Accepting credit cards doesn't have to be complicated for small businesses. 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 small businesses.
If you already know about credit card machines and just want to find the best credit card processor for you, visit our best credit card processors page.
How much do credit card machines cost?
Many vendors offer free credit card machines. Those that don't will allow you to either buy or lease your equipment. Pricing varies and depends on the model and features, such as EMV (Europay, MasterCard and Visa) and NFC (near-field communication) capabilities (more on this below). Costs also depend on whether you rent or purchase your machine, and whether you get it from the vendor or a third party. Generally, the most basic credit card machines cost less than $100.
Other costs to consider include credit card processing fees (see below), monthly service fees, setup fees, gateway fees and compliance fees. These costs vary greatly by vendor, but many also waive some fees for new customers.
What are the different credit card processing fees?
There are generally three types of transaction fees or swipe rates: interchange plus, tiered pricing and flat percentages.
Interchange plus — also known as wholesale pricing, true pricing and cost plus — is the preferred choice because it gives businesses the same low rates used by big-box stores. Interchange plus charges businesses a flat fee that consists of a small percentage plus some cents per transaction. Businesses can also often negotiate lower rates based on high sales volumes.
Tiered pricing, on the other hand, 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, mid-qualified and non-qualified cards. These include regular cards, debit cards, rewards cards, business cards and other types of credit and debit cards. Generally, credit card processing companies decide which types of cards are qualified, mid-qualified and non-qualified for their particular service, so tiers and pricing will vary greatly, based on who you ask.
To illustrate, Flagship Merchant Services, our pick for the best high-volume credit card processor, 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 0.30 percent plus 10 cents per transaction, and is negotiable for higher sales volumes. Its tiered pricing, however, starts at 0.38 percent for qualified debit cards and 1.58 percent for credit cards, plus 19 to 21 cents per transaction, and then increases for midqualified and nonqualified cards. [Go here for a full review of Flagship Merchant Services credit card processing.]
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 percent and 2.7 percent per swipe, respectively.
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How do credit card machines work?
Credit card machines are typically connected to the Internet, phone line, mobile device or computer 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.
What is a merchant account?
A merchant account lets businesses accept credit cards. It transmits payment data from a customer's bank to your bank and authorizes credit card transactions. Merchant accounts are offered by the credit card processor or directly by a financial institution, typically a bank. Usually, businesses will have to apply and get approved for a merchant account. As mentioned above, however, not all credit card processors require a merchant account.
What is the difference between a credit card machine and a POS system?
A credit card machine is simply a credit card reader and PIN pad. A point-of-sale (POS) system, on the other hand, is a complete checkout terminal that comes with a credit card machine, monitor or tablet, cash register, printer and other peripherals. POS systems also come with additional software or apps that track inventory, monitor sales, generate discounts, create financial reports, help with marketing and other features.
Looking for a POS system? Check out our roundup of the Best POS Systems for Small Business.
Can I use an iPhone, iPad, Android and other mobile devices with a credit card machine?
Some credit card machines are compatible with tablets, but the most common way to accept credit cards with an iPhone, iPad, Android and other mobile devices 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 the processor's 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.
For more information on mobile credit card processing, check out our full review of Square: Best Mobile Credit Card Processing Solution and Bindo: Best Mobile POS System for iPad.
What is NFC?
NFC technology lets businesses accept credit cards without swiping them. To accept mobile payments, you'll need an NFC-enabled credit card machine, such as Apple Pay, Android Pay or Samsung Pay.
What are EMV/chip cards?
EMV technology aims to defend consumers and businesses from credit card fraud and cyberattacks. It also protects businesses 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 on new credit cards instead. Most new credit card machines are equipped with both an EMV chip reader and a traditional credit card swiper.
For more information on EMV readers and chip cards, check out our full coverage: EMV: What Small Merchants Need to Know.
What security features should I look for?
The two main security features to look for in a credit machine and credit card processor are PCI compliance and EMV capabilities. PCI is the industry standard for credit card processing, which consists of several security measures, such as point-to-point data encryption. Although credit card processors have PCI as part of their service, it is businesses' responsibility to make sure they are compliant, to avoid hefty fees and putting their and their customers' data at risk. Learn more about PCI compliance.
How soon are funds transferred to my bank account?
As with most banking transactions, credit card funds go through an Automated Clearing House (ACH), which is typically completed within two business days. There may be delays in some cases, usually due to holds by banks or chargebacks by customers disputing their charges. Each credit card processor and bank has its own policies, so be sure to read the fine print regarding holds on funds.
Can I still get a credit card machine if I have low or bad credit?
Generally, yes. Although personal credit is not always considered when a business wants to obtain a credit card machine, many credit card processors consider it 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 doesn't require a merchant account or specializes in high-risk merchants. One such credit card processor is Payline Data, our pick for the best credit card processor overall for small business. [Go here for a full review of Payline Data credit card processing.]