In an increasingly paperless world, it has become crucial for businesses to accept credit card and debit card payments. Many consumers will avoid shopping in cash-only businesses in favour of shops that do accept card transactions.
Although the demand is there, the world of card payments isn’t simple. The complex set up process and varying fees can often deter small businesses from using card systems.
If you’re one of those smaller businesses who want to accept card payments but don’t know where to start then fear not, because with the right knowledge it’s very easy to get ready to process and accept card payments.
In this article, we’ll explain the basics of credit and debit card payment processing so you can get to grips with cards and support more customers.
- Requirements for processing card payments
- How to accept card payments
- Top 5 card processing service providers
- Card processing fees explained
- Next Steps: Cutting the cost of card payment processing
Requirements for processing card payments
There are a number of steps you’ll need to take if you want to start taking card payments; this is because making card payments involves a number of external bodies who work together to create the card processing chain.
These parties include:
- The merchant (you)
- The card issuer (the bank or financial institution who issued the customer their card)
- The payment processor (e.g. PayPal)
- The card scheme, a.k.a. the brand on the card (e.g. Visa)
Merchant Accounts are a specific type of bank account for credit and debit card payments that act like a holding pen for funds before they reach your business bank account.
Once a customer pays with their card, the service provider processes the information and makes the relevant fraud and available funds checks. Once these are completed the funds are then approved and the money is transferred to your business bank account.
Merchant accounts ensure safer credit and debit card transactions by checking that there are sufficient funds available in your customer’s account before authorising a payment.
If you need advice on which merchant account is best for your business, check out our 2017 buyer’s guide.
PDQ Machine / Card reader terminal
A PDQ machine (or Process Data Quickly Machine) is a physical device (card machine with chip and pin keypad) used to process card payments and the card payment software that manages orders (also referred to as a point of sale system).
PDQ machines come in three forms:
- Countertop: A fixed card payment terminal usually located at the point of sale in a retail environment. Needs to be connected to broadband by an Ethernet cable. Can accept contactless payments.
- Portable: These terminals use wireless or Bluetooth technology to operate within a 100m radius of a central hub. Ideal for start-ups, pop-ups and businesses with no fixed address. Will need to be charged to ensure payments can be taken. Can accept contactless payments.
- Mobile: Uses a mobile sim and GPS signals to accept payments anytime, anywhere. Perfect for festivals or large, busy events, as well as for restaurants and cafes where the terminal can be bought to a customer’s table.
For more information on card payment terminals, we’ve created a guide to PDQ Machine costs for small businesses.
If you sell online, you will require a Payment Gateway. This is an online equivalent of a card terminal as its job is to mediate communications between merchants and banks.
Payment gateways securely transmit sensitive card information and debits the customer’s account for the required amount.
Much like a physical POS terminal in a shop, the Payment Gateway allows you to take card payments directly from your website either by integrating a secure payments page or directly customers to a secure external payment gateway.
Card Payment Solutions
As a small business, you must decide how you are going to accept card payments depending on what’s best for your business. There are several options:
Face to face
Most businesses use card machines to complete credit and debit transactions because of their ease of use and because it doesn’t limit customer spend to the cash they have on their person.
Using either a countertop, portable or mobile card machine to process payments means funds will spend a few days in a merchant account before being transferred on to your business account.
Over the phone or by mail
MOTO (Mail or telephone order) customers who want to make a card payment will have to be processed through a virtual terminal.
Over the phone, this means you’ll need to request the customer’s card details and enter them into the virtual terminal yourself. You can find out more about taking remote payments in our overview of virtual terminals.
Card Processing Service Providers
As mentioned earlier, you must have a merchant account provider in order to securely accept and process card payments.
There are numerous merchant service accounts to choose from and to help you find the right one for your small business we’ve compiled a list of the cheapest merchant account services. Make sure to choose one that puts the needs of a small business first.
First Data has over 20 years of experience when it comes to processing card payments. They provide services for contactless and portable card terminals, as well as ecommerce and credit card payments over the phone.
First Data provide a highly secure merchant account service with a Data Vault storing secure data for future payments, as well as a dedicated team.
Their ecommerce solutions offer you the ability to integrate payment gateways into your own website, which can help you collect more customer data.
First Data’s merchant account also includes highly intuitive reporting tools that help you manage your business.
More info: First Data Merchant Account Review.
If you’re looking for a UK-based merchant account provider that understands small businesses’ needs, Paymentsense is the provider for you. They work with over 50,000 small businesses making them an excellent choice for SMEs.
Paymentsense value themselves on efficient service by sending out a card machine to you within three days of application and you can be up and running with online payments within 24 hours.
The company are also the only UK merchant account provider to offer capped contracted rates which means you won’t be surprised with any price hikes during your contract.
More info: Paymentsense Review.
You’ve probably heard of Worldpay as they are the UK’s leading provider of merchant accounts, helping over 300,000 small businesses process payments securely.
They offer chip and pin terminals that include wireless, GPRS and static desktop terminals. They also provide virtual terminals for the acceptance of card payments by phone or by email link.
Businesses who chose WorldPay will be able to offer ecommerce customers more secure transactions by connecting shopping baskets to a secure payment page hosted by WorldPay.
Like First Data, WorldPay also possible to integrate the payment gateway directly into your website and manage the payment experience yourself.
More info: WorldPay Review.
Payzone is a smart choice for businesses who want to avoid paying any setup or exit fees, and who want to avoid long-term contracts (Payzone can offer short, 12-month contracts).
Payzone supplies desktop, portable, mobile or PDQ terminals, as well as offering solutions for online and phone payments.
A lack of fees doesn’t comprise the service either as Payzone use the latest security technology available.
PayGlobal Payments is one of the more sophisticated merchant account providers.
For face-to-face transactions, they supply any of the usual terminals through either Global PAY Now or Global POS Link. GPNow connects terminals with an existing EPOS system via Bluetooth, while GPLink integrates desktop terminals straight to the till to avoid duplication of information.
For online transactions, they suggest GP Webpay and the Global Iris Solutions Platform. However, GP Webpay may suit more businesses because of its flexible pricing, quick processing and support for recurring payments.
Card Processing Fees Explained
For small businesses, the bottom line counts.
To ensure you don’t get overcharged, it’s crucial to understand card processing fees.
Card processing fees vary depending on your merchant account provider and their pricing plans, as well as the type of card you are processing. The factors that affect how much you will be charged for processing a credit or debit card payment include:
- Interchange rate – This makes up the fees charged by the card issuing bank and the credit card company fees. This varies depending on card type.
- Merchant account provider fee – Charges fee on top of the interchange rate. Fees are negotiable.
- Processing fees – Face-to-face transactions have lower fees compared to online card payments and over the phone card payments due to higher risk of fraud.
- Setup + monthly fees – Some merchant account providers will charge a setup fee, monthly and even an exit fee.
Your choice of card merchant will have the biggest effect on the card payment processing fees you pay. The merchant account provider acts as a middleman so you generally do not deal with credit card company fees directly, instead paying the fees that are passed onto you.
Merchant account providers have different types of pricing which affect the fees you pay:
- Flat rate pricing – you pay a single rate regardless of the type of card being processed.
- Interchange plus pricing – you pay a fixed percentage and a fixed amount above the interchange rate.
- Tiered pricing – the amount you are charged varies depending on the type of card you are processing.
As you can see, there is a lot to consider when it comes to the card processing fees you can be charged.
Do your research when it comes to choosing merchant account providers and opt for one that not only suits your business, but offers lower fees.
If you’re still confused, we’ve prepped up a guide to UK merchant account fees for you too.
Next Steps: Cutting the cost of card payment processing
Due to technology, credit and debit card payments are the future of online retail and small businesses are expected to offer the same payment processes as larger corporations.
It’s vital that SMEs consider their options and choose the right card payment processing solutions to suit their customer’s needs and ultimately increase their sales.
To compare the best card payment and processing deals online, just fill in the form on top of the page and one of team will be in touch to discuss your options and match you to the right suppliers.