Accepting credit cards doesn’t have to be complicated for your small business. The most common place to start is with a credit card machine. You’ll also have to consider swipe rates, merchant accounts, hardware and security standards, but we’ve got you covered. Here are the answers to frequently asked questions about credit card machines for your small business.
Credit card machines are used to collect payments from customers who wish to pay by credit or debit card. They are typically connected to the internet or a phone line, to send data to the processor. For most credit card processors, funds are transferred from the customer’s bank to the business’s merchant account. In some cases, the credit card processor uses a merchant account and holds funds on your behalf, and then directly deposits them into your checking account at your discretion.
Credit card machines charge a business’s customers and transfer the funds to the company’s merchant account.
There are various types of credit card machines, and each offers unique benefits. Some of the most common types of credit card terminals are countertop, mobile, virtual and integrated point-of-sale (POS) systems.
These credit card machines are the most common, and require a wired connection to your phone line or internet network. The device usually sits on a counter or tabletop. Countertop terminals can process both credit and debit cards, and some have a keypad for PIN entry. Many of them support card-not-present transactions, in which a merchant types in the customer’s credit card number. Here are some benefits of using this type of terminal:
These are some disadvantages to using countertop terminals:
Countertop terminals are best for your company’s brick-and mortar-store or office where you check out customers. You can expect to pay $100-$350 or more, depending on the brand, model and features.
Mobile terminals rely on a wireless connection through Wi-Fi, a phone or a tablet to process card payments on the go. This means they can be moved from the checkout counter to other places in the store – or even taken out to events. Here are some advantages of using mobile terminals:
The downside to mobile terminals is security.
Mobile terminals are best for businesses that are mobile and/or participate in events such as food trucks and farmers or flea market vendors. They are also useful for high-demand businesses, such as ticket vendors and Chick-fil-A locations. Finally, businesses that do house calls, like plumbers and tow truck drivers, can benefit from mobile credit card terminals.
Mobile terminals are around the same price as the countertop units, starting at $100 to $350.
These terminals allow your e-commerce business to process credit and debit cards by entering the payment information into a secure website. A client’s card does not need to be present to process this type of transaction.
These are some benefits to using virtual terminals:
These are some drawbacks of virtual terminals:
Some virtual terminals charge a subscription fee, in addition to your transaction fees on purchases. The transaction fees tend to be higher than when customers insert, tap or swipe their cards in person because of fraud.
These terminals tie card processing hardware to a POS system. The setups allow a POS system and card processing system to work together.
Here are some benefits of integrated POS terminals:
These are some disadvantages of integrated POS terminals:
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A credit card machine is simply a credit card reader and PIN pad. A POS system is a complete checkout terminal that comes with a credit card machine, monitor or tablet, a cash register and printer. POS systems can also include additional software or apps that track inventory, monitor sales, generate discounts, create financial reports and help with marketing.
When choosing a POS system or credit card processor for your business, you have many choices. To make it easier, we have evaluated the top providers in the industry and chosen the best picks for different needs.
Many vendors offer free credit card machines; others allow you to buy or lease your equipment. Pricing depends on the model and features, such as Europay, Mastercard and Visa (EMV) and near-field communication (NFC) capabilities. Costs are also based on whether you rent or purchase the machine, and if you receive it from the vendor or a third party. Generally, the most basic credit card machines cost less than $100, and more expensive models can cost several hundred.
Other costs to consider include credit card processing fees, monthly service fees, setup fees, gateway fees and compliance fees. These costs vary by vendor, and many waive some fees for new customers.
The cost of a credit card machine generally ranges from $100 to a few hundred dollars – depending on the model and added features.
There are three main pricing structures for credit card processing fees: interchange plus, tiered pricing and flat percentages.
This type of pricing – also known as wholesale pricing, true pricing and cost-plus – is the preferred choice because it gives your small business the same low rates used by big-box stores. Interchange-plus charges a flat fee that consists of a small percentage plus some cents per transaction. You can often negotiate lower rates if your company has a high sales volume.
By contrast, tiered pricing depends on the type of credit card being used. This pricing structure is less favorable because it works by bundling different types of credit cards into tiers – with increasing swipe rates. These tiers are classified as qualified, midqualified and nonqualified cards. These include regular cards, debit cards, rewards cards, business cards and other types of credit and debit cards. Generally, credit card processors decide which types of cards are qualified, midqualified and nonqualified for their particular service, so tiers and pricing vary.
Flagship Merchant Services is our choice for the best high-volume credit card processor, because it uses both interchange-plus pricing and tiered pricing. (Note that tiered pricing is the advertised cost, so you’ll have to ask for interchange pricing.) Flagship’s interchange-plus rate is 0.3% plus 10 cents per transaction, and is negotiable for your company’s high sales volumes. Its tiered pricing starts at 0.38% for qualified debit cards and 1.58% for credit cards, plus 19 to 21 cents per transaction – the price increases for midqualified and nonqualified cards.
Some credit card processors also charge a flat percentage per transaction. This is typically the case with mobile credit card processors, such as Square and PayPal, which charge 2.75% and 2.7% respectively per swipe.
A merchant account allows your business to accept credit cards. It transmits payment data from a customer’s bank to your company’s bank, and authorizes credit card transactions. Merchant accounts are offered either by the credit card processor or directly from a financial institution – typically a bank. You will normally need to apply for a merchant account. However, not all credit card processors require a merchant account.
Some credit card machines are compatible with tablets, but the most common way to accept credit cards with an iPhone, iPad, Android or other mobile device is by using a credit card swiper. This small dongle attaches to the headphone or auxiliary plug on a mobile phone or tablet, and processes credit cards using a mobile app. Another way to accept credit cards using a mobile device is by using a virtual terminal: A feature that lets you manually input credit cards into the app.
NFC technology allows businesses to accept credit cards without swiping them. To accept mobile payments with EMV technology, you’ll need an NFC-enabled credit card machine – such as Apple Pay, Android Pay or Samsung Pay.
EMV technology aims to defend both the consumers and your business from credit card fraud and cyberattacks. It also protects your company from liability in the event of a credit-card-related security breach. Traditional credit card swipers read the magnetic stripe on the back of credit cards. For better security, EMV reads a chip embedded in new credit cards. Most new credit card machines are equipped with both an EMV chip reader and a traditional credit card swiper.
The two main security features to look for in a credit card machine and credit card processor are data security standard – also known as the Payment Card Industry Data Security Standard (PCI DSS) – and EMV capabilities. PCI DSS consists of several security measures, including point-to-point data encryption. Although credit card processors have PCI DSS as a part of their service, it is your responsibility to make sure they are compliant to protect sensitive information and avoid hefty fees. [Read related article: Accepting Credit Cards? PCI Compliance a Concern for Small Businesses]
As with most banking transactions, credit card funds go through an automated clearinghouse (ACH), and transactions are typically completed within two business days. There may be delays in some cases, usually because of holds by banks or chargebacks. Each credit card processor and bank has its own policies, so be sure to read the fine print regarding holds on funds.
Most credit card transactions are completed within two business days, but the time can vary depending on your bank.
Generally, yes, you can still get a credit card machine if you have bad credit. However, many credit card processors consider your personal credit when processing merchant account applications. If you want to obtain a credit card machine and you have low or bad credit, look for a credit card processor that either doesn’t require a merchant account or specializes in high-risk applicants.
There’s certainly no shortage of options for consumers looking to open an account with a major credit agency, a preferred brand or a favorite store. Here are just a few of the card types your customers may use to make purchases:
Stella Morrison and Anna Attkisson contributed to the writing and research in this article.