"Y'all Take Credit?" The Best Ways to Process Credit Cards for Your Small Business

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For decades, credit-card processing was only available to the biggest department stores, restaurants and online stores. As the small business revolution has led to an increase in the number of entrepreneurs running their businesses out of less-than-traditional locales (like the back of a food truck, for example) a number of credit card processors have sprung up to meet the needs of the mobile entrepreneur. Whether you’re selling tacos, launching a clothing line, or walking dogs, if you have a smartphone, there’s a good chance you can take credit card payments for your work.

So, what’s the best fit for your business? That’s up to you, but let’s take a look at two of the biggest competitors.

Square

If there’s one company that can be credited with bringing the “credit card processing for everyone” movement into the mainstream, it’s likely Square. Their Square Reader launched in 2010 and allowed businesses to process credit cards simply by plugging the reader into a phone’s headphone jack and using the company’s smartphone app. The company has expanded its product line in recent years and now offers full point-of-sale functionality through its Square Register ($999), Square Terminal ($399) and Square Stand ($169) products. If those price points are a little steep for your start-up, Square offers free point-of-sale software that can run on most iPads you might have lying around. Pair that software with a chip reader ($35 or $49, depending on your style preferences) or the free magstripe reader Square offers and your company will be ready to take credit card payments for everything you sell!

The processing fees for Square vary slightly depending on the method you use to input the card information. Tapping or swiping a card through the Square Stand or Square Reader brings a fee of 2.75% of the total plus 10¢ per transaction, while keying in the card info brings Square’s highest transaction cost at 3.5% + 15¢.

Square spends a lot of its marketing time driving home the fact that they don’t have hidden fees. After any cost you pay on hardware set-up, the only cost to you for using Square is the processing fee. However, it often takes one-to-two business days for processed funds to transition to your bank account.

PayPal

PayPal has long been the leading name in online credit card processing, so it shouldn’t be a surprise that they developed offerings for business owners looking to take credit card payments in person as well as online. On one level, PayPal’s point-of-sale strategy looks very similar to Square’s - sell hardware that connects to mobile apps, then charge a percentage of the overall transaction as a processing fee. PayPal’s readers range from $14.99 for a mobile card reader that connects to your phone’s headphone jack up to $99.99 for a Bluetooth Chip Card Reader.

PayPal’s transaction fees are slightly lower than Square’s. In-person transactions bring a flat fee of 2.7% of the transaction amount, without an additional fixed fee. The major difference that PayPal offers comes with their dominance in the online space. If your business does any work selling online, there’s a good chance you already have a PayPal account set up - and you are likely already using it to drive your business. Taking advantage of PayPal’s in-person program (referred to as PayPal Here) means that both in-person and online sales can funnel into the same place. Add to this the ability to use your PayPal account to pay for products and services at retailers around the internet and one of the major benefits of PayPal becomes being able use your funds directly without transferring them to your checking account first.

It’s worth noting that the design of PayPal’s software and hardware takes a different tack than Square’s offerings. The divide between the products feels a little like the divide between Apple products and Microsoft products. They’ll both work for a wide variety of people, but the decision may ultimately come down to a matter of taste. (In this case, the sleeker design of Square’s products feels a little more like Apple).

Whether you choose to go with Square, PayPal or another provider, there are a few important factors to consider.

Start-Up Costs: How much will you have to spend before you’re able to process your first transaction? This number can vary wildly between services, so be sure you know what you’re getting into.

Ongoing Costs and Fees: One of the reasons we like both PayPal and Square is that they have set their services up in a way that minimizes ongoing costs and fees. For the most part, you only pay the services when you make a sale. If you are considering other alternatives, it’s worth the time to do the research and make sure there aren’t fees you have not considered.

Sustainability: Square and PayPal are leaders in the field, so there is a pretty good chance they will both be around for the future. If you are looking into different options (either in search of a lower transaction rate or to take advantage of options like Bitcoin payment processing that Square and PayPal don’t support) try to find a provider that is in it for the long haul. Any savings you may find through other avenues will be lost if you have to roll your entire operation over when your provider goes out of business.

Accepting credit card payments has become an integral part of many business models. Choosing a credit card processor that meets your needs is a big decision, but considering all factors before pulling the trigger can lead you to a partner that can help fuel your business for years to come.

Research helps with more than just your credit card processor. If you are looking for research and support for your business plan, marketing strategy, audience and competitor analysis and more, skysthelimit.org has the answers for you. Sign up today to gain access to our free Pathway to Business Ownership plan and bring your business to life today!

Alex Jonathan Brown