We live in the digital age where computers and electronic data are paramount to almost everything; even money.
As one going into a new business as either an employee or owner, you must be aware of how credit card payments will be a key factor to your business flourishing in success.
We will walk you through a concise plan of how one unfamiliar with bringing credit card systems into a business, as you well may be, can catch on to the basics and see several new opportunity’s in your company’s growth.
Benefits of Card Payments
The first major benefit of card payments is their simplicity. Most people have become attuned to paying via card nowadays, so being able to accept such payments will make business transactions occur at a far quicker and more efficient rate, as customers will be able to pay instantly rather than taking time for a cheque payment to be cleared.
” I’m hoping to be alive to see the elimination of money. ” – Tim Cooke, CEO Apple
This is more important when you take into account how the use of cash has taken a decline with the ease of contactless technology for small purchases. This has lead to the prediction
that most people will lean more towards card based payments over time.
Not holding as much physical cash will mean you have far less need to spend money on security for a safe and will mean you needn’t travel for a deposit as often.
Moreover, you won’t need to rely on alternate financing such as loans or overdrafts often, improving your cash flow.
Accepting card payments doesn’t just benefit yourself, but the customer.
Imagine yourself as the customer, needing to head immediately to the cash machine only to waste time unnecessarily, having problems withdrawing the cash or even getting so annoyed with the situation you decide not even to bother investing in this business.
Being able to facilitate instant transactions will convince the customer to see a variety in convenient payment options and be more likely to return.
Time can also be saved in that your customer and yourself won’t need to count the physical money you hold when making a payment. A quick insert of a card and short PIN code entry, or even a swipe of a mobile phone from something like Apple Pay, will have the trade take a fraction of the time fumbling with physical cash would…
— Craig Jarrow (@TMNinja) October 20, 2014
Knowing exactly how much money will be transferred and gained during the process means you can plan ahead for future payments, profits and savings. Card machines also make your customers on average more likely to become victim to impulse buying and means less physical cash and cheques need be dealt with, which means fewer bank fees.
Genuine data proves the benefit of cards. According to the Global payments report preview produced by Wordplay in 2015, Credit Cards were predicted to become the second most popular payment option by 2019 and online payments becoming the most popular; something still requiring a credit card.
No matter how you see it, the future where cards take precedent is incoming and any aspiring businessman best be prepared.
Why do we need a Payment Gateway and Merchant Account?
Once knowing why card payments are important, you’ll obviously want to know the “how.”
That would require a few small steps before any payments can be made by gaining two essentials.
What is a Merchant Account?
Firstly, a Merchant Account is required. These are a type of bank account that holds a customer’s account before entering the bank account of a business. This makes it a secure option for both the customer and you, the business owner, authorising the payment for a successful transaction. This payment should enter your business bank account within 2-3 days.
Before rushing towards procuring a merchant account, however, you need to be aware of the requirements:
- You must be at least 18 years of age.
- Unless a sole trader, you must have a business account.
- Be within one of the countries in which the merchant account system is supported (Most
countries in Europe support it)
- Must not have a business on the Prohibited Business list (Adoption Agencies, Legal Highs,
Sex work, etc.)
For a full list of supported countries and Prohibited Businesses, see here:
How does a Payment Gateway work?
Secondly, you will need a Payment Gateway.
These act as a connective between your business’ website and the banks, being a swift and seamless process where your customer need not interact with the intermediary step of the gateway.
The gateway purely acts as a platform on which a customer’s credit card and details are submitted and securely sent to relevant financial networks affiliated with the bank and to the merchant account, all it’s sensitive data being encrypted to avoid any third party hacking the data in an act of theft.
The method of card payment can differ depending on how your business operates. The convenient countertop card machines will make retailers and any other in-store establishments far more efficient for their easy usability and close proximity to the cashier’s station.
If, on the other hand, your line of work makes bringing the payment option to the customer rather than vice-versa then portable card machines are recommended far more; an essential for any sort of eating establishment (restaurant, cafe, pub, etc.). Bluetooth technology allows the payment to be processed anywhere within the business’ premises.
Similarly, mobile card machines allow for a greater range in payment; anywhere within the UK where network coverage is available being capable of having a payment transferred.
GPRS technology makes it convenient and essential for businesses that rely more on long range work such as online payment.
When it comes down to actual payment, you must also have a business bank account to transfer the money into through your merchant account, which will take roughly two working days. Such accounts will require a Tax ID Number and a social security number regardless of you having your merchant account yet, though whether or not you need more will vary depending on your specific bank.
Card Processing Fees and Rates
If you have little experience with making card machines part of your business, you may be surprised to find there is a fair amount of cost in bringing it in, though how much depends on
Along with deciding which of the three card machines you wish to utilise, you need to consider what type of business you are working on and your turnovers.
To plan your utilisation of card machines, here are a few questions to consider:
1. Transactions – How many do you make face-to-face and/or online/long range transactions
do you make per month? If both, how do the two methods compare?
2. What is the value of each individual card transaction you make per month?
3. What is the total value of payment received from card transactions per month?
4. What types of card make up the majority of transactions (credit, debit, etc.) and what
banks are the most popular?
Once you have come up with an answer to all these questions, you can speak to CheaperPay for advice and calculations of the cost.
As a small example, you may only need the merchant account and gateway solution if your business is exclusively online, whereas having the gateway overshadowed by card terminals.
Obviously, you will want heavy priority on all these options simultaneously if your business is both store and web-based.
Merchant Service Charges
Merchant Service Charges , as you may imagine, refer to charges a merchant account receives based on the transaction rate your payment provider agrees to, based on your answer to the four prior questions. This is set as a percentage of each transaction being taken by your provider as payment and varies depending on whether or not your account is on a credit or debit card.
To authorise each payment, you’ll need to pay Authorisation Fees .
The preset fees from the average provider based on the GBP currency are 0p for contactless transactions, and 2-4p for any card based transaction.
If your two fees previously explored fall below the amount agreed upon with your payment provider, you may be charged a Minimum Billing, which is on average £20 per month.
Card Machine Hire or Purchase
You will also need to hire various things such as card machines. Per month, Desktop/Countertop card machines generally cost £15, portable card machines with a fixed base unit cost £20 and Fully mobile card machines with a built in SIM card cost around £25. This isn’t taken into account VAT costs that will be necessary.
If you would rather pay for a machine than constantly pay for hiring, several banks will offer portable card machines for new businesses with prices usually ranging from £50-70.
As one who has aspirations for creating a business or trying to help expand a small business you are part of, this guide should now help you realise the benefits and cost of installing credit card payments as an essential part of your business.
CheaperPay can offer the best advice, setup and prices for the most appropriate card machine and the bills associated with them, you should reap in the many benefits of the time, free space and money that credit card payments provide for your business.