Studies show that customers who choose to pay with credit cards tend to spend an average of 12-18% more than they would if they had paid with cash.
As credit cards become more commonplace, accepting this method of payment is becoming essential in maximizing sales and improving the consumer shopping experience. While card payments will result in additional transaction fees and fixed costs, it is far more beneficial to incur these minor expenses than to turn away cashless customers.
In this guide, we'll explain how to process credit card payments both in-store and online, as well as the reasons why businesses should accept this form of payment.
When it comes to processing credit card transactions, each business' needs are different. Depending on the volume of sales and budget, the ideal solution will vary. Therefore, businesses must carefully research their options before settling on a provider or software.
1. Choose a Credit Card Payment Provider
First, businesses must select a credit card processing provider. For smaller businesses with limited sales volumes, payment services are oftentimes the best option. These services have predictable, regular card processing fees and do not charge minimums or monthly fees, and do not require an application/approval process. Oftentimes, payment service providers also supply the point-of-sale, and eCommerce and invoicing tools.
On the other hand, for a more established business with larger sales volumes, a merchant account may be more cost-effective as they often provide membership pricing models with lower transaction fees.
2. Select a POS System
A point-of-sale system is an electronic dashboard that manages the business' credit card sales. This electronic system houses all of the transactions, tracks remaining inventory, and offers analytics on a number of key metrics such as product sales trends and employee performance.
Many credit card payment providers offer their own POS systems and cross-functionality between its mobile application and digital terminal. There are different POS options for credit card payments processed in a brick-and-mortar store and those completed online, via an e-commerce website. No matter which environment a POS system is used in, it offers businesses a crucial service and provides much-needed business analytics.
3. Establish a Payment Gateway Connection
So, what exactly happens the moment a customer pays for their purchase using a credit card? Credit card payments must first go through a payment gateway. This payment gateway protects and secures the customer's information by encrypting the data and then sending it over through a reliable internet connection for approval. If the purchase is approved, the sale will be completed and the funds from the purchase will be deposited into the business' pre-established account within a few business days.
Depending on the payment processor you choose, some include a payment gateway while others don't. For all intents and purposes, more and more businesses today are settling for payment providers that offer an all-in-one package, which includes the payment gateway.
4. Choose a Card Reader
When consumers go to a store and make a purchase using their card, the card reader is the device in which they must insert, swipe, or tap the credit or debit card in order to make the purchase. This physical reader is required for stores that want to accept credit cards as a form of payment. However, having a physical card reader is unnecessary for businesses that want to sell their products through e-commerce websites. For online purchases, businesses use a payment gateway that allows the customer to input their personal and credit card information, which is secured via encryption, into the payment form.
There are a few things a business will need if it plans on accepting credit card payments in person. Most notably, shops will need to have a working card reader to go along with a POS system.
For payment providers that offer all-in-one solutions, a store's card reader will be connected to the POS system. Therefore, when a customer goes to pay with a credit card using the card reader, the purchase will show up as accepted or denied on the shop's POS system. Once it is accepted, the funds from the purchase will automatically be deposited into the business account.
Accepting credit card payments online is a different process than accepting one in person. An online business will need to have an e-commerce platform that can accept credit card payments.
Depending on which payment service provider is selected, a payment gateway is required for businesses to digitally process transactions. This is crucial because when a customer enters their personal details and card information during the online checkout process, they need to have peace of mind knowing that the payment gateway will encrypt and secure their private information, which is then processed through the internet for approval.
Once this process is complete and the payment is approved, the funds will be deposited into the business' account and the customer will receive confirmation that the payment has been accepted.