There are three main types of payments; in-person, online and over-the-phone. Find which payment processing method is best for your business with the help from our team at Penni.
If you are a business owner selling a product or a service, you'll need a payment processing method in order for customers to make a purchase. Accepting payment is the easy part; it is the backend that can get complicated and confusing, which is why we have payment processing companies to help with these transactions.
There are a few different payment processing methods available, depending on what kind of business you have and where you have transactions take place. You can have in-person payments, online payments, and over-the-phone payments. But which payment processing method is right for your business?
The different payment processing methods
In-person payments
If your business has a physical location, you'll need to be able to accept credit card payments at your cash register. The Federal Reserve Bank of San Francisco found that consumers used cash in only 26% of transactions in 2019.
You'll need a point-of-sale (POS) system for these in-person transactions, and part of this system is a payment processing terminal. You can buy this machine or rent one from a payment processing company. This allows customers to insert, swipe or tap their card and their transaction will be approved or declined within seconds.
If you do not have a physical machine, you can take advantage of using an online virtual terminal. This kind of terminal comes in the form of a software that you can install on your smartphone or tablet, and enables you to accept credit card payments by typing in the information. However, customers can be reluctant to actually hand over their credit card information, and would much rather use a physical card terminal.
Contactless payments have become increasingly popular, especially because of the Covid-19 pandemic. More and more business owners are choosing to have terminals that have near-field communication (NFC) technology so customers can just tap their credit card and not touch the device.
Online payments
If your business has a website with an online store, you'll need an online payment gateway that will work the best for your business.
There are two components to an online store, a digital storefront and a payment gateway. The digital storefront enables you to visually display your products and services that you sell. The payment gateway works together with your e-commerce store to help you take payments.
Online transactions typically have higher processing fees than in-person transactions, so keep pricing in mind when searching for a provider.
Over-the-phone payments
This is a common payment method used by restaurants and retailers, or in a scenario when the card is not present. The customer will have to share their credit card details with the merchant over the phone and the merchant will then have to insert those numbers in their terminal. Terminals will typically come with a “card not present” function where you can type the card details straight into the device.
These transactions will cost you more because they have a higher fraud risk.
The types of processing fees
You'll have to pay fees to your processing provider each time you accept a credit card payment. Processing fees vary by provider, but there are usually two fees associated with a payment.
Processing rate
This fee is a percentage of each payment and is based on the average transaction amount of the business.
Transaction fees
A flat fee charged to accept the credit card payment for each transaction. As previously mentioned, these fees are subject to change depending on the payment method.
Opening up a merchant account
After you've chosen a credit card processing company, you'll want to create a merchant services account with them. You will have to provide your business account information where the money will be deposited. You can also obtain a physical card terminal for your in-person payments.
You can check out our article about how to choose a bank card terminal. Only you can decide what is right for your business. As long as you know what you need and you choose a reliable and reputable payment processor and POS machine, you'll will be ready to start accepting payment from your customers.
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