Credit cards have been around for more than 40 years, and their usage has skyrocketed in the past 20 years or so. Meanwhile, the use of traditional payment methods, like note banks and paper cheques, has decreased significantly. Who carries cash or change in their pocket these days? In a recent study by Mobile Payments Today, 45.77% of Canadians use cash to make purchases, and 59.7% use credit cards. In other words, if you are running a small business, or just starting out, accepting credit card payments for your business will lead to more sales and satisfied customers.
Adding credit card acceptance to your business is not easy nor cheap. MasterCard and Visa charge a fee every time their cards are used. You have to sign up with a credit card processor to process those transactions, from there, your processor will then add charges to cover their costs and charge you a variety of fees for just maintaining your account.
Don’t worry, there are tons of alternatives out there. Let’s dive into merchant accounts first, then take a look at the types of credit card service providers out there, and finally, the types of credit card transaction methods you can use.
What is a Merchant Account?
A merchant account is simply an account to deposit funds from processed credit/ debit card transactions. Maintaining the account requires transaction processing services, security features and other types of services depending on your business’ needs. Traditional merchant accounts are expensive because merchant service providers require you to agree to a long-term contract, with a large fee associated with terminating your contract, just in case you decide to close your account before the contract end date.
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Alternative Credit Card Service Providers
There are alternative credit card services known as PSPs (Payment Service Providers) that provide most of the essential features of a full-service merchant account but at lower costs. They have revolutionized the credit card processing industry by offering flat-rate pricing, no fees for basic services, and month-to-month billing. They’re also easier to setup, but can be a bit risky due to sudden account freezes or terminations. There are many well-known PSPs out there, but two of the most popular ones are Square and Shopify.
Credit Card transaction methods
In-Store Credit Card Payments
If you have a retail business, you need to have at least one credit card machine per location. There are two types of credit card terminals; a traditional countertop or a POS (Point of Sale) system. A traditional countertop processes payments quite well but does not have any other functionality. A POS system has inventory management, employee scheduling, and other features to help you run your business easier, in addition to payment processing functionality.
Regardless of which system you decide to purchase, make sure that it is EMV (Europay, Mastercard & Visa) compatible. Many customers now carry EMV cards, so there is no need to continue using only mag-stripe cards.
No matter which system you decide to go with, it is highly encouraged to purchase the equipment rather than lease it. Equipment leases usually come with a four-year contract that you cannot cancel, and the monthly lease payments end up exceeding the cost of purchasing the equipment from the beginning. If you are still looking for more information, check out this article that explains the pros and cons of leasing and purchasing equipment.
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Online Credit Card Payments
If you have an e-commerce business, you won’t need a credit card terminal or POS system, but you do need a virtual terminal or a payment gateway to accept payments from customers. A virtual terminal is the digital version of a physical credit card that is hosted online and can be accessed through the internet. It allows you to input the customer’s credit card information directly to a web-based payment form, which you can then use to process the transaction.
A payment gateway is an online software system that connects your e-commerce business with your processor’s payment networks. As long as customers have access to the internet, they can enter their credit card information from anywhere. There are many Canadian payment gateways, but the most popular ones are FuturePay, Elavon, Ignite Payments & Payeezy. If you use a shopping cart feature for your e-commerce business, you must ensure that it is compatible with your payment gateway before you even set up your website.
Mobile Credit Card Payments
This method is one of the newest forms of payment. It was first introduced by
Whether you’re running an e-commerce business or a complex retail organization, it’s always a good idea to be able to accept a wide range of payment methods. It’s the best way for your business to stay up-to-date with today’s technology and reach more customers. But mainly, it’s important to find the payment method that’s suitable for you and allows you to run your business securely.