The Importance of Accepting Credit Card Payments
According to the Federal Reserve 2022 Payments Study, there were more than 51 billion credit card payments in 2021, up from 33.7 billion in 2015. The value of credit card transactions reached $4.88 trillion in 2021, up from $3.05 trillion in 2015. Approximately one-fourth of all non-cash payments are made via credit card.
Many consumers prefer credit cards as their go-to payment method.
- Credit cards offer protections that debit cards don’t. When dealing with fraudulent transactions, consumers are less likely to be held liable when using a credit card than they are when using a debit card. As a result, many consumers prefer to stick to credit cards, especially when entering their card information online.
- Credit cards often offer incentives. Consumers may use their credit cards whenever possible because they receive cash back, air miles or other incentives as a reward.
- Credit cards are a convenient and familiar choice. For many people, it’s simply the easiest way to pay for things.
For businesses, this means that accepting credit card payments is an absolute necessity. If you don’t, your potential customers may decide not to do business with you.
However, there are also downsides to accepting credit cards, namely security issues and processing fees. The good news is that when you select the right credit card payment processing partner, you can resolve these problems.
Payment Service Provider (PSP) vs. Merchant Services
When exploring your credit card processing options, you’ll likely come across two terms: payment service provider and merchant services or merchant account provider. Although these terms may sound similar, they can actually involve very different services, and the one you choose will have a big impact on your business.
A payment service provider handles payment processing for you. This includes providing a payment gateway, managing the actual payment processing and handling issues related to fraud detection and compliance. The payment service provider will also handle payment processing for other clients, and all of the business may be combined under a single merchant identification number.
A merchant account provider, on the other hand, may not provide a payment gateway, in which case you would be responsible for this. Merchant accounts may have strict requirements, meaning that many small businesses may have a hard time getting approved or even be excluded from these services. For small businesses that need to accept online payments, a payment service provider is often the most convenient, and sometimes the only possible solution. Setup is usually very quick, and the payment service provider should make everything easy for your business. However, choosing the right payment service provider is essential.
How to Select a Credit Card Payment Service Provider
Choosing a credit card payment service provider is a high-stakes decision for any business. In addition to impacting your overhead costs, your payment service provider will also affect your company’s reputation and customer relationships. If anything goes wrong, customers will likely hold your company accountable.
By going through the following five-step process, you can verify that a credit card service provider meets your needs.
1. Understand Credit Card Processing Fees
Credit card processing fees can add up fast. There are three types of fees you need to watch out for:
- Monthly Fees. Merchant account providers often charge fees, but payment service providers often don’t. However, some might, so it’s important to check.
- Transaction Fees. Transaction fees are standard, but they can vary significantly. Many fees are a percentage of the amount paid. If you’re doing a lot of transactions, or if the transactions are for large sums, a small difference in the fee – even just a fraction of a percentage – can make a big difference in your total costs.
- Extra Fees. Some providers nickel and dime you with extra fees. For example, if your credit card processor also handles ACH payments, see if there’s a next-day ACH fee.
2. Look at Available Channels
The more ways you can accept payments, the fewer barriers there are for customers who want to do business with you. If a credit card payment processor only offers one channel, you may be inconveniencing potential customers and limiting your growth.
For example, some customers may want to pay using online checkout, but other customers may prefer to pay by phone or text. QR codes are also becoming a popular channel. Can your credit card payment processor support all of these channels?
Likewise, you probably don’t want to limit yourself to just credit cards, either. If you can accept ACH payments and other payment methods, you’ll make it easier for a wider audience to patronize your business.
3. Assess Credit Card Security
These days, strong security is absolutely essential. Data breaches put people’s financial health at risk, and even if your company is the victim of a hacker, your customers will likely blame you for failing to safeguard their information. Regulators may blame you, too.
You can do your due diligence by verifying that the credit card processor you’re considering has strong security measures in place. An easy way to do this is to look for PCI compliance. PCI standards are managed by the PCI Security Standards Council and are widely recognized.
4. Check for Options That Make Things Easier
Your credit card service provider should do more than just process credit card payments. It should also be your partner and make it easier for you to run your business. Look for extra options and services that add value.
Here are some questions to consider:
- Do they offer customer service support? If there’s a question or problem, you’ll want to be able to get in touch with someone.
- Do they offer payment tracking? Knowing the status of payments can help you stay on top of things and avoid problems.
- Do they make it easy to generate reports? Reports can provide insights into your performance so you can make better business decisions.
- Do they help you handle chargebacks? Chargebacks, especially fraudulent chargebacks, can be a serious problem for many businesses.
- Can the services be branded for your company? When you use a payment service provider, you share a merchant identification number with other businesses, but this doesn’t mean you can’t deliver a consistent customer experience. Branded options can help you build your brand.
- Can they support or help with an app or customer portal? An app or portal can take your customer experience to the next level.
5. Watch Out for Red Flags
In addition to poor security and high transaction fees, other red flags may be lurking in a payment service provider’s contract.
Watch out for tiny fine print concealing dangerous clauses that could put your company at risk. For example, some payment processors reserve the right to hold your funds for various, sometimes vague reasons – possibly including reasons that have nothing to do with the finances or legitimacy of your business.
Choose a Credit Card Service Provider
That Checks All the Boxes
As your full service, third-party payment processor, Tranzpay offers a more affordable option that includes a secure gateway, a customer vault, payment validation and bank processing. We offer options that can be branded for your company, and we can provide an app or portal as a white label service.
