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How To Process Credit Cards As An Independent Business Owner

If you own a small business, there is no question about it – you need to be able to process credit cards. The simple truth is, very few people carry cash anymore. While some independent businesses operate via a cash-only model, they’re clearly losing out.


Today’s consumers love the convenience, tracking, and security of using their credit or debit cards everywhere they go. Not only that, but when shopping online, credit and debit cards are the only real option; and we all know how popular online shopping is these days.


So, as an independent business, you need to accept card payments. You need National Processing.


With the wrong merchant services company, processing credit cards can be complicated and expensive. The industry is littered with unreliable companies following convoluted fee structures, which makes it impossible to figure out the exact cost of taking credit and debit card payments. It also makes determining your profit margins much more difficult as well.


Worried about profit margins? Of course you are. What business isn’t? The good news is you’ve landed here.


In this article, we’ll break down how card processing works, the business behind it, the different ways independent businesses can accept credit and debit card payments, how to set everything up, and more.


That’s right; if you want to know how to process credit cards as an independent business owner, we have you covered.


Processing Credit Cards as an Independent Business Owner – The Basics

The best way of accepting and processing credit and debit cards for your independent business depends on how it operates.


If you have a physical storefront, specialized hardware like a card reader will be needed. If you sell products or services online, you’ll need specialized software. If you meet clients at the job site, then you’ll need equipment for mobile processing.

We’ll go over all of the details below.


How Card Processing Works

Before we jump into what you’ll need, let’s first walk through how money is transferred from customers to merchants when credit or debit cards are used. In other words, let’s look at the big picture.


To accept and process credit and debit card payments, you’ll need a way of taking the card number, expiration, and so on. If you operate an online store, you’ll need a payment gateway or virtual terminal. If you meet clients out in the field or have a physical store, you need a way of swiping or inserting the card with a mobile or credit card terminal.


After receiving the card data, it is then sent for approval from your chosen payment card processor. The processor will check to confirm that there are available funds to successfully cover the transaction.


With credit cards, the processor checks to make sure the transaction won’t exceed the customer’s available credit. With debit cards, they check the remaining balance of the checking or savings account the card is linked to.


Your processor will also perform anti-fraud checks to identify suspicious transactions. If funds are available to cover the transaction and no indications of fraud appear, the transaction will be approved, allowing you to complete the sale.

With a top-rated card processor, like National Processing, each of these steps can be done in a matter of seconds, giving you the ability to process thousands of card payments every single day.


At the close of each day, all completed credit and debit card transactions must be uploaded to your card processor’s network in order to be processed. This is known as batching. If you’re using a modern card terminal, batching typically takes place automatically.


The applicable interchange and markup are deducted from each transaction, leaving you with the leftover amount from each transaction after these fees are deducted. In most cases, it takes another day or two to transfer the funds back into your account.


How Card Processing Works from the Business End

The business end of credit and debit card processing involves many big names and major players, including:

  • Visa, Mastercard, and other credit card networks
  • Customer’s issuing bank
  • Merchant’s acquiring bank


Every transaction passes through each of these entities as well as your merchant payment processor, and each one requires a fee.


Different Types of Credit Card Processing Fees

Some merchant services charge different or higher fees than others, but most transaction fees are generally divided into markups and interchange fees. Both markup and interchange fees typically contain flat-rate and percentage components.


The interchange fees are set by the card networks and are not negotiable. These fees are divided amongst the issuing banks, acquiring banks, and the card networks. The markup fees, on the other hand, are the fees charged by your payment processor for their services.


If you’re looking for a reputable and reliable credit card processor, it’s hard to beat National Processing. As the top credit card processor for small businesses for four years in a row, they have a full-service in-house team and one of the lowest, most straightforward fee structures in the industry.


Accepting Credit and Debit Card Payments as a Small Business

Below are two ways used by most small independent businesses to accept card payments. Some businesses use both methods depending on their business model, so keep this in mind when evaluating your options.


Accepting Credit Card Payments In-Store

If you have a restaurantretail store, or another type of business with a physical location, you will need at minimum one card reader per location in order to process credit cards. You can choose between a traditional credit card reader or go with a POS (point of sale) system.


Traditional countertop readers are able to process transactions but little else. POS systems, however, can process transactions in addition to helping with employee scheduling, inventory management, and a variety of other functions.


Regardless of the type of equipment used, it’s important for it to be compatible with Visa, Mastercard, and Europay chip cards. Most consumers now carry chip cards and chip-compatible card readers are becoming less and less expensive, so there is no reason for using an outdated magstripe card reader.


When it comes to paying for this equipment, you can lease the equipment or purchase it outright. If you lease the equipment, you can save on upfront costs and possibly write the lease payments off on your taxes. However, going this route will typically cost you more in the long run.


Accepting Credit Card Payments Online

If you run an eCommerce business and strictly sell items online, card readers aren’t necessary. Instead, you will need a virtual terminal or payment gateway to process customer payments.


Virtual terminals are simply software applications that are capable of turning computers into credit card terminals. They can be used to process telephone and mail-in orders or be combined with card reader equipment for in-person credit card payments.


Payment gateways, on the other hand, are explicitly used for online transactions. These internet-based software services allow customers to enter their credit or debit card data and make online purchases anywhere in the world from their smartphone or computer.


The majority of merchant services providers charge a monthly fee for using a payment gateway. Some also charge an additional transaction fee of 0.05-0.10 cents.


One of the more popular payment gateways is Authorize.Net, but many larger payment processors are now offering their own payment gateways with the same convenience and security features.


Is a Merchant Account Necessary to Process Credit Card Payments?

For a long time, the only way for businesses to accept credit and debit cards was to have a merchant account. A merchant account is basically a bank account where the funds from debit and credit card purchases are deposited. That said, along with a merchant account, transaction processing equipment, software, and services are also needed.


The costs associated with a traditional merchant account can add up. However, if you process $10,000 or more a month, a merchant account might be a smart choice.


Different merchant account providers have different pricing models, and one might be a better fit for your business than others. You should certainly do your due diligence and perform a little research before choosing a processor or merchant account provider, but National Processing is one of the best in the business.


Setting Up Card Payments for Your Small Business in 5 Simple Steps

If you’re interested in setting your business up to accept debit and credit card payments, you’ll be happy to know you can do so in five easy steps. While we’ve simplified the process, we hope this step-by-step breakdown makes getting started even easier.

1. Choose a Payment Processor

Today, there are several different payment processors out there to pick from. However, it doesn’t take long to figure out which payment processors are worthy of your business.


As the top credit card processor for small businesses for four years in a row, National Processing is a smart choice. In addition to a competitive fee structure, they have a full-service in-house team of dedicated associates for customer service, tech support, onboarding, underwriting, and more all under one roof.

2. Discuss Rates and Terms

When you have narrowed down your list of payment processors to work with, contact them to receive some quotes. Not only should you inquire about their transaction fees, but you should also ask about equipment costs and any other fees they may charge.


Given all of the different pricing structures in the card processing industry, getting a true price comparison will be difficult. Just remember, interchange rates are set across the board and not negotiable.

3. Select Your Equipment

Some payment processors offer “free” card readers and other hardware and software equipment. This can be enticing and limit your startup costs to virtually nil, but these types of deals usually involve fixed-term contracts with penalty fees for early termination.


So, just keep that in mind when discussing equipment options with a credit card processor. It may be cheaper, in the long run, to purchase the equipment outright.

Also, keep in mind that some hardware and software used by payment processors is proprietary, so you will need to replace your equipment should you decide to switch processors.

4. Get Ready to Launch

Now, you’re ready to launch your business. Whether this means you’re actually launching your company, taking your current cash-only business online, or simply changing processors, there’s plenty involved to accomplish these tasks.


When you launch your business and begin accepting debit and credit card payments, you’ll likely run into failed transactions, cases of fraudulent charges, and other issues.


Although hiccups like these can be frustrating at times, they’re just normal credit card processing issues every business must deal with from time to time, so don’t stress. The increased sales will far outweigh any minor inconveniences you may face.

5. Review Your Monthly Statements

Launching your business or credit card processing procedures may seem like the final step, but it isn’t. The last and arguably most important step is to regularly review your monthly statements and credit/debit card sales data.


Credit card processors are human just like the rest of us, so they sometimes make mistakes and incorrectly charge merchants incidental fees. This doesn’t necessarily mean your processor is out to rip you off. It could be something as simple and innocent as a data entry mistake.


If you don’t realize you’ve been incorrectly charged until months or years down the road, the processor will be less likely to give you a 100 percent refund of the overpayment. The earlier you catch a mistake, the quicker you can get it resolved. So, reviewing your monthly statements is just good business sense.


If you find yourself stretched for time and can’t afford to hire an in-house accountant or bookkeeper as a small independent business owner, you should at least review your statements quarterly.


In addition to helping you catch billing mistakes made by your card processor, it will also help you identify sales trends, such as card usage preferences, seasonal fluctuations, and the like.


All of this data is an invaluable tool and can give you a clear picture of whether or not your current credit card processor is right for you and your business.

The Best Credit Card Processing Option for Your Small Business

The card processing business is a complicated one with different pros and cons for each merchant service provider you’ll run across. Each business that accepts debit and credit cards is also different, so there’s no “best way” of accepting cards and processing transactions.


In this article, however, we’ve given some useful information and solid general guidance on choosing the right card processing equipment and company for your business. The best option for your business comes down to a variety of factors, such as what you plan on selling and how you plan on selling it, the seasonality of your business, and your sales volume, just to name a few.


If you’re just starting out, the answer to many of these questions will be nothing more than guesses. Plus, what might have seemed like the best card processor at first may end up not being the right fit for your business later down the road. 


Therefore, you may need to switch processors at some point, so flexibility is key.

Choosing the best payment processor for your independent business might seem like a daunting task, but by breaking the selection process down step-by-step as we outlined above, you’ll pinpoint the best credit card processing option for your small business in no time at all.

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Christian Woodward

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Customer focused

If we can't beat your current rates, we'll give you $500!*

We happily accept merchants processing any amount. Price guarantee for merchants processing $10,000 or more per month. Free terminals and other promotions depend on processing volume, credit and qualifications.

Customer focused

If we can't beat your current rates, we'll give you $500!*

We happily accept merchants processing any amount. Price guarantee for merchants processing $10,000 or more per month. Free terminals and other promotions depend on processing volume, credit and qualifications.