As credit card balances continue to rise and match pre-pandemic highs, every business needs to be able to accept credit card payments. According to the Federal Reserve’s G.19 report, card balances increased 11% between April and May of 2021, recording the highest rise in five years.
Accepting credit card payments is essential for businesses to thrive and cater to their customers’ preferences. However, some small businesses or entrepreneurs on a tight budget may worry about the costs associated with implementing credit card payment systems.
The good news is that there are several affordable options available to provide your business with a way to accept credit without breaking the bank.
With a plethora of options available, understanding the world of payment processing companies can empower businesses to make informed decisions and optimize their payment acceptance process.
We will explore some of the cheapest ways to accept credit card payments, helping businesses expand their payment options while keeping costs to a minimum along with the essentials of payment processing companies and how they can benefit businesses of all sizes. There are many different payment processing companies ready to help your business to accept payments. Benefits of using payment processing companies for your business include:
Seamless Transaction Processing
Payment processing companies provide businesses with the necessary infrastructure and technology to process transactions efficiently. They handle the complexities involved in verifying and authorizing payments, ensuring a seamless and hassle-free experience for both merchants and customers.
Broad Payment Method Acceptance
Payment processing companies support a wide array of payment methods, allowing businesses to cater to diverse customer preferences. From traditional card payments to digital wallets and emerging payment technologies, these companies enable businesses to accept payments in various forms, enhancing convenience and customer satisfaction.
Payment processing companies employ robust security measures to protect sensitive customer data and prevent fraudulent activities. They adhere to stringent industry standards, such as Payment Card Industry Data Security Standard (PCI DSS) compliance, encrypting data during transmission and storage. This helps build trust with customers and safeguards businesses from potential liabilities.
Reporting and Analytics
Many payment processing companies offer reporting and analytics tools that provide valuable insights into transaction data. Businesses can access detailed reports, track sales trends, monitor chargebacks, and analyze customer behavior. These insights empower businesses to make data-driven decisions, optimize their operations, and identify opportunities for growth.
Integration and Customization
Payment processing companies often provide integration options with popular e-commerce platforms, point-of-sale (POS) systems, and accounting software. This allows businesses to seamlessly integrate their payment processing operations with existing systems, streamlining workflows and improving operational efficiency. Additionally, companies may offer customization options to align their services with specific business requirements.
Traditional Merchant Accounts
A common method to accept credit cards is by setting up a merchant account with a payment processing company or bank. This allows businesses to accept credit card payments in-person, online, or over the phone. While traditional merchant accounts may involve some setup and monthly fees, they often provide more flexibility and customizable options for businesses.
Mobile Card Readers
Mobile card readers have revolutionized the way small businesses accept credit cards. These small devices can be plugged into a smartphone or tablet, turning them into portable and cost-effective point-of-sale (POS) systems.
With options like Stax, Square, PayPal Here, or SumUp, businesses can accept card payments on the go, making it convenient for pop-up shops, service providers, or small retailers without a physical storefront.
Virtual terminals allow businesses to accept credit cards without physical card readers. These online platforms provide a secure interface for manually entering credit card information to process payments. Virtual terminals often come with monthly fees, along with transaction fees for each processed payment.
Payment aggregators or payment service providers act as intermediaries, allowing businesses to accept credit card payments through their platforms. These providers aggregate transactions from multiple businesses, resulting in lower processing fees and setup costs.
Examples include Stax, Stripe, PayPal, and Payoneer. Payment aggregators often offer user-friendly interfaces, quick setup processes, and customizable payment forms, making them an attractive option for businesses starting out or operating primarily online.
Online Payment Gateways
For businesses with an online presence, integrating an online payment gateway can be an affordable solution to accept credit card payments. Providers like PayPal, 2Checkout, or Braintree offer easy-to-implement payment gateways with competitive transaction fees. Stax also offers a range of payment gateway integrations. These gateways securely process online transactions, allowing businesses to accept credit cards directly on their websites and providing customers with a seamless and secure checkout experience.
Monthly fees for credit card payments can vary depending on several factors, including the payment processing provider, the type of business, the volume of transactions, and the specific services and features included in the package.
Monthly Statement Fee
This fee covers the cost of generating and providing monthly statements that summarize the transactions processed. It typically ranges from $5 to $20 per month.
Monthly Gateway Fee
If you are using an online payment gateway to accept credit card payments, some providers may charge a monthly fee for access to their gateway services. These fees usually range from $10 to $30 per month.
Monthly Account Maintenance Fee
Some payment processors or merchant account providers may charge a monthly fee to cover account maintenance and support services. This fee can vary between $10 and $30 per month.
PCI Compliance Fee
Payment Card Industry Data Security Standard (PCI DSS) compliance is required to ensure the security of credit card data. Some processors charge a monthly PCI compliance fee to cover the costs associated with maintaining a secure environment. This fee typically ranges from $5 to $20 per month.
Terminal or Equipment Rental Fee
If you are using physical credit card terminals or equipment, providers may charge a monthly rental fee for the use of these devices. This fee can vary depending on the type and number of devices rented, ranging from $20 to $50 per month.
Minimum Monthly Processing Fee
Some providers impose a minimum monthly processing fee, which is the minimum amount that you must pay in processing fees regardless of your actual transaction volume. This fee can range from $10 to $25 per month.
Peer-to-Peer Payment Apps
Peer-to-peer (P2P) payment apps, such as Venmo, Zelle, or Cash App, have gained popularity in recent years. While primarily designed for person-to-person transfers, some of these apps offer options for small businesses to accept payments as well. These apps are user-friendly, often with minimal or no setup costs, and allow businesses to accept credit cards from customers who are already using these platforms regularly.
For businesses that frequently invoice clients, using invoicing solutions with built-in payment functionalities can be a cost-effective way to accept credit card payments. Platforms like Stax Bill, Wave, Zoho Invoice, or QuickBooks Online offer invoicing features that allow businesses to send professional invoices and accept online payments directly through the invoice. These solutions streamline the payment process and eliminate the need for manual reconciliation.
By exploring these affordable options, businesses can find the cheapest way to accept credit card payments while minimizing payment processing fees. It’s important to assess your specific business needs, transaction volume, and desired features when selecting the most cost-effective solution. Processing fees range depending on your payment processor.
When businesses accept credit card payments, they may encounter various payment processing fees. While specific fees can vary depending on the payment processor and agreement, some common fees include: transaction fees, interchange fees, assessment fees, monthly fees, statement fees, PCI compliance fees, and chargeback fees.
Remember to consider factors such as customer support, security, ease of use, and compatibility with your existing systems to ensure a seamless and budget-friendly payment acceptance process. When selecting a payment processing company, there are many factors businesses should take into account, including:
Evaluate the fee structure, including transaction fees, setup fees, monthly fees, and any additional charges, to ensure it aligns with your business’s transaction volume and budget.
Payment Methods Supported
Ensure that the payment processing company supports the payment methods your customers prefer, including credit and debit cards, digital wallets, or other emerging payment technologies.
Security and Compliance
Verify that the payment processing company adheres to industry security standards and offers robust fraud prevention measures to protect your business and customers’ data.
Assess the quality and availability of customer support services provided by the payment processing company, as prompt assistance can be critical in resolving any issues that may arise.
Reputation and Reviews
Research the reputation and customer reviews of the payment processing company to gain insights into the experiences of other businesses and their satisfaction with the services provided.
8 Cheapest Ways to Accept Credit Card Payments
With cash payments on the decline and contactless payments on the rise, your small business needs to be able to support a variety of payment methods. However, credit card processing fees can turn out to be a significant expense.
The good news is that you can cut down on these costs substantially if you know a few useful tips. In this article, we’ll take a look at some of the best ways to lower your credit card processing costs. Here are the 8 cheapest ways to accept credit card payments.
1. Choose a Payment Processor with a Favorable Pricing Structure
Before you choose your payment processor, make sure that they offer a pricing structure that best suits your unique business needs. The right structure can potentially save you thousands of dollars in credit card processing fees every month. So, it would be well worth your while to understand the different pricing structures that are available.
In this structure, credit card processing companies bundle the assessment fee, interchange fees, and markup into three buckets or tiers depending on the type of credit card or payment method used.
- Qualified: For non-reward and debit cards
- Mid-qualified: For standard reward cards
- Non-qualified: For card-not-present transactions and premium cards
Tiered pricing is almost always a red flag because even though many processors might advertise their low qualified rates, most of your credit card transactions will end up falling in the other two buckets (with much higher rates). Your processor is the one who will be categorizing your transactions, and since the fees are all blended, you’ll have no way of knowing just how much they’re charging you.
In this structure, credit card processors clearly note the interchange rate and the markup that they charge you. The model is fair and transparent because you know exactly what you are paying them over and above the interchange rates set by credit card networks (Mastercard, Visa, American Express, and Discover). Regardless of the type of transaction or card used, the markup remains the same.
Because of its simplicity, many small business owners and startups prefer to start off with a flat-rate pricing structure. In this model, your processor will charge you a fixed percentage for all transactions — regardless of the card type. There might also be an additional per-transaction fee depending on whether it’s a card-present or card-not-present transaction.
In this pricing model, your payment processor will charge you an annual membership or subscription fee to access their wholesale processing rates. Payment processing is simple and transparent since they don’t markup assessment and interchange fees or eat away any portion of your sales.
Stax, for example, offers subscription-based pricing without any markups, hidden charges, ancillary fees, or long-term contracts. Businesses pay only a monthly fee in exchange for wholesale processing rates and the direct cost of interchange.
2. Integrate Your Payment Processor With Your POS
Credit card processing costs usually turn out to be more affordable if you use a point-of-sale system that integrates with your payment processing platform. If your POS system is independent of your merchant service provider, you may pay several additional fees (like fraud prevention fees, account fees, etc.), over and above the processing and transaction rates.
Besides paying lower rates, you may also benefit from a lower upfront equipment cost when you choose a payment processor that integrates with your POS. For example, some processors may set you up with free credit card readers. So, make sure to check with your POS provider about the payment processing platforms they partner with. Doing so may just help your business save money.
3. Consider “Zero-Cost” Credit Card Processing for Your Small Business
One of the simplest ways to lower your card processing fees is to influence customers to pay cash for their transactions. This is also known as zero-cost or zero-fee credit card processing and can be done in two ways.
Cash discounts – In this model, you’ll be marking up all prices in your store with credit card processing costs. However, a customer who chooses to pay by cash will receive a discount on their purchases.
Surcharging – In this method, you’ll simply tack on a surcharge or fee on top of the sale price if a customer chooses to pay by credit card at checkout.
Either way, you pass on the costs of credit card processing to your customers. However, when using any of these programs, make sure to check the applicable laws in your state/area. Cash discounts are legal in all 50 states (assuming you implement them properly) and surcharges are legal in all but Connecticut, Massachusetts, and Puerto Rico. CardX by Stax can help you implement seamless surcharging and automated compliance.
4. Go with a Payment Processor That Doesn’t Charge Additional Fees
Many payment processors charge a number of additional fees (besides processing fees) that can quickly add up to hundreds of extra, unnecessary dollars if you’re not careful. Here are some types of hidden fees that you should definitely avoid paying:
- PCI compliance or PCI non-compliance fees
- Application/Setup fees
- Batch fees
- Statement fees
- Early termination fees
- Monthly (or annual) minimum fees
Make sure to look for a payment service provider that is transparent about their fees and charges. If your processor currently charges you for any of these, work with them to get rid of those charges or switch to another processor that doesn’t charge them. With Stax’ transparent pricing, for example, you never have to worry about any hidden charges or ancillary fees.
5. Lower Your Fraud Risks and Chargebacks
Chargebacks and fraud can cost your business a lot — both in terms of lost revenue and unnecessary stress. With every dispute, you may end up losing twice the sale value as chargeback fees (plus, the loss of the sale). What’s more, your payment processor may even classify you as a “high risk” merchant (with higher processing rates) if you have too many chargebacks. Here are some things you can do to cut down on fraud:
- Favor card-present transactions over card-not-present transactions
- Ask for a photo ID to verify the customer’s identity
- Ask customers to enter the CVV code whenever possible
- Use an address verification service to make sure that the customer’s billing address matches the one on file with the card issuer
6. Go with a Merchant Service Provider Instead of a Bank
A merchant service provider will set you up with a merchant account — a special type of bank account where payments are deposited before being transferred to your business bank account.
Merchant service providers allow you to process credit card payments securely. They also enable your business to accept credit card payments online without the need to redirect your customers to third-party sites.
Besides your merchant account, you’ll also get access to services like fraud protection to ensure safe and secure card transactions.
Banks, on the other hand, generally don’t offer merchant services. They would typically employ the services of a third party to process your card transactions. Needless to say, this would incur an additional cost, which would translate to higher credit card processing fees.
This is why you should choose a merchant service provider instead of a bank as it will lower your overall credit card processing costs.
7. Negotiate Better Terms to Get the Cheapest Credit Card Processing Rates
The great thing about using a membership-based service is that you might be able to negotiate lower processing rates. You might not be able to change the interchange fee since it’s set by card networks. However, if your sales volume is high enough, you could ask your payment processor to lower the fee that represents their cut.
That said, the best way to score favorable processing rates is to choose a provider that offers low rates right from the start. For example, using a payment processor like Stax, which gives you access to direct costs of interchange, means you won’t have to go through the hassle of negotiating to begin with.
8. Be Selective with the Credit Cards You Accept
It isn’t a coincidence that retail and e-commerce businesses widely accept credit card payments through Mastercard and Visa, while Amex or Discover cards find fewer takers. This is because Amex and Discover charge higher processing fees to merchants — since the rewards they offer customers are greater.
Naturally, you could lower your credit card processing costs by choosing not to accept credit card payments from these networks. However, doing this could potentially result in the loss of some customers who prefer these payment options.
Final Words on the Cheapest Ways to Accept Credit Card Payments
While it may be impossible to completely eliminate credit card processing costs, following the tips mentioned above can certainly help to reduce them significantly. Make sure to choose a payment processor that offers the lowest fees for the services you need.
Stax’ low transaction fees, free virtual terminal, user-friendly software, and integrations make it a perfect choice for growing businesses. With support for recurring payments, ACH, and level 2 and level 3 processing, Stax’ proprietary software can also help you with invoicing, customer management, reporting, and text-to-pay options.
FAQs about Accepting Credit Card Payments
Q: What are the cheapest options for accepting credit card payments?
There are several affordable options available, including mobile card readers, payment aggregators, online payment gateways, peer-to-peer payment apps, and invoicing solutions. These solutions offer cost-effective ways to accept credit card payments for businesses on a budget.
Q: Are there any hidden fees associated with accepting credit card payments?
While each payment processing provider may have different fee structures, it’s essential to review their terms and conditions to identify any potential hidden fees. Some common fees to watch for include transaction fees, monthly statement fees, gateway fees, account maintenance fees, PCI compliance fees, and terminal or equipment rental fees.
Q: Can I accept credit card payments without paying a monthly fee?
Yes, certain payment options, such as peer-to-peer payment apps, may not charge monthly fees to accept payments. However, it’s important to consider other factors, such as transaction fees or limitations, associated with these options before making a decision.
Q: Are there transaction fees associated with accepting credit card payments?
Yes, transaction fees are typically charged for each credit card transaction processed. These fees can vary depending on the provider, type of transaction, and the payment method used. It’s important to compare transaction fees among different providers to find the most cost-effective solution for your business.
Our transparent subscription-based pricing with 0% markup, makes us one of the best credit card processors in the market today. Contact our award-winning customer support team today to learn how we can help you level up your business.