If you’re launching a small business, there is a lot to consider. You’ll need to select a business name, marketing strategy and business location; identify your products or services; and set your pricing … the list goes on. Regardless of how you choose to set up your business, your end goal is to make money.
To do that, you should meet your customers’ expectations by providing them with a variety of payment options. Particularly, you’ll need a way to accept credit card payments to facilitate the maximum number of transactions.
Monthly plan fee
From $99
Volume-based discounts
No
On Stax’s Website
Monthly plan fee
From $14.95
Volume-based discounts
No
On Clover’s Website
Monthly plan fee
From $13.95
Volume-based discounts
No
On Merchant One’s Website
Monthly plan fee
From $79
Volume-based discounts
Yes
On Payment Depot’s Website
How does credit card processing work?
Credit card processing is the behind-the-scenes way that a customer’s credit card company communicates with your financial institution to transfer money.
For an in-person transaction, the customer swipes, taps or inserts their card, and your point-of-sale (POS) device or credit card terminal sends the transaction information to their credit card company; then your customer’s credit card company verifies that funds are available to complete the transaction and sends those funds to your financial institution. Transaction complete!
While the process looks simple at a glance, there are a few components you’ll need to get up and running before your business is ready for credit card payments.
For in-person sales, you’ll need to select a credit card terminal or a POS system, which includes both software and hardware components to accept credit cards. If you want to accept credit cards for online sales through your digital storefront, you’ll need to pick a credit card processor that integrates with your website. There are lots of online and in-person processing options with varying fees and terms, so research several providers to find the best one for your situation.
Software to accept credit cards
Credit card processing software works with your business website’s payment gateway or your physical card reader. The latter can be a mobile device with tap or credit card entry abilities set up or a dedicated device. Processing software communicates with your customer’s credit card company to confirm that the transaction can be completed successfully.
Find the best credit card processing provider for you by comparing their range of services and associated fees. You should also ensure that the provider can handle any type of payment you plan to accept, like credit cards, automated clearinghouse (ACH; aka direct debit or electronic check) or cryptocurrency.
Some processing providers offer additional benefits you might need, like invoicing, reporting, or support for international transactions. Other things to consider include a processor’s customer support policy and the length of time they can hold funds for transactions they flag for review.
There are a few top contenders in the small and medium-sized business space that you can start with in your search for the best credit card processing company, like Stripe, Square and Helcim.
Stripe
Stripe is a great choice if you’re looking for predictable flat-rate pricing: 2.7% plus 5 cents for in-person transactions and 2.9% plus 30 cents for online transactions. It offers a comprehensive e-commerce solution and processes payments using advanced encryption, so you can rest assured that your customers’ data is protected. Stripe also comes with the added credibility of being a credit card processor chosen by a well-known brand like Amazon.
Stripe might be best if you’re only going to conduct business online, as it has fewer options for in-person payments. Note that implementing and customizing Stripe can require fairly advanced technical knowledge.
Square
Like Stripe, Square has predictable flat-rate pricing (its processing fees are 2.6% plus 10 cents for in-person transactions and 2.9% plus 30 cents for online transactions); however, it offers a wider selection of hardware and accessories, like registers, terminals, stands, mounts and chip readers. If you’re planning on processing primarily in-person transactions, Square is the better choice. It’s also quick and easy to implement, so you can start accepting payments right away.
Be sure to review Square’s options and pricing before you commit, though. If you have a high volume of business or need additional subscription-based features, you might end up paying more than you expected.
Helcim
Helcim’s pricing structure is slightly different, as it separates the interchange rate (paid to the credit card associations) and provider markup fees (paid to the processing provider) on each transaction. This method can provide additional clarity for business owners and potentially be more cost effective for businesses with large sales volumes. At no additional charge, Helcim includes business tools for tasks like inventory and customer management.
Note that Helcim doesn’t support high-risk business types, so you’ll have to confirm your eligibility. In addition to its software, Helcim sells proprietary hardware, which is required to process transactions and an additional expense.
Hardware to accept credit card payments
A device to read credit cards is the main hardware you need to process payments. This hardware can read the card using a chip, swipe or tap — or allow for all three methods. You can choose from two types of hardware: a countertop reader that’s installed permanently in your business location and a portable credit card terminal that allows for payment processing anywhere you do business.
Credit card processors like Square include both the hardware and software to complete credit card processing, while others provide the software and allow you to use third-party hardware. What type of hardware is necessary depends on the processor you choose. Square allows you to enter credit card information into an app on your mobile device without a card reader (with higher fees), while other providers require the credit card to be swiped or inserted into a physical card reader.
Accept credit card payments in person
If you’re going to be processing payments in person, select your POS device based on what meets your business needs. If you have a physical store with a checkout counter, you can opt for a countertop card reader (picture a terminal or swiveling tablet and dock that you may have encountered at a local coffee shop). Also, if you plan to accept a wide variety of payment methods, consider a POS device that would allow for cash and check processing.
If you anticipate that you’ll do the majority of your sales on the go (such as at farmers’ markets or craft fairs or via in-home services), you should opt for a portable card reader, which connects to your phone or tablet, or a mobile terminal device.
Accept credit card payments online
If you don’t plan to have a physical location and will run your business fully online, you’ll need a credit card processor that integrates with your website or digital storefront, allowing you to accept credit cards online.
Processing credit cards online may be more convenient than processing them in person, but it may also be more expensive. As Aaron Sheehan, an e-commerce consultant with Bald Commerce, points out: “Most e-commerce platforms have prebuilt integrations with credit card processors. … Keep in mind that online transactions are usually called ‘card not present’ by processors and will cost you a little more per transaction than you would pay to run a card someone physically uses at your shop.”
In addition to researching the features and fees associated with each provider, be sure to select a secure provider to protect your customer’s personal information. For example, opt for a provider that offers security features like fraud prevention, data encryption and transaction monitoring.
Credit card processing fees
Each credit card transaction your business processes will incur fees, as credit card companies and payment processors both take a flat fee or percentage of the transaction. These are the fees you pay for their services rendered in processing the transaction.
Fees vary depending on multiple factors, including the types of credit cards you accept, if the payment occurs in person or online, and the type of POS system you use. Fees can be charged through flat-rate pricing, tiered pricing or a membership model.
Interchange rates typically vary depending on your transaction volume (rates decrease as your transaction volume increases), so locking in a flat-rate fee structure (same rate per transaction regardless of volume) could lead to unnecessarily high expenses as your business grows.
“Processors offer discounts for volume, so it can be useful if you sell both online and in person to use the same company,” says Sheehan. “Combining all of your processing into a single contract can save you money, especially if you’re growing quickly.”
Review several providers and select a structure that fits your business model; then remember to reassess your credit card processor as your business grows to ensure you don’t end up overpaying.
Other fees to consider include monthly minimum fees tied to your transaction volume and chargeback fees that would be incurred if a customer disputes a charge. Also, consider setup or termination fees charged for starting or leaving a contract with a provider, and note any fees for expedited payment settling, which allows money to be deposited into your account without a lengthy hold period.
Frequently asked questions (FAQs)
Across the board, Stripe stands out as the best credit card processing company for small to medium-sized businesses. Stripe has a volume-based discount, reasonable payment processing fees and no monthly plan fee. Of course, if your business has specific needs, take some time to review several credit card processing companies, and compare the fees and discounts available for your situation.
Each processing company has some type of fee, whether as a percentage of the sale or as a flat per-transaction fee. You can compare multiple providers and services to find the lowest fees for your situation. Also, be sure to reevaluate your credit card processor as your business grows to keep your expenses low. Some processors do promote “zero-cost” processing, which basically means passing along the processing fees to customers via a credit card surcharge or a cash discount program.
The cheapest way to accept card payments is to find a processing provider with a fee structure suited to your business model. If you process a large number of small-value transactions, you’ll want to focus on low per-transaction costs. If you process only a few pricey transactions, you might prefer a per-transaction flat fee. The location of your transaction, such as in person, online or over the phone, will also affect your costs.
Costs vary depending on the credit card processor and POS system you choose, as well as on the location of the sale and credit card types you accept. You’ll need to research the fees or subscription prices associated with your processor and POS system and decide which credit cards you want to accept to keep your costs down. Be sure to regularly reassess your credit card processing expenses and make changes as necessary.
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