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Small Business Tools, Technology

Is Your Small Business Ready to Handle Plastic?


It wasn’t so long ago that one of the biggest hassles for small business owners was something that should have been very simple: getting paid.

In the “old days” before the development of powerful online small business tools, small business owners had a few (mostly bad) choices for how to get paid by their customers. They could:

  1. Get paid in cash and have to deal with the security risks and hassles of depositing the cash into a bank account
  1. Get paid via check and struggle with occasional slow-paying or deadbeat customers whose checks bounced or who never bothered to pay their bills at all
  1. Get paid via credit card and receive the money immediately, but with the added cost of having to maintain a merchant account and pay various transaction fees

To be fair, there’s no perfect way to get paid, and every aspect of payment processing is a cost of doing business. But for many small business owners, getting paid via plastic (credit cards or debit cards) was, until fairly recently, a big headache. (There’s a reason why so many restaurants and bars in New York City only accept cash.)

Having a merchant account was a big hassle and a surprisingly big expense for a lot of small business owners; just being able to process credit card payments was a big undertaking. As described in this blog article, traditional merchant accounts charge a wide range of fees, and there can be complex terms of agreement and minimum transaction volume requirements that make it hard for small business owners to get the best rates, or even find themselves gradually getting a worse deal than they had originally expected.

The good news: Even though getting paid and maintaining cash flow will always be a preoccupation for small business owners, today it’s easier than ever before for your business to efficiently handle plastic and process credit card transactions without eating up your profits. Today there are excellent mobile payment processing services like Square, PayPal, and flint that make it easier and cheaper than ever before to take credit card payments.

Here are a few key points to keep in mind when choosing a mobile payment processing tool for your business:

Transaction Fees vs. Monthly Fees

Mobile payment processing tools have different fees depending on your business’ method of accepting payments and the volume of credit transactions that you process. Depending on which plan you choose, you might prefer to pay a per-transaction fee (but no monthly fee) or you might be able to get a better deal on transaction fees if you sign up for a monthly plan. For example, as detailed in our Kabbage infographic about mobile payments, Square has no monthly or termination fees, and it gives you a free mobile app (which you can use to manually enter the digits of credit cards) as well as a free card reader (which you can use to swipe credit cards. But Square’s transaction fee is 2.75 percent of the total amount swiped, so if you bill a customer $1,000 via credit card, Square gets $27.50. The transaction fee is slightly higher for manual “keyed-in” credit card transactions where you do not have the credit card in your possession (such as taking credit card payments by phone) – for keyed-in transactions, Square’s fee is 3.5 percent + $0.15, or $35.15 of a $1,000 payment.

On the other hand, you could sign up for a monthly plan from Inuit® GoPayment, and pay $19.95 per month to get a slight discount on transaction fees: 1.75 percent per swipe, and 3.15 percent + $0.15 for keyed-in transactions.

Check for Different Features

Different mobile payment processors have various features that might be beneficial to your business, depending on your needs. For example, flint lets you send invoices for payment, PayPal’s mobile payment solution gives you 1 percent cash back to your PayPal Debit Card, Intuit GoPayment automatically syncs with QuickBooks accounting software, making it easier to track payments and record your business expenses, refunds, and chargebacks. Several mobile payment-processing tools offer mobile invoicing so you can request payments while on the go. Some tools will give you a free card-swiping device, while others charge a small fee for the device. Check carefully for the various features and possible fees related to credit card swiping, manual entry, or scanning – flint has a feature where you can scan credit cards from your phone, with no additional card-swiping device required.

Most mobile payment processing tools have fees that are pretty comparable; it’s just a matter of choosing the tool that has the right features and functionality, and that is compatible with your bank and your daily business operations.

Mobile Wallet Payments

Another payment option that is becoming increasingly popular with consumers is the “mobile wallet” payment system, where you can take credit card payments without even having to see the customer’s credit card at all. With mobile wallet apps like Google Wallet and Apple Pay, the customer securely links their credit card information to their smartphone, and then simply taps their phone to your business’ Point of Sale system using Near Field Communication (NFC) technology to transmit the credit card data directly.

To set up mobile wallet payments for your business, you need to have a point of sale terminal that is capable of contactless payments. Contact your payment provider to let them know you would like to accept mobile wallet payments such as Apple Pay. For more details on how to accept mobile wallet payments at your business’ location, check out Google Wallet for Business or Apple Pay’s FAQs for business owners.

Mobile payments are rapidly becoming more popular – as of 2014, over half of consumers said they had made a purchase with their phone, and the total spending via mobile payments is expected to reach $214 billion during 2015. On the whole, this is very good news for business owners. These mobile payment tools offer total payment processing fees that are lower than old-style merchant accounts, the payment processing is faster, easier, and more efficient, and they enable you to connect your business with a wider audience of customers than if you were relying on cash and checks alone. The future is bright for mobile payments and for the small businesses that embrace them!