How To Take Credit Card Payments To Boost Your Online Business

Imagine this: A customer discovers your small business, loves your product and is happy to pay to get their hands on it. The only thing is that you don’t accept credit card payments and like a lot of consumers these days, they don’t carry much cash. That’s a sale lost which for a small business owner adds up quickly.

If you want to grow your small business into a bigger business, you need to offer multiple payment solutions including credit card payments. Credit card processing doesn’t have to be complicated or expensive. Here’s everything you need to know about adding credit cards to your payment methods.

Understanding Credit Card Companies

The main credit card providers in the US are Mastercard, Visa, American Express and Discovery. You don’t have to accept payments from all of them. Many international, national and small businesses don’t. The biggest reason behind selective credit card acceptance is the processing fees involved.

“Swipe” Fees

When paying with a credit card, every transaction incurs fees for the business taking the payment. These transaction fees AKA interchange fees or swipe fees tend to be about 2-3% of the payment which means 2-3% off your profit margins. Different credit card companies set different fees so some businesses only accept payments from credit cards with lower fees.

Partnership Benefits

Some businesses negotiate partnership deals with credit card companies. In exchange for only accepting credit card payments from their company (incentivizing customers to use or get their credit card), the credit card company will offer the business lower transaction fees (preserving the business’ profit margin when processing credit card payments). It’s the best of both worlds for the business and the credit card provider. However, it does leave customers with fewer payment options.

Cash Only Businesses

Despite some credit card companies setting lower transaction fees and businesses with enough leverage being able to make deals to lower fees, some business owners decide not to accept credit card payments. Their businesses are cash only or only accept cash and debit cards as they tend to have lower fees. This means that they can’t accept payments online which cuts them off from a lucrative revenue stream.

So what should you do? Which credit cards should you accept? It’s up to you! Here’s what to take into consideration when accepting credit cards from the major providers.

Mastercard and Visa are at the top of the list for credit card acceptance because their interchange fees are lower. Despite its higher processing fees, American Express’ customer base tends to have high rates of income and spending so can attract customers who make large and repeat purchases. Discovery credit cards are on the higher end of the spectrum of fees but without the reward of a customer base of big spenders.

What credit cards are your customer base most likely to have and want to use? In general, that’s Visa because it makes up 58.3% of cards in circulation. However, if you offer high-ticket items and market to higher-income customers, it could make American Express worth it.

How To Take Credit Card Payments

Once you have decided which credit cards to accept, it’s time to get your credit card payment processing system in place. Whether you are collecting in-person, over the phone or online payments, this involves using a credit card processing service and collecting credit card information.

A credit card processing service is the infrastructure that processes payments. Traditionally this is a merchant account, a type of bank account designed for credit card processing. This is a bit outdated because you have to negotiate your own fees which can differ depending on the credit card provider and payment method. Merchant accounts don’t tend to offer complementary hardware like credit card readers either.

The modern evolution of a credit card processing service is a third-party payment processor or payment service provider such as PayPal, Stripe and Podium Payments. Payment processor platforms handle the merchant account, standardize fees and may even throw in a credit card reader for free.

The second step of credit card processing – collecting credit card information – varies depending on the payment method.

How to accept credit card payments online

When taking online credit card payments, you need a way for customers to input their credit card information into your payment processor. That’s called a payment gateway which will be offered by your payment service provider or in some cases your website provider such as Shopify.

How to accept credit card payments in person

To process credit card payments in-store, you need some kind of hardware to read the card. You can use a point of sale (POS) system but rising in popularity are card readers, particularly mobile card readers. This turns your phone into a functioning card terminal, a convenient way to take credit card payments through contactless payments and mobile payments from a mobile wallet.

How to accept credit card payments over the phone

If you spend a lot of time on phone calls with customers, you’ll need a point of sale system that allows you to manually input a customer’s credit card information as they read it out. However, as customer preference favors text communication over phone calls, having the capability to send payment links over text may be a better idea.

How to Ensure Credit Card Payment Security

With the rise of credit card payments has come the rise of credit card fraud, particularly with online payments. There are security processes you can follow to minimize the risk to customers and the reputation of your business in the eyes of previous and potential customers.

Importance of SSL encryption

The first thing you can do for secure online payment processing is get a Secure Sockets Layer (SSL) certificate for your website. This encrypts the connection to the website so data can’t be intercepted.

Compliance with PCI DSS standards

Payment Card Industry Data Security Standards (PCI DSS) is the security standards program set up by the major credit card companies. It outlines the security processes to be followed by companies that handle credit card data. There are 4 different levels of compliance depending on the nature of your business. Achieving PCI DSS compliance is a best practice for businesses and increases customer trust, especially for online businesses.

Fraud prevention measures

As a business processing sensitive customer data when processing payments, you need to have fraud prevention measures in place. Focus on securing your payment processing, encrypting your data storage and blocking fraudulent attacks such as malicious software and fishing scams.

How to Manage Credit Card Payment Disputes and Chargebacks

The final thing you need to know about accepting credit card payments is the issue of disputes and chargebacks. This is when a customer disputes a charge on their credit card from your business and their credit card company initiates a chargeback to retrieve the money for the customer. It’s particularly prevalent in the online business world.

Understanding common reasons for disputes

To minimize disputes and chargebacks, you need to know why they happen. The main reasons are fraud, customer dissatisfaction and misidentification of the payment. Luckily there are things you can do to manage all of these.

Resolving disputes effectively

Disputes can be resolved with clear communication. First, find out the reason behind the chargeback so you can take action to ease the customer’s concerns with the hopes that they will end the dispute such as clarifying what the payment was for.

Preventing chargebacks proactively

You want to keep your chargeback ratio low as businesses with a significant percentage of chargebacks from their transactions cause suspicions from banks which can create all kinds of issues. So make sure you:

• Have security measures in place to prevent fraudulent charges
• Communicate with customers regularly after the sale to help them utilize the product and reach out for help if they need it
• Have a strong refund process in place including a clearly outlined refund policy and a responsive customer service
• Make it easy for customers to identify your payments on their credit card transactions

For an easy to set up, convenient to use and intuitive payment system, check out Podium Payments.