Small businesses constitute a significant part of the economy, and credit cards are critical to their success. UK Finance head of research Adrian Buckle reports that there has been a long-running trend away from cash, with more consumers veering towards cashless options such as credit cards. In 2008, approximately 60% of payments were made in cash; by 2020, that figure was only 17%.
With the increasing pivot towards cashless payment, credit card processing is starting to become a backbone for small businesses across the country. However, a lot goes into getting the right equipment, setting it up, and managing it. If your business is new to credit card processing or you’re just looking to brush up on your knowledge, here are some tips you need to know:
- Open a merchant account
A merchant account is an agreement between you and your bank that allows you to accept payments via credit card, debit card, or other electronic payment methods. To get started with credit card processing, you’ll need to open an account with a merchant bank or processor (also known as a merchant acquirer). Most businesses pay a monthly fee based on how much money they process through their account. Some banks will offer discounts if you agree to use only their services for other needs, such as loans, checking, or savings accounts for your business.
- Find a suitable payment processor
If you accept credit cards as part of your payment processing, you’ll need an integrated point-of-sale system to process credit card payments. Finding a suitable payment processor requires looking into one that can provide a seamless card processing experience that fits your business. The kind of card payment machine you should get will depend on the type of services you provide. A restaurant, for instance, might find it more convenient to have a portable machine that can take card payments around the restaurant. On the other hand, a small grocery store may need a countertop machine to take payments at the till.
- Have contingencies in case of fraud
Credit card fraud and scams do not only hurt consumers, but also small businesses. For instance, if a customer has a chargeback filed because of a fraudulent transaction, it may be difficult to recoup your losses. You should ensure you have a plan in place, so you aren’t left scrambling for cash when something like this happens. This can include having different payment processors or setting up direct deposit with the bank so that payments are automatically made when they come in. Consider setting up fraud alerts with your credit card processor so that any unusual charges get flagged immediately. These measures will help protect both sides from losses due to fraud.
- Know the transaction fees
Not all credit card processors are created equal. Before deciding on a credit card processor, it’s essential to make sure you know all the transaction fees that are involved so you can account for them in your balance books. Some costs that your processor may charge include minimum monthly payments, surcharges for international transactions or business purchases, and transaction fees. For instance, your processor may charge you 5% or more if you process £10,000, or they may charge 1.5% per transaction. It’s crucial that you understand the fees associated with accepting credit cards and confirm you’re getting a good deal when you sign up for a service.
Credit card processing has become an essential part of small businesses. Setting up your credit card payment system with the right strategy doesn’t have to be complicated. These four tips are good starting points to consider before setting up a card processing system for your business.