The Ultimate Guide to Small Business Credit Card Processing Services

Using an efficient credit card processing service has become essential for any small business that wants to thrive in today’s economy. Whether you’re an online merchant, hairdresser, or own a restaurant or bookstore, providing your customers with fast credit card payments can significantly depend on your potential success.

Customers have become impatient. Whether they’re paying online or in person, they expect their payments to be processed fast. Any slight delay, even lasting only a couple of seconds, can significantly impact the customer experience. The problem is, though, that there’s an abundance of options available. Therefore, choosing the best possible credit card processing company has become a huge task.

Each payment processor, while offering practically identical services, comes with various features, different pricing, and differences in transaction fees. As a small business owner, you stand ahead of a tough nut to crack. To ensure you make a more informative decision, we’ve prepared the following guide to payment processing services.

What Is Card Processing?

Simply put, card processing refers to the process of accepting credit card payments for a business’s products or services, whether in person or online. Now, while accepting payments takes no more than a few seconds, it’s a multi-step process involving several parties, not only a merchant and a customer. The key entities involved in credit card transactions are:

  • Payment processor. Your credit card processor will work as the intermediate between your business and the credit card company. A payment processing company is responsible for moving the payment from the card-issuing bank to the merchant account safely and quickly.
  • Payment gateway. Payment gateway technology connects your business to the credit card processor. Essentially, as the name suggests, this technology works as a gateway that verifies the transaction accepting or declining the payment.
  • Merchant account. Your merchant account allows you to accept payments. This is where your payment processor transfers the customer’s funds. You can obtain the account via your bank or a third-party merchant services provider.

What Are Payment Processing Services?

As stated above, card processing companies work as the middleman, ensuring the transaction between a merchant and customer is smooth and secure. Now, there are two options when talking about card processing services. You can either opt for a standard credit card processer or a merchant account provider.

Simple credit card processors typically charge businesses per transaction fee. As for Merchant account providers, they usually come with monthly fees while offering cheaper processing fees per transaction. As for the exact features, these will vary from one credit card processing provider to another. We’ll discuss it in more detail later in the article.

Processing in person payments

Why Does Your Small Business Needs Card Processing?

As a small business owner, you probably face fierce competition, especially if you run an e-commerce store. In such a case, any feature that can give you an advantage is worth its weight in gold, and offering fast and secure payment processing can provide you with that.

Remember that customers don’t expect you to accept credit card payments. They take it for granted. What clients want is for small business owners to provide them with various payment options along with super fast processing, be it for in-person or online payments. That’s where credit card processing companies come in.

Let’s look at some of the critical benefits coming when working with a reliable credit card processing service.

Improved Customer Experience

Suppose two small businesses are offering the exact same services. One does accept credit cards, and the other doesn’t. Which one do you think will attract more customers? Which one would you choose if you were one? In both cases, the answer is the business accepting credit cards.

Paying with a credit card or any other cashless payment method is incredibly convenient for customers who can pay for their products instantly. Also, let’s not forget that reputable payment processors offer a choice regarding payment methods.

When working with a quality credit card processing company, you’ll be able to offer your customers much more than just credit and debit card payments. By providing consumers with alternative payment options, such as mobile payments, pre-paid cards, gift cards, e-wallets, etc., you’ll significantly improve their customer experience. This can significantly increase their chances of returning to your establishment and turning them into loyal clients.

Stronger Payment Data Security

Businesses that process credit card payments must follow the Payment Card Industry Data Security Standard (PCI DSS). PCI is a set of security standards established to ensure businesses store, transmit, and process cardholder and authentication data in a safe manner. Now, as a small business owner, you need to renew your PCI compliance yearly. Otherwise, you may face severe financial implications from a security breach.

Credit card processing companies can help, providing small business owners with advanced payment processing technology. These will add multiple levels of security to how your business processes payments, ensuring your customers’ money and sensitive data stay protected. Staying PCI compliant will also enhance your business’s legitimacy.

Reduced Overall Business Expenses

Some small businesses worry that incorporating credit card processing solutions might be too expensive. They couldn’t be more wrong. The credit card processing industry has become highly competitive, with an abundance of options available for small businesses. That said, numerous payment processors offer packages dedicated to smaller businesses, both in terms of services and pricing.

Increased Cash Flow

One of the most significant advantages of credit card processing is that it doesn’t require manual accounting. The entire process is automated, ensuring a business receives all its payments quickly. First, it improves cash flow as you can expect the money to land in your bank account in a matter of a few days. And secondly, it discards any problems revolving around billing, checks, and invoices from your customers.

Enhanced Business Scalability

Working with a payment processor can provide you with a significant boost when growing your business. First, with a quickly evolving payment processing industry, it’s best to work with a service that can help your business stay ahead of the curve and provide you with the latest technology.

Secondly, reputable credit card processors provide several bundles for businesses at different stages of growth. That said, you will be able to conveniently find a credit card processing service that will fit your budget and monthly processing volume, ensuring sustainable business growth without you losing control over your finances and processes.

Processing payments at an online store

What Are the Costs of Small Business Payment Processing Services?

How much you will pay for using a credit card processing company’s services will depend on a provider, as each company comes with a different pricing model. Essentially, one has to consider three primary sets of costs when choosing between small business card processing services – rates, fees, and equipment costs.

Card Processing Rates

Processing rates are nothing else than the fees you pay for a single transaction. Typically, transaction fees are a percentage of the total sale amount. The rate you will pay to your payment processor will consist of three parts.

First, there are interchange fees and the card brand’s assessment fees. These are set by card networks and are non-negotiable, with every business paying the same amount. Besides these two, there’s the processor’s markup. And since each credit card processor sets its own margin, this part is negotiable.

Based on these three parts, companies structure their pricing models. Credit card processing companies use three main rate structures:

  • Flat-rate pricing. It’s a fixed fee paid per transaction. It’s a recommended option for smaller businesses that process less than $5,000 a month, as all they pay is a transaction fee, and there are typically no monthly or annual account fees involved.
  • Interchange-plus pricing. In this pricing model, businesses are charged first by their credit card companies plus a percentage from each purchase. This pricing structure is mainly recommended for online businesses that have a substantial credit card sales volume, as the price you’re quoted is the negotiable processor’s markup.
  • Subscription model. As the name suggests, this model requires a monthly subscription fee. However, it may also include interchange fees or flat rate pricing for credit card transactions.

Credit Card Processing Fees

There are several types of fees charged by credit card processing companies, and each processor may charge different ones. When comparing payment processors, you will likely encounter the following standard fees:

  • Monthly fee. Monthly fees are also called statement fees. They cover such things as customer service and statement preparation and typically range from $5 to $15 per month.
  • Payment gateway fee. A monthly fee that covers using the payment gateway is called the payment gateway fee. Essentially, it allows you to accept and process payments online. Its cost varies between payment gateways, but it’s typically comparable to a standard monthly fee.
  • PCI compliance fee. PCI compliance fees are required for renewing your annual PCI compliance. Usually, a compliance fee is around $100 a year, although not all card processing companies charge it.
  • Monthly minimum fee. Some card processing service providers may charge you a monthly minimum fee. In essence, you need to generate a specific amount in processing fees ($25 or higher). Otherwise, you’ll be charged the difference.

Specific actions also trigger several additional fees. For instance, processors often charge cancellation fees or early termination fees if you decide to cancel the service before the agreed period. You may also be required to pay a chargeback fee if a customer disputes a transaction. As said, these fees will depend on a credit card processing company, so it’s essential to do your research when comparing different services.

Processing Equipment Costs

If you own a brick-and-mortar business, you should also add dedicated equipment costs to your overall credit card processing service tally. To process payments, you’ll need a mobile credit card reader or a classic credit card terminal. That’s a minimum credit card processing hardware. Additionally, you might need to add the costs of additional equipment, such as a receipt printer, cash drawer, or barcode reader.

This may seem like a lot, but you can save yourself some money by opting for a mobile card reader instead of a terminal. Phone or tablet credit card readers come with all the features of a card terminal, such as contactless payments, but are much more convenient and cheaper. For instance, when using a mobile card processing reader, you can send receipts and invoices via email or text, saving money on a receipt printer.

Of course, the hardware costs don’t apply to online businesses. You’ll, of course, have to pay for the dedicated software along with all the transaction fees charged by your payment processor. You won’t need to invest in any sort of equipment, though.

How to Choose the Right Credit Card Processor for Your Small Business?

Understanding the differences in a pricing model is undoubtedly helpful when comparing credit card processors. It will help you calculate the costs and decide which card processing company will best suit your small business. However, the overall cost isn’t everything, and there are several other factors one should consider when choosing the best possible small business credit card processing services provider.

Type of Your Business

Do you run an online store or a brick-and-mortar business? The type of your business plays a significant role in deciding on a payment processor, as you’ll want to prioritize different fees.

For example, for e-commerce stores dealing primarily with online purchases, you can save money on dedicated processing hardware. You’ll also put more emphasis on making credit card processing secure and protecting your online customers’ personal information. Online businesses should also ensure they provide users with more payment options, such as e-wallets.

On the other hand, brick-and-mortar businesses will need to include additional in-store processing fees and hardware costs.

Pricing

As discussed, credit card processing companies use several pricing models and fees when charging small business owners for their services. The crucial step here is to determine which one of those will work best for your specific business. When it comes to that, the best idea is to consider the volume of your transactions, as specific pricing structures work better for either low or high sales volume businesses.

For instance, flat-rate pricing works best for a low and inconsistent number of transactions. This model includes fixed processing fees, meaning that it’s easier for small business owners to calculate and track their costs with a lower transaction volume. On the other hand, small businesses with considerably higher monthly transaction volume should opt for interchange-plus pricing, providing them with lower payment processing fees that can balance out monthly fees.

Features

Every credit card processor offers different features in addition to standard processing services. Such features can bring extra value and prove to be a great asset to any small business. However, like with pricing, it all depends on your business type, as not all features are a good fit for all small businesses.

For instance, some processing hardware allows businesses to accept and process multiple payment methods and perform advanced business tasks. Let’s take a POS (point of sale) system as an example. Such systems enable small businesses to accept credit and debit cards and work with contacless and mobile payment methods, such as Google Pay and Apple Pay.

In general, more complex services may require more advanced features. Be sure to consider those before deciding on purchasing a specific processing services bundle. Otherwise, you might end up paying more than you should.

Trustworthiness

Choosing a credit card processing company isn’t a frivolous decision. Working with a top-quality card processing services provider will enhance your business’s security, legitimacy, cost-efficiency, scalability, and workflow. That said, you should only work with a reputable credit card processor that can deliver you the best possible service, doesn’t come with any hidden fees, has transparent pricing, and offers reliable customer service.

Accepting an in-store credit card payment

General Processing Service vs. Merchant Account Service

As briefly mentioned, small businesses can opt for two types of credit card processing services: general processing and merchant account. Let’s explain how they differ in more detail.

General Processing Services

A general processing services provider operates as a middleman between a business and its bank. In this case, a credit card processor takes care of all transactions and authorizations, moving money from the customer’s bank account to the business’s processing account.

Such services usually charge per transaction fees, taking advantage of a flat-rate pricing model. That’s why general card processing services are the best choice for start-ups and small businesses with a low or inconsistent volume of monthly transactions.

Merchant Account Services

Merchant account providers also work as the intermediary between the business and the customer. However, while also processing all transactions and authorizations, such services move money from the customer’s bank account directly to the business’s bank account. This provides two key advantages – lower transaction fees and no withholding of funds.

Small transaction fees apply because the payment processor doesn’t need any authentic funds. These are provided by the bank, meaning you only pay interchange fees, which, as covered, are typically cheaper than a fixed per transaction fee for general processing. Also, since the funds land directly in your bank account, you don’t have to wait for them to be clear for withdrawal.

Another difference is that merchant account services charge monthly fees in addition to interchange fees. That’s why such services are recommended for small businesses with a greater sale volume and high-value transactions that can balance out these two costs.

What Is the Best Small Business Card Processing Service?

With so many options available, choosing a credit card processing service that will suit your small business may seem daunting. Or is it? With Payment Savvy, your perfect credit card processing solution is just around the corner. Payment Savvy provides small businesses with several card processing services to fit every need you might have.

We have years of experience helping companies from various niches with their card processing needs, providing them with top-quality and reliable services. With Payment Savvy credit card processing, you’ll be able to increase sales, streamline processes, increase productivity, and reduce expenses. Learn more about us here or contact us directly to see why we’re the ideal solution for your payment processing needs.

Key Takeaways

Whether online or in-person, consumers expect businesses to provide them with several fast payment options. For that, however, they need to work with a reputable credit card processing services provider. And as covered above, finding the one that will suit your every need can be a tough assignment.

Still, it’s crucial if you want your business to thrive. Credit card processing services offer small businesses numerous advantages, including enhanced customer experience, increased workflow, and more robust payment security. How to choose the right provider, though? It all comes down to considering your individual business needs and current situation, as some features and pricing models may work better with specific business types and sale volumes.

Hopefully, this guide has answered your questions regarding small business credit card processing services. And if you have any more queries regarding card processing, be sure to visit our blog, where you’ll find more articles and comprehensive guides.

FAQs

In case there are still some unresolved matters regarding small business credit card processing, here are some of the frequently asked questions surrounding the topic.

What are small business credit card processing services?

Credit card processing services are offered by third-party payment processors who work as the middleman between the business and its customers. Every time a person makes a payment, a credit card processor transfers the money from their credit account to the dedicated merchant account.

Why do I need a small business credit card processing service?

Nowadays, customers expect businesses to provide them with several fast payment options. Only credit card processing companies can deliver that, significantly enhancing the customer experience. Other than that, working with a reputable card processing company like Payment Savvy will provide you with a boost in workflow and payment security, as well as help you control your finances better.

What is the difference between a payment processor and a credit card processor?

Both card and payment processors handle credit card and debit card transactions and mobile payments or card-not-present transactions. Essentially, they refer to the same type of service and are used interchangeably.

What is the best pricing structure for card processing services?

Now that depends on your business. For instance, smaller businesses and start-ups that have a low or inconsistent volume of monthly transactions should opt for a flat-rate pricing structure, where they are required to pay a per transaction fee. On the other hand, businesses with a more significant sales volume should take advantage interchange-plus model, which includes monthly fees and an interchange fee, which tends to be much lower than a standard transaction fee.

What to consider when looking for a credit card processor?

When comparing small business credit card processing companies, one should be sure to consider the following:

  • pricing and fees,
  • additional features,
  • their monthly transaction volume,
  • type and size of their business,
  • reputation,
  • security solutions,
  • customer service.

Chad is a serial entrepreneur and founded Payment Savvy in 2011 armed with the goal of providing high-risk establishments with a pioneering and tailored payment processing solution that allows them to flourish. Having decades of knowledge in the financial services and debt recovery industries, he ensures every client receives the same level of expertise, resourcefulness, and strategic vision no matter the size of the organization. Always willing to push the envelope, Chad’s forward-thinking and leadership skills are responsible for Payment Savvy being on the map as an industry-leading payment processor.