How Do I Accept Credit Cards?

Credit: Dreamstime


If you’re planning to start a business, you will most likely need to figure out what method of accepting credit cards is right for you. There are myriad credit card processing options for business owners to choose from. Weighing the importance of price and convenience to your business will help you determine which credit card processing company and plan is for you.

There are three ways to accept the credit card payments that will eventually make their way into your bank account: Merchant accounts,Internet gateways and third party providers.

Merchant accounts

You can open a merchant account with any number of banks, on-line companies or software service providers such as QuickBooks. Even some retailers, such as Costco, offer merchant accounts.

Merchant accounts usually charge a monthly charge (usually between $5 and $20) and a transaction fee of between $0.10 and $0.40 per transaction including refunds.

You will also be charged a fee based on a percentage of the transaction. This fee is usually between 1.5 percent and 4 percent per transaction.

All of these fees can vary based on your sales volume and whether the sale is considered “qualified” or “non-qualified” by the merchant account. Charges can be considered non-qualified for various reasons, including if the card information is keyed in, rather than swiped, and will therefore incur higher fees. Some merchant accounts may also charge you a one-time set up fee. Frequently, set-up fees can be waived as part of a promotional offer.

Once you have opened a merchant account, you must decide how you are going to actually get the customer’s credit card information to your merchant account. If you are selling products on the Internet or you are a mail order or telephone order (MOTO) business, you will need an Internet gateway service. These companies are the pipeline that gets the credit card and customer information to your merchant account.

Internet gateways

Internet gateways charge a set up fee (between $50 and $100), plus monthly fees that can total $25-$50 per month. Additionally, they charge a fee for each transaction.

Our sister site, TopTenREVIEWS, offers pricing comparisons reviews for credit card processing with both merchant accounts and gateway services.

If you are planning to accept credit cards in person, you will need a method of swiping the card. You can use a card swiper that comes with your business’ POS (point of sale) system or you can get a simpler version that can attach to a laptop computer. You can usually get such a device as part of your agreement with your merchant account provider and may want to factor their offering in terms of equipment into your decision making process.

Most gateway services will allow you to use your Internet gateway for online sales and a card swiper (provided by them or through your POS vendor) for in-person sales. Both kinds of transactions — online and in person — can then flow to the same merchant account.

There are also wireless devices, including an Apple iPhone app, that will allow you to accept credit cards off site without having to swipe them.

Third Party Providers

For those who are not yet ready to commit to a merchant account, there is another option: Third Party Service Providers allow your customers to use credit cards, on their site or yours, without you having to have a merchant account. The drawbacks are that the fees can be higher and it may take longer to get your money from the third service provider.

Examples of these companies include: PayPal, ProPay and CCBill. Fees can range from 2 percent per transaction up to 20 percent, so be sure to check the fine print carefully before choosing one.