Last updated: April 22nd, 2024
Are you dreaming of running your own business? Whether online or in-store, you need to know how to accept credit card payments to maximise sales.
Running your own small business offers a range of benefits:
- You choose your hours and where to work from.
- You hire a team that suits your business values.
- Growth and expansion align with your vision.
- It is a fulfilling creative pursuit.
- It’s a great way to make new connections and foster a community.
Accepting credit card payments can be challenging (especially in the start-up phase). We’re here to step you through it.
By the end of this article, you will feel clear on how to:
- Decide which payment options suit your business best.
- Set up your chosen payment option.
- Transition your business to a cashless model.
- Prevent fraud or risk with online payments.
(Related: 7 Best e-Commerce Platforms In Australia).
Is It Essential To Accept Credit Card Payments?
As a small business in today’s society, it’s almost essential to accept credit card payments.
No, it’s not legally required, but you put your business at a significant disadvantage if you do not offer multiple payment options. These options include:
- Credit card payment directly on your website.
- Third-party payment options like Stripe or Square.
- PayPal Checkout for online payments or PayPal Here for in-store.
- Zippay, Afterpay, or Klarna.
- BPAY.
- Direct bank transfer.
Expert Tip.
Most people do not carry cash, with many experts predicting we will be a cashless nation by 2024. Even businesses like The Big Issue (which sells magazines on busy city streets) offer card payments to improve their accessibility.
What Are The Benefits Of Accepting Credit Card Payments?
Credit cards are a convenient and quick way to manage your finances online. They’re also the most used payment method worldwide, according to Shopify.
Streamline Your Sales.
Not only is it quicker for customers to pay with credit cards (important in busy shop environments). It’s much easier for you to manage your physical store through an online payment system.
Not convinced? Consider that without cash:
- Customers won’t be fumbling for change.
- You won’t need to balance a till.
- You eliminate the need for daily bank trips for small change.
- Employees can use the extra time to assist customers.
- You maximise your sales with a diverse buyer demographic.
Important!
Whilst some customers may find the transition difficult, you can ensure adequate signage informs your customers that your business will be going cashless from a specific date! Consider text or email reminders, too, or read here for more tips.
Eliminate Transaction Errors.
One difficulty with cash payments is that discrepancies can quickly occur. The good news is this is almost impossible with credit card payments.
Credit cards will only process payments with adequate funds. Avoid awkward confrontations where customers hand you less cash than you owe. For tips on spotting a fraudulent credit card, read here.
Improve Your Small Business Image.
A business that supports multiple payment types attracts a broader range of customers. You are essentially saying, ‘We’re grateful for your business and will help you pay in a way that works best for you.’
You should keep in mind the following:
- Operating on a cash-only model reduces your customer demographic.
- You can develop a reputation for being a business that is difficult to purchase from when you do not offer multiple payment types.
Consider asking your customers (in the transition phase) which payment types they would best prefer. For inspiration from other businesses transitioning to cashless models, read here.
Global Trends Emphasise The Importance Of Going Digital.
The financial market has been rapidly changing over the past five years thanks to the introduction of Cryptocurrency and other online financial trading options.
Did You Know?
The global credit card payment market reached US$477 billion in 2021. The market is projected to reach a value of US$762 billion by 2027, according to a global report by the IMARC Group.
The above report highlighted the most popular worldwide providers:
- Visa.
- Mastercard.
- Others (American Express, Independents, etc.).
In terms of what people are using their credit cards to spend on, trends show:
- Food and Groceries.
- Health and Pharmacy.
- Restaurants and Bars.
- Consumer Electronics.
- Media and Entertainment.
- Travel and Tourism.
If you are a small business in any of the above categories, consider updating your payment options sooner rather than later to maximise sales!
Is Your Business Eligible To Accept Credit Card Payments?
Before you go through the process of setting up credit card options, let’s first check your business’ eligibility.
Eligible businesses encompass almost every industry and include:
- Brick-and-mortar establishments.
- Online businesses.
- Small companies.
- Sole proprietor businesses.
- Independent contractors (how to pay international contractors).
- Mobile businesses.
Important!
If you’re unsure whether or not credit card payments will change your business’s financial structure, it’s best to speak to an accountant or financial planner about your specific circumstances. Don’t forget to choose the best accounting software, either.
What Steps Do You Need To Follow To Accept Credit Card Payments?
Below are our recommended steps for installing a credit card payment system for your small business. Of course, you can adapt this to your unique business.
1. Determine How You Will Accept Credit Card Payments.
Before you instal a credit card payment system, you must determine what types of credit card payments you will accept and how this best supports your type of customer.
Need help determining who your buyer is? Be sure to analyse:
- Recent customer data.
- Their purchase history.
- Most popular products sold.
- The average price of sale.
- What times do people purchase, and why.
By measuring the above, you will be able to determine your customer’s buying habits which will then inform your choice of payment options.
2. Select A Credit Card Payment Processing System.
Your next step is to select a credit card payment processing system.
The system and provider you choose will impact several aspects of your business and should offer the capability to be set up both online and in-store.
When choosing payment options, be sure to check the following:
- What types of cards do you accept (some systems do not accept all credit cards).
- Your repayment fees for the type of transactions you process.
Expert Tip.
Finding a provider that seamlessly integrates payments on your website is best. This prevents payment processors from taking customers off-site to another window for payments. We love Stripe, Square, and Paypal.
3. Choose Which Type Of Payment Processing Systems Work Best For Your Business.
There are two types of payment processing systems you can purchase.
These are:
1. Merchant Account: How Does This Work?
- You will need to open a merchant account with your bank to accept payments via credit cards.
- You will need to validate your business details with the bank of your choice.
- The merchant account looks like another account in your banking account and is easily accessible through online banking.
2. Payment Service Provider: How Does This Work?
- Payment service providers are companies that allow you to accept credit cards without the creation of a merchant bank account.
- They are ideal for small businesses because they have low credit card processing fees.
- You should be mindful that these limit how much money you can accept at once (for example, PayPal has a maximum transfer of $10,000).
Expert Tip.
If your business is multiplying, you can always switch from a merchant account to a payment service provider. Be sure to check with your bank on the best way to do this.
4. Set Up Your Businesses’ Credit Card Payment Hardware And Software.
Once you determine the type of payment processing system you want to use, you are ready to set it up!
Our recommended steps are:
- Purchase the hardware and software.
- Check how long you have the right to use this (for some options, you must renew yearly).
- Instal your chosen option. At your physical store, you will need to purchase a card reader that is EMV chip-enabled. Online, you will need to integrate the system into your chosen web hosting platform.
- Refer to the instructions provided by your specific payment option.
- Test that the equipment is installed correctly with a small payment.
There are several card readers on the market. We recommend one that accepts tap payments due to the volume of people that opt to pay with the banking features on phones.
5. Consider A Mobile Card Reader To Accept Credit Cards On Your Phone.
Another great option, particularly in the interim of your transition to a cashless business, is a mobile card reader. These will allow you to turn your mobile phone into a credit card machine.
We recommend:
- Choosing a device that plugs into your mobile phone, provided by Paypal or Square.
- Opting for a contactless chip reader to accept tap-and-go payments or a swipe/insert option for a physical card.
The disadvantage of mobile card readers is that you will need to be present to facilitate the payment. However, these options will work great for market stalls, freelance trade and beauty services, or small shop fronts.
How Does Accepting Credit Card Payments Online Differ From Those Accepted At Physical Stores?
Fortunately, it is much easier to set yourself up with an online payment system than to establish a payment system at a brick-and-mortar establishment.
To accept credit card payments online, you will need either a payment gateway or a digital storefront:
- A payment gateway: This should be provided with the merchant account you set up with your bank or your payment service provider plan.
- A digital storefront: The easiest way to set up one is to create one within your eCommerce platform provider, Shopify, WordPress, or Squarespace.
Whilst brick-and-mortar establishments can be very successful, there are downsides to accepting credit card payments.
These include:
- Monthly service fees to the processing company.
- Transaction fees on every payment you accept from customers. For Mastercard, these range from 1.55% to 2.6%, and for Visa, 1.43% to 2.4%.
- Fraud, which can occur in over-the-phone payments (we do not recommend utilising this as a payment option).
(Related: How To Issue A Professional Invoice).
Are There Risks To Accepting Credit Card Payments?
Like any online activity, there are risks associated with credit card providers and services you choose to engage with.
However, in the scheme of challenges associated with your business, these are minimal and can be mitigated with regular reporting and safety checks.
The issues we see often are:
- Processing fees and chargebacks make it more challenging for small businesses to maintain profit.
- Fraud or cyber hacking can be challenging to predict. Ensure you engage with an IT expert to protect all devices associated with your business.
Accepting Credit And Debit Cards.
For your business to grow and thrive, it is essential to know how to accept credit card payments. Beyond that, you should consider offering multiple options and taking business in a way that best supports your customers.
With guides like this and some research into your business’s spending habits, it can be very achievable to set up your chosen credit card payment systems.
We recommend you shop for different options to find your best match. If in doubt, don’t be afraid to onboard a technical or IT solutions expert to assist you! We’re sure your sales will thank you in the long run.
Steven
