What is the Best Way to Take Credit Cards For a Small Business? That question comes up a lot among small business owners. Usually after they sign up for the wrong service and get their first bill, sucking all of the profit right out of their wallet.
Credit card processing has come along way since the first time my Dad and my uncle started accepting Visa “Charge Plates”. Some of you may not even remember the old four part carbon receipts. The customer got one, the store got one and two went to the bank and a month or so later you got paid.
For the last two decades, my businesses have had credit card processing through banks, credit card processors and we even tried it through QuickBooks for a while.
It used to be that a regular Visa or Mastercard would cost 1%, and American Express 2% and Diners Club 2.25%. Then came the rewards cards and now the entire lot will cost you anywhere from 2.4% to 3% depending on several factors. The irony is that consumers looking for a better deal and getting rewards cards actually caused the prices that vendors need to charge to go up.
Even though most credit card processors and credit card companies prohibit separate pricing for credit and cash transactions unless you are a gas station many vendors do it anyway. Starting in January, we are offering a 2% quick pay cash discount for customers who pay by cash or check before their bill is due.
More importantly, just about any small business anywhere can take credit cards with the use of a smart phone and a small reader. If you are a very low risk business like mine you can probably get away with a mag stripe reader. I mean how many people are going to steal a credit card to buy one of my books, attend a class or get consulting for their business? Those little stripe readers are free.
If you have a store, there are finally some great integrated cash register, inventory and credit card processing units that don’t cost much more than a tablet. Most of these solutions also include a chip reader. If you didn’t know it, if you take a stolen credit card unknowingly and it had a chip and you didn’t use a chip reader, you as the vendor foot the bill. If you sell to the general public and don’t know your customers, spend the money on a chip reader.
All of the companies have about the same processing times and rules. Our least favorite by a longshot is PayPal. The main policy of using your account balance first, checking account second and then a credit card has caught everyone I talked to at least once. For fraud reasons we have a positive transfer bank balance meaning that there is only enough money in our operational account to cover the checks written and the checks are verified.
The problem is that PayPal has convinced the banks not to play, so instead of declining the ACH transfer, our bank pays it and charges us a $29 NSF fee because we have the money in another account. We have stopped using PayPal to pay for goods, and are migrating our clients to another solution. The other reason we don’t suggest PayPal is the accounting problems. Because PayPal is like a separate checking account and money goes in and out, there is some significant additional time required to figure out where your money is really going.
Unless you have a big eBay store, we can’t see a reason to use PayPal given the competition.
We are only rating the big guys here that provide a simple all inclusive solution. There are over 500 customer tablet based POS systems out there. Easy with unique features for a specific business. If you have less than 5 stores, you need to keep it simple and focus on the business, not the POS tools. Besides you don’t need to worry about your POS failing when the vendor figures out they were undercharging and are out of money.
One of the decisions you are going to have to make is to buy or lease and host or cloud the data. Do you want to own everything or trust it to the vendor and the cloud. When you lease equipment and don’t host your data, when they go down, you go down. We aren’t listing POS systems like Vend because they don’t offer card processing, just POS.
So here is the breakdown of the current systems out there big enough to make our list that we would trust with our money.
Square – 2.75% – not cheap but no additional per transaction fees, no monthly charges, chip readers and POS stands are available for just $99. Finally Square now has online invoicing and processing for the same fees making it one of the easiest systems to use.
Intuit GoPayment – $19.95/month plus 1.6% per transaction or 3.2% if the card doesn’t swipe and it is keyed in. If you do more than $1600 a month in store Intuit GoPayment starts costing you less than PayPal and at $1900 a month, it is less than Square in total fees. If you don’t want to pay a monthly fee Intuit GoPayment is just 2.4% plus $.25 per swipe and 3.4% + $.25 for keyed entry. Intuit also offers a POS system for stores that integrates with QuickBooks. All that said, Intuit is looking more like a bank every day and the solutions aren’t as simple, clean or easy as some others we tested. Intuit’s website is fabulously clandestine about pricing with lots of free trials. It took over 40 minutes to get an answer from the person on LiveChat.
Stripe – 2.9% + $.30 per transaction and another .5% if they use bitcoin to pay you for the bitcoin to dollar conversion fees. Pricey, well rated overall, best feature is you can create an app to sell stuff like the order app at Taco Bell. That alone could be worth the extra half point.
Google PayAnywhere – 2.65% per swipe, requires android device.
PayPal – 2.9% + $.30 for online payments 2.7% in store swipe. If you have an eBay store you are stuck with PayPal, eBay forbids any other checkout system.
