What Is Credit Card Processing?

Every small business should have a credit card processing system in place in order to accept credit card payments. But before you implement a system, there are a few crucial things to know.

Why Should Small Businesses Accept Credit Card Payments?

The reason it’s important to accept credit card payments is simple: People are more likely to buy from you if you offer their preferred payment method. The following statistics highlight just how important it is to offer the payment methods your customers prefer:

A quarter of customers will stop mid-transaction if they can’t pay with their preferred method.

• 75% of consumers say that their preferred payment methods changed during COVID and are likely to stay that way.
• 41% of consumers consider whether a business offers convenient payment methods when deciding where to buy a service or product.
• 33% of consumers prefer using traditional credit card payments (swiping or inserting) at local businesses.
• 14% of consumers prefer using tap credit card payments at local businesses.
• Consumers feel comfortable spending 43% more when they swipe their cards than paying with cash.

What Do I Need to Know to Accept Credit Cards?

To accept credit cards, you will need a payment processor and a credit card reader. This article will help you choose a credit card processing service and understand how it works.

What Is Credit Card Processing and How Does it Work?

Credit card processing is what retailers use to accept credit card payments. It refers to all types of credit card transactions, including in-person, online, over the phone, and by mail.

The process involves using a payment gateway, the technology connecting you as the merchant with the payment processor. Using the payment gateway involves sending the payment information to the merchant bank or payment processor, which then approves or declines the process.

Credit card processing involves through three main steps:

1. Authorization

1. During this step, the customer gives the merchant their credit card information.
2. The merchant requests payment authorization from the payment processor.
3. The payment processor passes this request on to the card association (Visa, MasterCard, etc.).
4. The request is approved or denied.
5. That approval or denial is sent to the payment processor and then to the merchant.
6. You complete the interaction with the customer and give them their goods or services. 

2. Authentication

This step occurs after you and the customer complete the transaction.

1. The credit card association requests the issuing bank to authorize payment.
2. The bank confirms transaction approval and identifying information.
3. The bank approves or denies the transaction. It holds the purchase amount in the account.
4. The business day ends, and your point-of-sale terminal batches approved transactions for payment processing.

3. Settlement

1. Your POS terminal sends your batched payment authorizations to your payment processor.
2. Your payment processor sends those authorizations to the card association.
3. The card association sends information to the issuing bank.
4. The bank charges the customer’s account.
5. The bank subtracts interchange fees and sends the balance to your bank.
6. Your bank puts the money in your merchant account.
7. All account statements are updated.

Things to Consider When Choosing a Credit Card Processor

Choosing your credit card processor is an important decision, as it will play a crucial role in your ability to process payments.

Cost

The cost will be an obvious deciding factor when choosing your credit card processor, as it is with anything else related to your business. When looking at cost, be sure to pay attention to the rate structure, which includes hidden fees. Interchange plus pricing is a common format, but it can have additional hidden processing fees.

Some common fees to check for include:

• Application fees
• Setup fees
• Interchange fees
• Other transaction fees
• Monthly gateway access fees
• Monthly statement fees
• Monthly minimum fees
• Other monthly fees
• PCI compliance fees
• Early contract termination or cancellation fees

Fraud Prevention and Security

Because of the sensitive information sent during payment processing, security and fraud prevention are crucial. This will include the latest technology, such as EMV chip cards or NFC contactless technology. It can also include other fraud prevention measures.

Payment Method Coverage

Make sure the payment processor you choose supports the payments that you plan to offer. Remember that offering the payment methods your customers prefer will make a significant difference in your ability to attract clients and their expenditures.

So, if you want to accept credit and debit cards, as well as text-to-pay or contactless payments, make sure your chosen processor accepts all those methods. You don’t want to have to work with multiple payment processors or limit which payment methods you accept.

But don’t just think about overall payment methods. Also, consider transaction types. For example, do you simply need support for in-person transactions? Or do you also need support for card-not-present transactions, such as online or over-the-phone orders?

Transaction Speed and Uptime Record

You need to choose a payment processor that you can rely on. That reliability comes through via two main factors: their uptime record and transaction speed. In terms of uptime, you want to be able to count on the system being available to process transactions when needed.

In terms of transaction speed, you don’t want your team or customers to wait prolonged periods before accepting payments. Remember that even a small delay can lead to frustration. Of course, speed isn’t the only crucial factor to consider. After all, a transaction speed that is too fast may require sacrifices in terms of security, which you should not make. While transaction speed is important, security is even more crucial.

Customer Support

Customer support is another critical aspect of your chosen payment processor. You want easy access to support and get useful assistance if you need maintenance or to troubleshoot an issue.

Hardware and Apps

Don’t forget to consider the type of hardware you will need to use a given payment processor. Will you need an expensive terminal, or can you make do with one that is more affordable? Is there a mobile credit card reader, or is it a countertop type? Does the terminal support the types of transactions you need, such as swiping and EMV? Can you turn a mobile device like a smartphone or tablet into a POS system?

Additional Features

It is also smart to pay attention to the extra features that your payment processor offers. Not all will have additional features, but the best will.

For example, Podium card readers integrate with the rest of the Podium Platform. This means that every time someone uses a Podium card reader for a transaction, you have the opportunity to collect reviews. You will also get to drive marketing opt-ins and the ability to continue conversations beyond checkout. All those features add value and can help you grow your business and sales.

Get Started With Podium

The easiest way to get started with credit card processing services is by using Podium. We offer convenient card readers for your credit card processing, and our credit card processing does much more than just process payments. It also lets you drive reviews and market opt-ins. Our credit card processing company also lets you continue the conversation with customers beyond the checkout, helping you gain insights. With our credit card terminals, you will be able to accept payments by swiping, tapping, dipping, and using mobile wallets.

Ready to modernize your payment processing? Check out this guide to get started.