3 most common ways to accept credit card payments for your small business

In this 4-minute read:

  • Merchant accounts and traditional payments processors
  • Payment service providers
  • Ecommerce solutions

In today’s digital world, customers expect to be able to make their purchases with a credit or debit card. Fewer people carry cash or checks than ever before, so having some kind of credit card payment capability will be a valuable asset for your business. 

We’ll walk through the most common ways to accept credit card payments and help you determine which way will work best for your business. 

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How to accept credit card payments in your business

There are three main ways to accept credit card payments:

  1. Use a merchant account/traditional payments processor
  2. Use a payment service provider
  3. Use an ecommerce solution

In some instances, you may even use a combination of some or all of these methods. 

Merchant accounts / payments processors

A merchant account is essentially a bank account that assists businesses in accepting credit card purchases. You can use a merchant account through your bank or another financial institution that offers this service. 

Merchant accounts are not business bank accounts though. Their purpose is to accept the funds from your credit card transactions, and the money will then need to be moved into your business bank account once the transactions are complete. 

Check out this article: Small business guide: What is credit card processing?

Merchant account providers will generally set you up with the tools and equipment you need to process credit card payments too, like a terminal, tablet, or phone add-on. These are commonly called POS (Point Of Sale) systems. Your bank may act as the “payments processor” or they may have an agreement with one of the many payments processor companies.

If you use a smaller bank that doesn’t provide payments processing or merchant accounts including credit card processing, ask around the local small businesses in your area and ask them who they process with, and see if they like their solution, POS system, and rates.

One thing to keep in mind is that most merchant accounts require you to sign a contract for a set amount of time. So before getting too deep into this process, make sure you are ready to commit to the provider you have selected. A good merchant services provider can explain all the rates and fees to you, and will likely be able to get you better rates overall than some of the third-party service providers.

Payment service providers

Payment service providers are third-party services, like Square, Stripe, etc. that provide simpler online methods for processing credit cards. While you can still use a merchant account with this method, you don’t need to have one in order to use a payment service provider. 

This is one reason why Square has been so disruptive to the traditional payments processor market space. They streamlined and simplified the process of accepting credit cards for small businesses, and their fee structure is very easily understood. This is all good for small businesses, particularly those who don’t know the ins and outs of the “payments” space.

However, depending on your merchant account, you might actually get a better deal from one of the more traditional processors, so be sure to ask around, speak to your merchant services agent or salesperson, and ask whether they can give you better rates.

Payment service providers can provide you with a terminal for your store or office, mobile devices and add-ons, and online integrations for processing credit card payments. 

Some payment processors even have their own POS systems that you can use to track inventory, customer order history, and more. If you need or want a multifunctional POS system, be sure to ask your representative and compare features and prices between providers and processors. 

NOTE FOR INDEPENDENT CONTRACTORS AND ONE-PERSON BUSINESSES: Depending on the size of your business, you may also benefit from payments service providers like PayPal, Zelle, or Venmo. These allow bank to bank and person to person transfers for very little cost. If you are a one-person operation just starting out, you may be able to utilize this type of payment. PayPal users can pay you with a credit card (and you will have to pay the fee, about 3%, which is close to what accepting payments via a business processing setup would cost you). Learn more in our article: What are alternative payment methods and why should your business consider them?

Ecommerce solutions

If you only want to sell online and don’t have a need for accepting payments in-person, then an ecommerce solution like Etsy or Shopify could be a great option for your business. 

These ecommerce platforms have credit card processing built-in to them for all of their users to take advantage of. 

Again, this can also be combined with one or both of the other two methods. It doesn’t have to be an online-only solution. You could have a physical store with a merchant account or payment processor and then use one of these ecommerce solutions for your online store. 

You might be interested in: How to get your business started selling online

There may (well, there WILL) be fees associated with each of these methods for accepting credit card payments. Within each method, there are several solutions available to choose from. Determine the method that seems the most fitting for your business and then research the different platforms available to find the most competitive offers and prices. It’s always a good idea to talk to your merchant services provider and develop a relationship there. They will almost always be able to provide you the best prices and service.

How to choose which way to accept credit card payments

Only you can decide which form of credit card processing will be the most beneficial to your business, but we’ll provide some instances when each of these methods can be useful. 

Traditional merchant accounts are the most beneficial for brick and mortar businesses or businesses where you are physically selling something in-person. If you have offerings online, ask your merchant services provider if they offer an online store/shopping cart or ecommerce solution in addition to your merchant account. 

Payment service providers are generally great for self-employed individuals and businesses that offer in-person and online solutions. Whether you are selling a product or a service, you can use this solution to allow your customers to pay online. The added benefit of including flexible and often lower-cost POS systems with your payment processor can be especially handy for retailers whether you have an online store or not. 

Ecommerce solutions are great when you are selling a product online, particularly if you start small and sell only online. This allows you a way to start marketing your products without having to invest in a storefront. 

Let Womply help you find the perfect processor for your small business

The payments industry can be very confusing and overwhelming for small business owners. However, Womply has direct relationships with a number of the nation’s top processors, and we can help you navigate the complexities and get you set up with a processor that not only provides competitive rates on reliable credit card processing, but can give you additional tools that can help your transaction data into actionable insights to help you attract and retain more customers!

Click here to check out our small business loans resources. Learn more, plus get free reputation monitoring and customer insights when you sign up for Womply Free!

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