Monday, December 3, 2012

Options for Processing Credit Cards

Accepting payments by credit card has become more efficient and customizable with advances in technology.   Following are some advice and tools to process credit card transactions, both on- and offline, for small businesses or organizations.   If you’re a small business and you have either decided to start accepting credit cards or maybe you are thinking about selling some your products or services online or you want to improve the services you offer to your customers, here is what is involved in new alternatives to processing credit card.

Taking credit card payments requires you to sign an agreement to uphold the Payment Card Industry Data Security Standard, commonly known as PCI requirements.   Violating the PCI requirements can result in a substantial fine and the loss of your ability to accept credit card payments. If the information gets into the wrong hands, you also risk losing your customer’s and possible future customers. 

Credit card companies will also charge a per-transaction fee whose size and terms can vary substantially.  For example, a merchant account might charge you $20 per month plus 2.3 percent of each transaction—a good rate, applicable to an organization with a high volume of transactions—or a simple 3.0 percent of each transaction with no monthly fee, which might be more appealing if you’ll have a low volume of transactions.
If you want to take online payments, make sure your merchant account allows them. You might want to choose an online payment vendor first and ask them for recommendations for a merchant account bank to make sure it’s compatible with your online payment method. 

Methods to Charge Credit Cards
There are various different methods to accept credit cards.  You can select which one works best for you and your business. 

Credit Card Machines
The most traditional method of accepting credit cards is called Imprinters.  Those are the little plastic swipe machines that carbon copy the credit card, make quick imprints of the credit card information for you to process later. The negative side of these is that if a card is declined, you won’t find out until later when you try to process the card. You can generally get an imprinting machine for free, or for a small fee, from the bank where you opened your merchant account.

Imprinters make the most sense when you only need to take a few payments in some kind of temporary location. They’re a short-term, quick-fix type of processing method rather than something you’d use to process a volume of credit cards over a long period of time.

Bank Processing
If you’ve collected credit card information via an imprinter or through mailed-in donation-via-credit-card forms, one of the most straightforward ways to process the charges—though likely not the cheapest—is to ask your bank to do it. Many banks will run these payments for organizations that have merchant accounts with them.

The payments are then deposited into your merchant account and make their way into your regular bank account within a few days. The bank is responsible for destroying the paper forms, reducing your risk. If you almost always receive your credit card payment information in paper, bank processing can make a lot of sense.

Credit Card Terminals
If you need to take a higher volume of payments in on-site situations, consider investing in a credit card terminal, also called a “swipe terminal.” These small machines allow you to swipe a credit card, enter the payment amount on a keypad, and then process the payment—and, in many cases, even print out a receipt. In most cases, you can buy them for a couple of hundred dollars from the bank that hosts your merchant account, or rent one for a particular event. AuctionPay and sites like it rent terminals with a focus on nonprofit events.

Terminals may require a power source, though some run on batteries. They also require connectivity, generally a telephone line, to process credit cards in real time—some allow you to store transaction information to process when you can connect to a phone line. Unlike with imprinters, the terminal stores the information internally so it’s more secure, and so you won’t have to enter it later, but you still run the risk of not receiving payment for any declined cards.

Terminals are widely used and effective in a number of different situations, from on-site events or a development office that needs to process a lot of phone credit card donations to gift-shop type settings. However, integrating terminals with other databases—say, to process a donation and record it at the same time to a constituent record—can be difficult. If you need to do a lot of this, one of the other methods might work better for you.

 Mobile Devices
An alternative to portable credit card terminals, smartphones or other mobile devices (like tablets and the iPad) can now process transactions via a wireless connections by either manually entering card numbers or—with inexpensive additional hardware—swiping cards directly. This functionality can be provided through a vendor, like Square or Sage, or you can download a card reader app for free or at a low-cost.

Virtual Terminals
A “virtual terminal” allows you to enter credit card and payment information into an online form and process it over the internet. You can “rent” a virtual terminal from an online payment processing specialist, such as, usually for some combination of a monthly fee and a percentage of the transactions.  

 Point of Sale Solutions
If you want to take credit cards in a permanent physical location like a gift shop you need hardware-intensive options. You will be able to swipe cards and print receipts. You have options of using both with a credit card terminal or a separate swipe hardware and a receipt printer. You will be able to add up a number of items and calculate taxes, which terminals typically won’t do and you may want a price scanner and a display pole (the small screen that displays what you’re ringing up to the customer).