4 things to consider before accepting credit card payments online
These days, more and more people are relying on credit and debit cards as payment methods. It’s simply because it offers advantages that cash payments cannot match.
For example, responsible credit card use allows customers to increase their credit score, earn valuable rewards, and cover unexpected expenses.
On the business side, it can make cash flow management less stressful and improve sales and revenue. But while accepting credit cards as a payment option sounds like a good idea, it’s a complex undertaking that requires a lot of work and planning.
AT help you learn more about processorsbelow, we’ll cover four things to consider before accepting credit card payments online.
You can accept credit card payments in three main ways. Before accepting them online only, it’s important to consider the type of business you run and how your customers use their cards.
- Online payment by credit card: This might be the best and only option if you have an e-commerce business or are a freelancer who primarily handles business with remote clients.
- Payment by credit card in person: This might be the most appropriate method if you have a retail store and most customers come to your physical location.
- Mobile payment by credit card: This might be the most practical choice if you are a contractor or landscaper working on-site for your clients.
Remember that determining how you will accept payment can also help you determine the type of credit card processing equipment you will need.
Allowing credit card payments will help attract and retain customers. But what happens when a customer pays with a card? Understanding how it works can give you an edge in handling potential transaction issues.
Whether you receive payment in person or online, credit card processing works as follows:
- Authorisation: When the customer submits their credit card details for payment, the card reader or payment gateway captures them. The payment processor will communicate the transaction to the associated card network for approval or decline.
- Rules: If approved, the issuing bank debits the transaction amount from the cardholder’s account. The payment processor will then instruct the issuing bank to transfer the funds to the merchant account. It may take several business days for the merchant to access the funds.
There are many the costs involved in the processing of credit cards, depending on the payment processor you choose or the partner company that handles these transactions. Although some of them are necessary, you can negotiate or seek help with card processors to eliminate other fees.
Typically, credit card processing will cost a business 1.5% to 3.5% of the total of each transaction. Below are the components where this fee goes.
- Exchange: The bank issuing the credit card collects interchange fees. Note that this includes most of the merchant discount rate. One way to save money on these fees is to settle your lot daily or increase security measures, especially each time the payment is captured.
- Evaluation: These fees go to credit card networks, such as Mastercard, Visa, American Express and Discover. Like interchange fees, there is no way to negotiate the cost of assessment. However, you can shop around with payment processors and pricing plans to lower your fees.
- Payment processor: These fees are paid to the company you choose to work with to handle your credit card payment transactions. Note that its markup depends on the payment processor you choose. So be sure to always do your research and compare plans.
It is essential which bank you work with and which credit card processor you choose. Note that it’s not just about the fees or cards you can accept. Besides cost, be sure to consider the following factors when selecting the best credit card processor.
- Fraud protection and security: You will need a processor that provides enough security for your transactions. Make sure they have additional protections such as encryption and tokenization features. Also check if they are PCI-DSS compliant.
- Multiple payment methods: Customers would always prefer to have multiple payment options. So, always find out what payment methods the processor accepts and make sure that credit cards, debit cards, and digital wallets are on the list.
- Customer service: You will need help with your payment processing system from time to time. You encounter technical difficulties or decide to upgrade. Make sure the credit card processor offers good customer support. It is also better if they offer onboarding and activation.
Offer a online payment option by credit card to your customers would be a great decision. Although it can be overwhelming at first, you will get used to it using card processors. Also, be sure to choose a reliable and secure credit card processor. Remember that you will be held responsible for every transaction your customer makes in your business.