man paying online with credit card
Giving customers the opportunity to pay with a credit card increases your likelihood of making a sale. — Getty Images/Nastasic

No matter how small or new your business is, the ability to accept credit cards is a must-have. Fortunately, it’s never been easier for businesses to accept credit card payments. Here are three ways you can get started.

Open a merchant account

A merchant account is a bank account with a merchant acquiring bank that businesses use in order to accept credit card and other electronic payments. The merchant acquiring bank acts as an intermediary between the business and the credit card company, facilitating the authentication of the payment and other technical aspects. Once the electronic payments are processed and approved, the bank distributes the funds into the merchant account.

To get started, you’ll choose the credit card companies you want to work with. This depends on the type of business you’re running and what countries you do business in. At the very least, you’ll likely want to accept the key players like Visa and Mastercard.

From there, you’ll find a merchant acquiring bank to open your merchant account with. Your bank will require that you submit the following information:

  • Business activities.
  • Banking information.
  • Tax returns.
  • Payment model.

The biggest advantage of going this route is that it will be less expensive in the long term. While the merchant acquiring bank can charge the business per-month and per-transaction fees, the amounts typically end up costing less than flat-rate fees. However, you will likely have to sign a multi-year contract so you want to choose the right partner the first time.

[Rr: 5 Things to Consider Before Choosing a Credit Card Processor]

If setting up a merchant account is too time-consuming, you can start by using a payment service provider.

Use a payment service provider

If setting up a merchant account is too time-consuming, you can start by using a payment service provider. Payment service providers allow you to accept credit card payments without setting up a merchant account. Common providers include companies like Square, Stripe and PayPal.

The benefit of choosing this method is that you’ll pay a flat rate fee and there are no set up fees. This makes it easier to get started and since the billing is month-to-month, you won’t be locked into any long-term contracts.

However, there are some downsides to using a payment service provider. Some customers have complained about sudden account holds or even having their account closed by the company’s fraud prevention team.

And the fees do add up quickly. Most payment service providers charge fees up to $2.9% for companies that do less than $1 million in volume per year. Many businesses choose to start out with this model and then switch to a merchant account when ready.

Use an e-commerce platform

If you plan to accept payments primarily online, you can choose to set up an e-commerce platform like eBay, Etsy and Shopify. These platforms have built-in payment processors and accept all major credit cards as well as alternative payments, like gift cards.

To get started, you’ll create your store and activate your payments. You can choose to either build an e-commerce website from scratch or implement e-commerce capability into your existing website. Regardless, you’ll need your EIN (employee identification number) and banking information for setup.

As far as pricing, many sites offer free trial periods so you can try out your store before committing long-term.

[Read: Credit Card Security: What Your Business Needs to Know]

Which payment method is the right choice?

As you can see, there are pros and cons to each type of payment system. Merchant accounts are more time-consuming to set up but will likely end up costing you less down the road, whereas payment service providers and e-commerce sites are easier to set up but come along with higher fees.

Here are a few questions you can ask yourself to help you determine which is the right choice for you:

  • What kind of transaction volume will I be doing every month?
  • What kind of features do I need?
  • How much can I expect to pay in fees?
  • What level of customer support can I expect to receive?

The answers to these questions should help you create the best plan for your business to begin accepting electronic payments.

CO— does not review or recommend products or services. For more information on choosing the best credit card processors, visit our friends at business.com.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

Published August 15, 2019