Before you can actually use hardware for accepting credit card payments, that is, the card reading machine, there are a few things that need to be in place first. When you are trying to figure out how to set your business up to use a retail credit card terminal and accept credit and debit card payments, there are a few terms you’ll see a lot: merchant account, payment gateway, and payment processor.
• Merchant Account
Your merchant account is the actual bank account that money from your customers’ credit card transactions is deposited into. It is somewhat like a loan, because it is underwritten. The bank will assess the potential risks it takes on by sponsoring an account for a specific merchant. These risks may include customer charge backs, and potential fraudulent activities by the merchant.
• Payment Processor
The actual transfer of funds from the cardholder’s bank or credit card company to your merchant account is done by the payment processor. The payment processor is the entity that ensures that the funds end up in the right place. This usually takes a couple of days or more, which is too long to draw out a simple retail transaction or dinner payment, hence the need for the payment gateway in the interim.
• Payment Gateway
A payment gateway is a server that your cash register, credit card terminal, or website will connect to. One the other end, it also connects with the processing network(s) you use. When a credit or debit card is used to make a purchase at your payment terminal, the payment gateway will tell your cash register or website whether or not the charge is approved by the customer’s bank. This way you know whether or not to give the customer the goods or services they are requesting. This usually only takes a few seconds, and happens either at the cash register or when the customer goes through the checkout process online. The payment gateway does not actually transfer the funds. It only checks to see if the funds are available and if the customer’s bank will release the funds to the merchant at the appropriate time. It then submits the charges to the processor for settlement. Even though the customer has walked away with products in hand or services received, you have not actually received their payment yet—only the approval for their payment.
Merchants have historically gotten gateway and processing services from different companies. Now, however, it is becoming more common for a single card servicing company to provide both the gateway or approval service, and the processing or funds transferring service. This is beneficial for merchants, because when there are problems, they don’t have to try to coordinate between two different companies.
Second: Choose your providers
You’ll need to choose providers for each of these accounts. There will most likely be fees associated with each of these services. They can be comprised of a certain percentage of credit card sales plus a flat fee per transaction. Rates vary broadly among different providers. You can ask to see an example of a typical monthly statement from a provider, which may help you to better understand the company’s fees and policies. Some providers require you to enter into a contract with them in order to receive their services. Be aware that should you need to terminate your contract early, termination fees can be extremely costly. Also, be aware that often low front-end transaction rates are compensated for by very high back-end fees.
Keep in mind that the companies with the lowest fees are not necessarily the best. Check track records for accuracy, dependability, speed of service, and customer service. Some merchants have tested potential providers’ customer service, before committing to any provider, by calling them on different days and times of day to see how long they stay on hold, or if their calls are forwarded to a message service.
Processing services sometimes offer free or low cost retail credit card terminal or terminals, or a virtual credit card terminal when you sign a service contract with them. If the POS terminal is from a reputable manufacturer, that is usually a good indication that it will be reliable. Factor the resulting amount of discount from the free or low cost of the best credit card terminal into the total costs and fees to get a more accurate projection of how much it will cost to go with that particular provider.
Third: Choose your business credit card terminal
Once you’ve found the companies you want to use for your accounts, it’s time to choose the credit card terminals you want. If you are operating a brick-and-mortar retail establishment, you’ll most likely want the best retail credit card terminal. With a retail terminal, customers can swipe or insert their cards to be read by the machine. This is quick and easy for both the customer and the merchant, and can cut down on chaos during rush hours and special events. If your establishment has an online retail outlet, you will also need a virtual terminal for customers to enter their card information and submit their payments online. With a retail credit card terminal there are usually several optional features, such as
• Swipe or insert
• Keypad for PIN
• Signature pad
• Text displays of various character capacities
• Integration with existing POS/cash register/computer system
There are other credit card terminal options as well, such as mobile processing or a card-not-present business credit card terminal. Pick the best business credit card terminal that meets your business’s needs.
Fourth: Set up your credit card terminal and start taking credit card payments
Once you get your retail credit card terminal, you can set it up following the directions provided by the manufacturer and the gateway service you have contracted with. This will include connecting the card reader to your POS computer or cash register, and may include installing a driver for your card reader on your computer, as well as installing or changing options on your computer’s POS software. If your terminal is not a retail credit card terminal, follow the directions given by the terminal provider. Once everything is connected, do a couple of trial runs to see that things are working properly. Then start accepting credit card payments and enjoy the new experience!