The Essential Guide to Taking Credit Cards for Your Small Business
Meet the Author
Tom Coughlin, PhD is the owner and founder of The Merchant Way. He’s an engineer by training raised in the garden state, New Jersey. With his uncles owning businesses in Long Island, he grew up hearing the challenges small business owners face over family holiday dinners and barbecues.
In 2019, he learned that some credit card processors don’t do things right. They charge businesses high fees and crazy bogus line items. Tom set out to do things different and give better service with more savings while being a company that could be counted on.
Small businesses can take credit card payments in many different ways. For online businesses, small businesses can use an online merchant gateway. For in-store businesses needing to take credit card in-person, a small business can set up a POS (point-of-sales) system. POS systems come in all different shapes and sizes depending on your small business needs. And, if you need on-line and in-store there are ways to do both. The best way to get exactly what you need is to talk to a merchant services provider.
So what do you need for your business? It may be a lot to consider, but with these questions below, we’ll help you tease out exactly what you need.
Do you need to be able to take payments in-store?
If so, then you’ll likely need a POS system that comes equipped with a cash drawer and credit card reader. If you want to have a way of keeping track of inventory while you sell items, then a Clover system is perfect for you. In addition, if you need to have a menu for restaurants then Clover is a great choice. However, if you only want a POS system that can take credit cards than you can use a credit card reader without inventory – a Clover or Dejavoo system are perfect for you. The bonus of having Clover is that it has a dashboard website of your business so you can manage and keep tracking of your business from anywhere. Need to change a menu item or check your month sales – the dashboard can do that!
How to take credit card payments online?
Taking payments online can be tricky. One of the major things to consider is to minimize your credit card fees. With Stripe or PayPal fees can be as high as 7% on a transaction. Stripe comes standard with Squarespace, which is why we recommend to use Shopify for your on-line business. Shopify lets you integrate with many different processing companies. With more versatility, your merchant services provider will be able to find you the best rates.
Credit card fees are set by multiple companies
Credit card fees are set by the credit card providers, such as Visa, MasterCard, AMEX, etc. The fee that these providers charge is called “interchange.” And twice a year, interchange rates are changed by the credit card providers. On top of interchange, there are smaller fees charged by the banks that process these transactions and the merchant services providers who manage the accounts, statements, and filings.
Getting rid of credit card fees altogether?
It is impossible to not pay credit card fees. However, one way to reduce the fees is to switch to DuoPricing. DuoPricing is the ability to pass the fee onto the customer. Using programmed software, your item costs can automatically add on the fee at check out. DuoPricing is also called cash discount and most gas stations use this. Last time you were at the pump, you may remember that it was cheaper to pay in cash. Switching DuoPricing is based on the same principles. Small businesses were only approved to use DuoPricing in the late 2010s. We estimate that most businesses will adopt this style of payment processing by the late 2020s.
Is DuoPricing the same as surcharging?
So, you’ve heard of surcharging. A surcharge is an additional fee, charge, or tax that gets added onto the price of a cost of good. Surcharge is added beyond the initially quoted price.
Although in principle, DuoPricing and surcharging are synonymous, DuoPricing is not the same. DuoPricing can only be done with in-person. By offering a cash discount, this is not the same as surcharging.
Passing the fees to the customer is different when it is done online. In this case it is called surcharging. Surcharging is legal in most states.
States That Do Not Permit Credit Card Surcharges
In the following states, anti-surcharging laws are still on record but are unenforceable due to recent court decisions: New York, Oklahoma, Texas, Utah, California, Florida, and Maine.
As of early 2021, there is only one US territory and four states that don’t allow credit card surcharges. In the following jurisdictions, you won’t be able to impose surcharges (at least for now): Puerto Rico, Colorado, Connecticut, Kansas, and Massachusetts.
Do you need to setup recurring billing?
If you need to setup recurring billing for your customers, then an online platform is best for this. Using multiple settings you will be able to import contacts, and setup automatic invoicing, and some platforms are compatible with providing surcharging. Just as your merchant services provider for more details.