competitive online processing rates with their current payment processor.
If youâ€™re using a merchant account provider to accept credit cards at your physical store, you may also need a payment gateway to connect your merchant account with your online store. There are several options available to you. Some merchant account providers, like Stax by Fattmerchant and Payment Depot, come with built-in gateways at no extra cost. Others, such as Authorize.net, make you pay a monthly fee. Another option for services like Authorize.net is to use a separate gateway.
Some of the most popular merchant services for online payments are:
In some U.S. states, online and brick-and-mortar merchants can legally pass their credit card processing fees to consumers. Depending on where a business is located, they can use the following methods to do this:
Adding these surcharges to your purchase totals or product prices doesnâ€™t allow you to avoid other merchant processing fees, such as merchant account costs and PCI compliance fees. Itâ€™s also essential to make sure that your website has a system in place to ensure that customers are located in states that allow convenience fees and credit surcharges to be added. This is particularly important if your state allows these things, but you have customers from other states. Several payment processing providers offer this service, including:
Either of these options will help your business avoid incorrect charges to customers that could violate state laws.
Businesses that provide memberships, subscriptions, regular deliveries, and professional services typically require the ability to collect the same fees from customers regularly. Recurring payment processors have tools for generating quotes, handling billing, and sending invoices to help you with the financial issues associated with customers and clients who consistently do business with you. They also come with a way to ask customers to sign a one-time authorization form, collect payment information, and safely store it according to PCI compliance regulations.
All-in-one payment processors that support recurring payments include:
Make sure you read the fine print before you sign on with a recurring payment provider. You donâ€™t want to be caught by surprise by unexpected fees or charges that could cut into your bottom line.
Long considered a financing relic, BNPL has become popular again with consumers because inflation has made many goods too expensive to pay for all at once.
This short-term financing option allows customers to pay for their purchases in installments which are deposited into your business bank account. These programs typically come with minimum interest, usually much lower than the rates on credit cards. BNPL capabilities can be integrated into most popular online payment processors, while some, like PayPal and Square, provide it as a service built into the app.
Some of the most popular BNPL apps include:
Always do your due diligence to select a BNPL system with a payment structure that is effective for your business.
How much you pay for payment processing depends on the type of payments you receive and the provider you choose. Typically, if you select a provider with no monthly fees, you can expect to pay relatively high transaction fees, typically around three percent. If you pay an up-front monthly fee for your service, the transaction fees will be lower. Transaction fees, whether for one-time payments, recurring fees, or invoice payments, could be a percentage of the transaction, a flat fee, or a combination of the two. If you sell high-ticket items, it could make sense to choose a provider with low flat fees. If your offering is less expensive, paying a percentage of them with no set fee could be the better option.
If your online operation includes a brick-and-mortar business, itâ€™s important to note that online processing fees are usually higher than in-store fees.
Thereâ€™s no way to accept credit cards online for free because credit card issuers like Visa and MasterCard charge a processing fee for every transaction. This is known as an interchange fee. Your merchant account provider or payment processor pays this fee, then passes it along to you with a markup to cover their costs. The markup can take the form of a transaction fee, monthly fee, or a combination of the two.
Because of these interchange fees set by credit card providers, direct bank payments and ACH or e-check payments are the most affordable way to accept payments online. However, most people prefer the convenience of paying online with a credit or debit card.
Here are some things to look out for when evaluating payment processing services.
Checking for all these things will help ensure your online payment system will be effective for your operation.
Here are some things you can do to control online payment costs:
These steps will help ensure youâ€™re doing everything possible to control your online payment costs.
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