Businesses are increasingly shifting online, and it’s becoming less common for people to make purchases at brick-and-mortar stores like they used to. If you’re like most small business owners, then you’re probably already well aware of this trend, and may even be looking to take advantage of these new shopping behaviors.

Of course, one of the challenges associated with online transactions is actually getting paid for the goods and services you provide. After all, there’s no face-to face-interaction with your customers, which means you can’t collect cash or scan a card in order for them to complete their purchase. This is obviously a major speed bump as you work toward starting an online ore commerce business or shifting an existing business into the online retail space. Luckily, there are a number of companies that have developed solutions to help you easily and seamlessly collect credit card payments online.

This guide will help you identify the right credit card processing company for your business, as well as walk you through how to get everything set up.   

Why do businesses need to accept credit cards online?

There is one obvious reason that your business needs to be able to accept credit cards online: because accepting traditional payment methods like cash and/or checks simply isn’t feasible. Credit cards are one of the most reliable ways for both customers and businesses to exchange funds online, and if you aren’t able to accept credit cards online, then your online business is going to struggle mightily to be successful.

Of course, ease of use is just one reason why your business needs to be able to accept credit cards online. Customers trust the protection of credit cards when shopping online, and it’s often their number one choice for online payments. They typically offer a level of protection that no other form of payment can match, and people who use credit cards can rely on purchase and fraud protection to ensure that they aren’t scammed out of their hard-earned money. Plus, credit cards come with a whole host of other benefits that can vary from cash-back to rewards points.

Why customers are increasingly shopping online and using credit cards to do so isn’t really the important question, however. You can spend your time trying to understand changing buying and spending habits, but at the end of the day, philosophy doesn’t pay the bills. Instead, you simply need to know that people are choosing cashless payment methods like credit cards more often and, if you fail to provide that option, you are missing out on sales. 

In fact, about 70% of transactions in the United States are now cashless and that number only continues to grow, especially as people begin to adopt online payment services via their mobile devices, like Apple Pay or Google Pay. The bottom line is that offering people payment options is more important than ever.

These service providers allow customers to link their credit card to their profile and pay online with just a tap of a button. Soon, even carrying around a plastic card may be an obsolete concept. By having the ability to accept credit card payments online and staying on top of changing trends, you can ensure that your customers are served in the way they prefer to shop.

Probably most important, however, is the fact that credit cards make shopping easier. And when shopping is made easier, your business benefits. With brick-and mortar-stores, if someone wants to make a purchase, they have to get into their vehicle, drive to the store, find the item, go to the counter, and then make a payment. In the digital landscape, making a credit card payment is as simple as a few clicks of the mouse or a few taps on a smartphone display. The barrier for making a purchase is lowered for credit card users, and your business should be eager to take advantage of that.

A part of making shopping easier is also enabling people to make purchases when they want. Since a credit card is credit and not actual cash on hand, people can make purchases today and then pay for them at a later date. If your business doesn’t accept credit cards, then your customers need to actually have the cash in their hands or the money in their bank account. That means they may put off making a purchase, re-think their purchase decision, or go to a competitor that actually does accept credit cards.

How to choose the right credit card processing company

If you want to accept credit cards online, you’ll need to partner with a credit card processing company. These companies do the leg work and process payments to a customer’s credit card, as well as ensure that the funds make it into your businesses’ bank account. Of course, this is just a very basic overview of what a credit card processing company does. For many payment solutions providers, their businesses are about much more than just acting as a bridge between customers and businesses.

Many credit card processing companies offer additional services and benefits to help make life easier, which is why shopping around and comparing credit card processing companies can get confusing if you’re not prepared.

The first thing to do when choosing a credit card processing company is to consider your own unique needs when it comes to managing your business. Obviously, you want a company to process credit card transactions, but are there other things you’re looking for? For example, do you need help with bookkeeping, starting an online store, managing inventory, or taking mobile payments? Asking these questions is important as you begin to research your options.

Some payment processing companies, like Shopify for example, offer a complete business operations experience. Not only will they help your business process credit cards, but they will also provide you with all of the tools you’ll need to start an online store, manage your inventory, and even market to your customers. This type of all-in-one solution can help streamline many different aspects of your business.

On the other side of the spectrum, some credit card processing companies cater to businesses who already have their own website created and simply need a payment gateway to process customer payments. With these companies, they usually provide you with a piece of code that you can add to your website in the form of a payment or checkout button. This redirects customers to your payment gateway, which then collects credit card details and processes the payment on behalf of your business. 

At the end of the day, both all-in-one and basic solutions accomplish the same main goal of processing payments.  They just cater to different types of businesses in different stages of growth.

What are the costs associated with accepting credit cards online?

One thing that has held many businesses back from accepting credit cards is the cost of doing so. It’s important to note, however, that credit card processing fees aren’t as high as many small business owners think they are, and you may be pleasantly surprised at how affordable it actually is.

The costs passed on to you as a business will vary between various processing companies. The typical fee charged is represented as either a percentage of the purchase price or a flat fee plus a percentage of the purchase price. This fee is a combination of the fee charged by credit card companies like Visa, Mastercard, American Express and Discover, along with a markup cost for the processing company itself.

While on the surface, the costs associated with processing credit cards may be very similar between processing companies, it’s important to look closely at the costs and compare them as they pertain to your specific business. For example, a business selling big-ticket items may benefit more from having a flat fee plus a lower percentage per transaction, whereas a business selling more affordable items may prefer to simply pay a percentage of the transaction cost, even if it is a little higher than the processors that collect a flat fee. This will ultimately come down to your volume of sales and the cost of what you sell.

Some credit card processing companies also charge a monthly fee or an annual fee, in addition to transaction fees. These companies tend to provide lower transaction fees.  Once again, the value of this will largely depend on the volume of your sales.

It’s also important to ask about contracts and, if a processor requires a contract, what the cost of breaking it would be. These costs can be significant and, if the credit card processing company no longer meets your needs, getting out of the contract can set you back hundreds – and sometimes even thousands – of dollars.

Finally, other costs associated with accepting credit cards online generally have to do with additional features you may wish to add. For example, a basic credit card processing plan may not have a regular fee other than the transaction costs. If you wish to add mobile payment capability or buy a physical credit card terminal for a brick and mortar store, however, then these setup fees could change. Be sure that you are comparing the actual costs of all the features you are looking for, rather than just the transaction costs, as you may be surprised at what a difference it makes.

How to set up online credit card processing for your business

Once you have decided on the right credit card processing company for your business, including comparing the various features among all the major players in the industry, it’s time to actually set up your payment gateway. While this may seem intimidating, most credit card processing companies make the process quite easy and intuitive, even for beginners.

The first step in accepting credit card payments online is to actually sign up with the provider you have chosen. This is a relatively quick part of the overall setup. Credit card processors do have some know your customer (KYC) rules you’ll need to follow, however, to ensure that they know that your business is legal and the people representing it are authorized to do so. In some cases, you may need to submit business registration documents, tax forms, personal identification, and other documentation. It’s advisable to have this on hand before you begin the signup process.

As part of the setup, you may also be prompted to enter tax collection and remittance information. This may not be required if you are simply setting up a processing service for an existing online store. For an all-in-one solution that includes features like inventory management or a web store package, on the other hand, the processing company may require this information before you can begin.

Of course, ensuring that the money you have collected actually makes it to your business bank account is an essential part of accepting payments online. Your selected credit card processor will also walk you through this, and will most likely ask for a scan of a voided check and/or direct deposit form. This is where you can also test how fast remittance is with the provider you have chosen and the bank account you are using. In most cases, remittance to your bank account only takes a few business days, and some processors may even get that time down to a single day.

Once you are signed up, you may want to consider setting up a point of sale system (POS) if you want your online store to be integrated with a brick and mortar store or office. Some credit card processors will have a POS system set up ready for you to rent or buy, while others will have recommended vendors that they work with. Regardless, it’s important to ensure that the POS system you choose is compatible with the processor you have signed up for.

Once these initial steps are complete, you’re now ready to add a payment gateway, which is essentially a virtual terminal, to your website. There are three different ways that this is done and how you do so depends entirely on the company you have chosen and the type of setup you are building.

  • If you are looking for convenience when accepting credit cards online, then these are the solutions that will require the least amount of effort on your part. When you build your website, the credit card processor will have the payment gateway built right into your website so customers can go directly from the cart checkout to your payments page. It’s a seamless experience for both you and your customers.
  • The second method of setting up a gateway is designed for businesses that already have their own website and simply want to begin collecting online payments from customers using credit cards. In this case, the payment processor you have chosen will provide a link or code for your website that redirects users to the payment gateway of the processor you have chosen. In many cases, providers offer white label payment gateways that allow you to brand the gateway to match your store. As far as the customer is concerned, the gateway is a part of the website and the experience is seamless. For you as a business owner, the setup of this is rather easy but requires a little more effort than choosing a pre-built solution.
  • There are some situations where you may have a website designed that offers integration with certain payment processors. This is somewhat of a mix between a pre-built solution and a separate payment gateway since the website builder you used will bridge much of the gap between your checkout page and the payment gateway. While you will still have to manually enter some information to complete the setup process, once it’s done, you shouldn’t have to alter the information unless you change payment processing providers.

Once you’ve got your payment gateway set up, you’re ready to go live and start collecting online payments. 

Getting paid after collecting funds online

Now we arrive at the most important step of collecting credit card payments online: getting paid! After all, why go through all of this effort if it isn’t going to affect your bottom line? 

Generally speaking, getting paid when using a credit card processing company is fairly easy but there are some important things you should know about the process.

First, understanding how the payment process works from the point where a customer checks out is important. When they enter their credit card information and submit their order, it doesn’t mean that the money will appear in your account right away. The payment processor communicates with the credit card issuer to ensure that the customer has enough funds available on their card. This puts a hold on the funds as well. The credit card issuer also charges the payment processor a percentage of the transaction fee, which is then passed onto you as the business owner through the transaction fees you’ll owe to the payment processor.

Once the order is complete, the funds are released to the payment processor, who then holds the funds in your merchant account for a certain period of time. This is partially done to ensure that there are no chargebacks. If a customer cancels their order right away, the payment processor can simply return funds immediately without having to debit your business bank account.

After the waiting period has passed, which is usually anywhere from 1 to 5 business days, the payment processor will deposit the funds to your connected bank account, minus the transaction fees that they charge for processing the payment. So for example, if you are paying 2.5% per transaction and you make a $100 sale, the total amount of money deposited to your account by the payment processor would be $97.50. 

It is important to always have funds available in your account for chargebacks, even after the payment processor has remitted funds to you. Credit card issuers allow chargebacks up to 6 months in some cases, and the payment processor will debit your bank account to complete such a request. To avoid unexpected chargebacks, you may want to provide a customer service number, live chat, and/or email support so that customers can reach out to you about issues before they resort to requesting a chargeback from their credit card issuer.

Start making money online today

Now that you know the process for collecting credit cards online, you’re ready to partner with a credit card processor and set up your own payment gateway. This will enable you to serve more customers from around the world rather than just the people in your immediate area who can visit in-person to pay for their goods and services. If your business is like many others, accepting payments online is the next step in serious growth.

To learn more about credit card processors, you’ll want to visit the websites of some of the most popular processing companies to get a clear idea of the fees charged, as well as features available.  From there, it’s a matter of evaluating your options and figuring out what makes the most sense for you and your business.