Credit Card Processing Services for Small Businesses

Customers spend more money when they use credit cards.
Customers spend more money when they use credit cards. (Image: Jupiterimages/Brand X Pictures/Getty Images)

In order to facilitate customer payments, most small retail businesses enter into arrangements with merchant services companies that handle credit card transactions. Credit card processing can be costly for a small business because merchant services companies charge a variety of fees. However the capacity to accept credit cards enables a small business to dramatically expand its sales potential, usually justifying the expense of the fees.


Credit cards have become such a common form of payment that many customers don't even carry cash anymore. If your business does not accept credit cards, then many potential customers are simply unable to pay for your products and services. According to a research study led by Priya Raghubir of New York University, customers tend to spend more money when they use credit cards than when they pay with cash. Although this trend has disturbing consequences for consumer credit, it can be advantageous for a small business owner interested in expanding his bottom line.


Small business credit card processing can be expensive because business owners must pay fees on each transactions -- percentage fees on the total dollar amount of the transactions they process -- as well as monthly fees and sometimes annual fees. In order to choose the best fee structure for your type of business, assess your sales patterns. If you own a business such as a coffee shop that processes a large number of small transactions, choose a fee structure with a small cost per transaction even if you pay a higher overall percentage fee. If you own a business such as a construction company that processes a limited number of large transactions, choose a fee structure with a low overall percentage fee, even if you have to pay a higher fee per transaction.


In order to process credit card transactions, you will need a credit card processing terminal. If you will be physically swiping customer credit cards and collecting customer signatures on receipts, you will need a terminal with a printer. You can purchase or lease a credit card terminal from your credit card company or from an office equipment store. Credit card terminal leases tend to come with terms of at least three years, so if you can afford to purchase a machine, you will save money in the long run.


Your credit card processing company will provide you with monthly statements containing information about the sums you have processed and the fees you have paid. Your statement will list your transactions in batches corresponding to the cumulative totals of transactions that you close out on your terminal, sending these transaction totals to your merchant services company, which transfers the funds to your linked bank account.

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