Our world is changing, which has to be the most obvious statement ever written. Among the many changes brought on by the COVID-19 pandemic has been the approach that customers take with payments. Handling greasy coins and wadded-up bills has always seemed icky to many of us, but when there’s the potential to also catch an aggressive virus in the process, the migration to plastic is bound to be expedited.
“Considering that credit cards are increasingly becoming the chief mode of payment not only in America but in the whole world, you may be on the losing end if you are running a business and not accepting credit card transactions,” warns small business finance expert Marco Carbajo. “According to research by BAI Research and Hitachi Consulting on Consumer Payment Preferences, 41% of shoppers have cut down on their use of cash, while 97% of respondents are turning to credit and debit payments instead. This is to say that almost everyone in the United States, including business owners, have at least one credit card in their wallets. Going by the above statistics, you may be rethinking your business decision on credit cards, especially if you are not offering credit card payments yet you want to improve sales and efficiencies in your business.”
Yes, cashless payment is more crucial than ever. And it’s a win-win scenario. Your customers get an easier and safer way of paying. And you get your money faster. That’s right—your cash flow will get a major boost from the lightning-fast payments made possible with small business credit card processing.
Traditional approaches to business still have their relevance, but innovation is required for success. Need proof? Of the businesses that experienced higher sales throughout the pandemic, 27% attributed much of that growth to the move toward credit card processing and contactless payments.
How savvy is your business when it comes to credit cards? If you’re not sure, try this little test. Imagine that your city issued a new law tomorrow that banned the use of currency in business transactions. In this bleak scenario, only credit cards and other contactless forms of payments are legal. Would you already have a system in place to accept these payments? Or would the lack of cash devastate your business?
Regardless of how you would fare in the cashless society mentioned above, it’s clear that we can all do a better job of improving our payment systems. And that’s where credit card processing for small businesses comes in.
Credit Card Processing Companies Offer Real Benefits
So what is small business credit card processing, and what do these credit card companies do? Basically, processing refers to all the actions that take place from the point that a customer uses their credit card to make a purchase up to the point when that approved amount arrives in your account. There’s a journey that must occur for this to happen, and credit card processing is the mechanism behind the scenes.
Aside from magically transporting money into your bank account, credit card processing provides many other substantial benefits for your business. For starters, you will likely see increased sales when you offer convenient credit card payments.
“Credit cards encourage impulse buying and improve your cash flow,” explains small business expert Elie Katz. “Shoppers like being able to check out quickly and easily without having to write a check or make an extra trip to the ATM (which limits their purchasing to only their available funds). An MIT study indicated that customers tend to spend an average of 83% more when they’re paying with credit cards. This includes a high rate of impulse purchases. Credit card transactions are processed and verified electronically, and settled quickly. Proceeds are typically deposited the next business day, or sometimes even same day, into your bank account. You won’t have to handle as much cash, reducing theft and security concerns in your store. You won’t have to worry about bounced checks or wait for checks to clear. This also means no more sending out invoices and waiting for customers to pay. If you are an e-commerce merchant, accepting secure payment by credit card is imperative.”
Increased sales and smoother cash flow will always be welcomed with open arms by small business owners. But let’s look at some of the other benefits that come from good credit card processing companies:
Saves You Time
With credit card payments, the processing company does the heavy lifting and delivers the money to you. This is much more efficient, as counting and depositing cash takes time and effort.
Opens Your Business to International Opportunities
Dealing with foreign currency and exchange rates can be a real headache. But credit card transactions make it easier to deal with clients and customers from other countries.
Brings Legitimacy to Your Business
Seeing a Visa, Mastercard, or American Express logo on a cash register or e-commerce site conveys that the business is affiliated with major brands. Your customers will be more likely to trust you to protect their data and deliver on the transaction. Additionally, they will see your credit card acceptance as a key factor in customer service that makes their lives easier.
Reduces the Chances of Getting a Bad Check
Is there any more sickening sound than that of a bad check as it bounces? We’ve all heard that dull thud and known that it means you’ll either have to pester the customer for payment or lose out on the money altogether.
Choosing Your Small Business Credit Card Processing Partner
While these benefits make processing an absolute necessity, it doesn’t mean that all credit card processing companies are equally suited to your needs. You’ll need to carefully consider your options before signing on the dotted line.
Are you currently looking to start with your first credit card processor? Great! You’ll want to review this section carefully, as it provides several of the key considerations in the process. Even if you already have a process in place, it’s always wise to review your options and think about an upgrade.
The best place to start is by reaching out to your network. As you speak to other small business owners, don’t just focus on which companies they recommend. You should also ask about which companies you should avoid. Get specific examples of why these companies are bad choices, then use these learnings as guideposts in your search.
This is also a great time to get advice from your business mentor. Even if they don’t have extensive experience with credit card processing, they will often have broader insights that can set you up for a better decision.
Lastly, don’t forget your customers. While you definitely want your credit card processing solution to work for you, it’s even more important that it works for your customers. When there are delays or hiccups in the purchasing process, many people won’t stick around until it’s fixed. They’ll just take their business elsewhere.
To get your customers’ perspective, send out a quick email survey. You can incentivize responses by offering a promo code or entry into a contest to everyone who completes the survey. Ask them what they like most about their shopping experience, then follow that with questions about how you can improve.
With all the insights you collected from your research, you’ll be able to judge the quality and applicability of a processing partner. Here are some questions to think about:
How Much Will It Cost?
This has to be the first question that many small business owners will ask. The cost for processing fees obviously varies, but if it’s percentage-based, you can expect to pay somewhere in the range of 1.3% to 3.5%. You’ll also need to consider the payment processor fee, which might be 10¢ or more per transaction. Other payment models charge a monthly rate or a flat for every transaction.
How Easy Is It to Use?
You could sign on with the fastest, most feature-laden service in the world, but it wouldn’t do you much good if it’s difficult to use. Make sure that the checkout process is intuitive for your customers and that your employees won’t need to enroll in a college course just to figure out how to use the system. Move on to another option if a system is too complex, as the time and effort required to use it will only negate the time-saving benefits of credit card transactions over cash transactions.
How Good Are the Security Features?
Cash registers have historically been a dangerous thing for small business owners. Money often vanishes due to careless or criminally minded employees. And the presence of a large amount of cash has been enticing to thieves since the first cash registers were invented centuries ago.
But you can’t simply rest on your laurels after partnering with an efficient credit card processing company. You need to ensure that the product has strong enough security to protect you from data breaches and other threats.
Can It Improve the Entire Purchase Process?
Modern technology should never exist on an island. Your processing solution should also integrate with the rest of your systems to make all aspects of your business run smoother. The Sunrise app is a good example of this, enabling you to send invoices directly from your phone and then track when payments are received. It even sends reminders to customers for you.
It’s only when a whole range of tasks are automated like this that you’ll begin to see substantial improvements in your efficiency. And by reducing the manual element, you can also reduce the opportunity for human error.
Are There Revenue Requirements?
Some excellent credit card processing options simply aren’t available to small businesses. Before you get too far down the road with any particular service, you’ll need to confirm that your business meets any requirements they might have.
Will the Contract Be Too Restrictive?
Even after you’ve signed on with a processor, there’s always a chance you’ll change your mind in the future. Perhaps you discover issues that limit the compatibility, or your business might evolve to the point that it’s no longer a good match.
To avoid a big financial sting, make sure there aren’t significant fees for early termination of your contract. A small fee is acceptable, but it’s simply not fair if you’re going to be charged $3,000 for canceling the contract.
Proven Solutions for Credit Card Processing for Small Business
Bear in mind that there will never be a perfect solution for your business. But you should seek an option that lines up with nearly all your needs and preferences. There shouldn’t be too many compromises required.
Let’s take a quick look at some of the options on the market:
This is one of the best deals when it comes to a versatile product backed up by proven customer service. The processing rates vary depending on the type of business, so restaurants can plan on the lowest rates, and e-commerce will come in at the highest.
If you need to acquire equipment like a terminal, plan on a long-term contract with National Processing. But if you already have your own equipment and only need the processing service, there are no contracts. If you enter into a contract, be aware that an early termination fee will likely be included.
Has there been a more disruptive payment innovation in the past decade than the Square card reader? I still remember the day those iconic little devices hit the market.
The fee structure is straightforward with Square and includes no monthly fees. Also, the lack of revenue requirements makes it ideal for small businesses that aren’t churning out a high number of daily transactions.
Here’s the first option on our list that uses a monthly fee structure. There’s a $99/month tier for smaller businesses and a $199/month tier for mid-sized businesses, each of which includes a nominal fee for each transaction. You’ll need to run the numbers, but don’t be surprised if the low transaction fees more than compensate for the addition of a monthly fee.
Another benefit of Fattmerchant is that it provides more invoicing and reporting resources than the competition. So if analytics and automation are important to you, give this service a serious look.
Dharma Merchant Services
There are no monthly fees for Dharma Merchant Services, and you’ll actually save money on your rates if you exceed $100,000 in transactions each month. The rates start at 0.07% + $0.07 for each in-person transaction, with somewhat higher rates for online transactions.
If you run a nonprofit, then Dharma Merchant Services could be your ideal match—the service offers discounts to nonprofit organizations. Additionally, they promote good in the world by donating some of their profits to worthy causes.
This service is optimal for small businesses with an e-commerce focus. There’s a wide variety of pricing options, and the online transaction fees are quite favorable.
While CDGcommerce uses contracts, you don’t need to worry about early termination fees because your contract will be month-to-month, so you’re never far from the escape hatch if you decide that the service isn’t working for your business.
If customer service is important to you, Helcim is probably a top contender for your business. This processing company bends over backward to make sure you get what you need, when you need it. If problems arise, you can typically count on them to quickly find a resolution.
There are various pricing options for Helcim, but they mostly favor businesses with a high number of monthly transactions. So if your sales numbers are on the lower side, you might want to look elsewhere.
Like Square, PayPal is one of those ubiquitous names in the credit card processing industry. They offer predictable rates and can handle all manner of transactions. This makes them ideal for businesses that have international clients and customers.
Let’s Take a Minute to Process All This Information
This guide has shared the benefits of small business credit card processing, the essential considerations when choosing a processing company, and introduced you to some of the biggest names in the industry. Even if you’re excited to sign up with a certain processor, it’s important that you allow enough time to do additional research and weigh your options.
The most important thing here is that you find a processor that fits your business like a glove (or maybe “like a vehicle wrap” is the more appropriate metaphor here). Because when your customers are able to more confidently and conveniently make purchases, the future is brighter than ever for your business!