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How To Accept Credit Card Payments (3 Methods & FAQs)

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Why credit card payments?

As a business owner, you’re always scratching your head for new ways to increase your sales. Having the option of credit card payments is one of them. In today’s world of technological advancement, people all around the globe prefer to pay with credit and debit cards.

In fact, 68% of UK adults own a credit card as of November 2023. That means, if you’re not using card payments, you’re likely missing out on sales and customer trust.

What are the advantages of accepting credit card payments?

  • Your sales will increase. According to a Forbes report (by Katherine Haan 2024), 58% of people said card payments are more likely to make them spend the most money. This is because they might only have a small amount of cash in their wallet, but their credit card limit is usually far more.
  • The customers’ trust in your business increases. By offering multiple payment options including credit and debit cards, you can cater to customer preferences and improve their overall shopping experience. Moreover, when they see that you accept cards from major companies, they see you as legitimate and trustworthy. The same report found that more than 70% of the people said that they prefer a business to accept card payments.
  • The risk of theft decreases. With cash transactions, there’s a greater chance of theft and employee dishonesty. With credit card transactions, that reduces significantly. In addition, credit card companies have safety features like encryption and tokenisation, which limit fraud chances as well.

Now that you know of its competence, let’s discuss how to take credit card payments.

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What are the ways of taking credit card payments?

Businesses can accept credit card payments online, over the phone, or in person.

1. Credit card payments online

Credit card payment online

Online credit card payments are suitable for e-commerce businesses, companies providing digital services or reservation-based businesses like restaurants. This method requires having a digital storefront, payment gateway and a payment processor.

  • A digital storefront is a business’s home page where they display their products and services.
  • A payment gateway is an interface where customers can input their payment details.
  • Payment processors are companies that process the customers’ payment details, and cross-check them with the credit card networks and issuing banks to enable the secure transfer of funds.

This method has a high processing fee due to the associated risk of fraud.

Top advantage: Accepting online credit card payments allows businesses to accept the payments 24/7. This provides customers with the flexibility to make purchases at their convenience.

2. Credit card payments on the phone

Phone payments are suitable for businesses that have a speedy inflow of customers like restaurants with drive-thrus or reservation-based businesses like hotels. This method requires you to use your computer as a virtual terminal or you need a POS system.

The customer shares their credit card number with the merchant who manually enters it into the card reader and processes the payment. It is also called a card-not-present transaction because the customer doesn’t need to physically have a credit card for payment.

Top advantage: By accepting payments over the phone, businesses can cater to customers who don’t even carry their credit cards with them. This helps to expand customer the customer base.

3. Credit card payments in person

Credit card payment in person

In-person credit card payment is helpful for brick-and-mortar businesses like grocery stores and furniture retailers or mobile business merchants like food trucks. This method requires a POS system of some kind and a card reader (although the exact hardware requirement will depend on the setup of the business).

The customer walks to the POS system and uses his card on the card reader to pay. 4 types of cards can be processed by the card readers: pin, chip, contactless and magnetic stripe. You can compare and choose the best card readers for your business, but generally, they consist of 2 types.

  • Countertop card readers. These card readers are attached to the counter and the customer has to physically come to the counter to make the payment.
  • Mobile card readers. These are portable card readers that work by connecting to Wi-fi, cellular data or Bluetooth and allow payments to be made on the go. They are suitable for on-site service providers like landscapers, in-home masseuses or electricians.

This method generally has low transaction fees.

Top advantage: Accepting in-person credit card payments reduces the risk of fraud. When a customer presents the card in person, the merchant can check its authenticity by looking at features like the chip or hologram or comparing the signature with the customer’s identification.

What are the steps to accepting credit card payments?

1. Find a credit card processing provider

Many companies provide credit card processing, but you need to find the right one for your business. Keep in mind the following considerations while making the decision:

  • What are the fees for the transactions, rent, hardware, etc?
  • What is the volume of your transactions? Many companies provide better rates if the volume is high.
  • What is your mode of accepting card payments? Online, mobile or in-person.
  • What type of credit cards do you intend to accept?
  • Does the processor’s software integrate seamlessly with your website (if you run an online business) or is compatible with your outlet (if you own a brick-and-mortar business).

2. Open a merchant account

A merchant account is a type of business account that enables businesses to accept card payments from their customers.

This is necessary if you plan to take in-person credit card payments. Most banks in the UK (e.g. Starling, Revolut, HSBC and Barclaycard) have in-house merchant services that offer multiple features like sales tracking and loyalty programs.

If you want to accept credit card payments without a merchant account, payment service providers like PayPal, Stripe and Square can help you out They charge a transaction fee to transfer money from your customers directly into your business account.

3. Set up payment terminals

Setting up payment terminals is the final step. If you’re a brick-and-mortar business, you need payment terminals like a card reader (the price of each card reader will vary) and a point-of sale (POS). Your customers can pay you easily using them.

If you’re an online business, however, you will not be needing this hardware but you’ll still have to set up an online payment channel. For this, you may need to hire a website developer or get technical support from your card processing provider.

If you’re an e-commerce business, though, most platforms like Shopify have inbuilt payment portals for your convenience.

What are the fees for accepting credit card payments?

Generally, the cost of accepting credit card payments includes the hardware costs and processing fees.

Hardware cost: This includes the cost of the card readers or rental charges if you choose to rent out the card reader. And the cost of a POS system.

Processing fee: This is the fee that is charged per transaction, based on the type of credit card (Reward credit card, cashback credit card, etc.).
Because the card processing providers use different technologies to conduct fraud checks and evaluate available funds in the bank account, this fee is different for each provider but it generally falls between 1.5% to 3.5% plus a flat fee.

Here are some rates.

Service provider Processing fee/transaction
Stripe
1.5% + £0.20 for standard UK cards. 1.9% + £0.20 for premium UK cards
Square
1.75% for in-person transactions. 1.4% - 2.5% + £0.25 for online transactions on UK and non-UK cards respectively
PayPal
1.29% - 3.4% + £0.20 - £0.30

How long does it take to process a credit card transaction?

Credit card transactions generally take around 2-5 days to be fully settled. It is to be noted that the exact amount depends on the card processing provider and your bank.

If the bank conducts additional fraud checks and technical details, the duration can be prolonged but it will not be longer than 5 days (generally). That being said, many service providers in the UK offer next-day or same-day payments as well, although they may charge extra for it.

While you won’t receive the credit card payment as quickly as a cash or debit card payment, the growing credit card payment trend in the country depicts that businesses should integrate this payment method into their system.

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FAQs

You can start getting credit card payments without having a merchant account, thanks to payment service providers like Square, Paypal, SumUp and Stripe. They will take a transaction fee and transfer the money from your customers directly into your business account.

The transaction fees for credit card payments vary between 1.5% to 3.5% plus flat rate (authorisation + merchant fee) depending on the credit card company and the payment method. E.g. in-person transactions cost less than online transactions since there’s a higher risk of fraud in online transfers.

Not all credit card providers allow this but you can transfer money from your credit card to your bank account if you have the facility. It can be done through the mobile app of your bank or ATMs.

If you use the app, simply select the “From Credit Card” tab and enter the amount to transfer. If you use the ATM, select the “Cash Advance” option on the screen and then enter the amount.

Written by:

Isabella Robinson
Isabella Robinson
Isabella Robinson is a seasoned business content writer, leveraging several years of experience to craft impactful narratives that seamlessly blend business insights with engaging storytelling across diverse industries. Her expertise lies in delivering compelling content that resonates with audiences.