Accepting credit card payments has never been easier for small businesses. In addition to using credit card terminals and point-of-sale (POS) systems, you can accept payments on your mobile devices. It requires signing up for an account with a payment processor that offers mobile credit card processing, downloading an app and purchasing a mobile card reader.
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Can I use my phone to process credit card payments?
You can accept credit card payments on your phone by partnering with a payment processor that offers top mobile credit card processing solutions. Two of the most popular brands are Square and PayPal; each company offers mobile credit card readers and pay-as-you-go terms specifically for mobile credit card processing.
Accepting mobile credit card payments can offer your business a cost-effective way to accept card payments. Another benefit is that you can accept cards at events or even throughout your establishment, such as a restaurant that accepts payments tableside. For companies that don't yet accept card payments, opening an account and purchasing a card reader from a payment facilitator – such as Square, SumUp or PayPal – is an easy solution. For organizations that already process credit cards using a highly rated POS system, mobile credit card payments can generally be set up through your current full-service payment processor. [Related: Understanding PayPal Credit Card Fees]
Working with a payment facilitator is generally easy and straightforward. Most businesses fill out a form online. There are often no credit checks or requirements to submit processing statements or marketing materials, which is helpful for companies looking to accept credit cards for the first time.
Partnering with a full-service processor for mobile credit and debit card payments can be more complicated, though, as you will likely need to apply for an account. These companies require more information and documentation, but sales reps are eager to work with you and often offer to help fill out the application over the phone.
Once this is submitted, there is generally a waiting period prior to approval. If you don't meet the processor's standards, your application could be rejected.
Benefits of accepting credit cards by mobile phone
Accepting mobile payments is not necessary for every industry, but in many instances it expands where you can do business and enhances your checkout process. Here are some benefits of mobile credit card processing that might apply to how you conduct business:
Provides customer convenience
If you have a mobile business – such as a food truck, a home services company or a craft vendor selling at farmers markets – the ability to accept credit cards with your mobile phone is a must. Expanding the payment type that you accept beyond just cash is more convenient for your customers because few people carry cash anymore. When you make it easy for customers to buy from you, sales revenue increases.
Even if your business has a fixed location, having mobile payment capability can give you the flexibility to try out new venues. For example, if you have a restaurant, the ability to take credit cards with your Android device or iPhone will allow you to participate in food festivals. Clothing and jewelry stores with mobile payment capability can try out pop-up shops and trunk shows. Even sales consultants can accept payment when visiting client locations.
Shortens customer wait times
Some fixed-location businesses utilize mobile payment equipment to quicken the checkout process. This is a good strategy for high volume businesses and those running popular promotions that result in long checkout lines. When customers have a lengthy wait to pay, some of them will decide it's not worth the purchase. However, if you have cashiers with mobile payment devices attending to customers in line, you can significantly reduce wait time and reap all of the sales.
Closes the sale
If you have the type of business that requires customers to place a deposit to initiate a sale – such as a roofing contractor – accepting mobile payments can improve your closing ratio. Rather than giving customers a lag time in which they may reconsider their decision, your rep can accept payment while in the customer's home or business. This reduces cancellations and speeds up the sale.
Improves bill collection
Instead of chasing down overdue bills or waiting for customers to mail you a check, you will be able to accept payment at the time of service. Having customers pay on the spot saves you time and money, and helps you avoid write-offs for bad debt.
Offers instant access to your financial data
In addition to mobile credit card readers, you will have a smartphone app that shows you all of your sales, product and customer data at all times. If you need to make a decision or need that information for a third-party the data is at your fingertips.
How to accept credit card payments on your phone, step by step
Follow these steps to accept credit card payments via your phone:
1. Sign up with a credit card processor.
If you do not already accept credit cards, you will need to get a merchant account with a top credit card processor or an account with a credit card facilitator – like PayPal or Square. Make sure that the processor provides mobile card readers and supports mobile payments.
2. Download the payment app.
Each processor or facilitator has its own payment app. You will need to download it from the processor and provide basic information about your business. Some companies allow you to get the app first and sign up for an account within it.
3. Get a mobile reader.
Many processors provide a free mobile credit card swiper so you can begin accepting payments, but you should order a mobile credit card reader that accepts chip cards, as they deter counterfeit fraud. This technology shields you from liability if you unknowingly accept a fake card. You may also want to get one that is enabled for NFC payments, which allow you to accept tap cards, digital wallets and payment apps – such as Apple Pay and Google Pay.
Mobile credit card readers connect to your phone through either Bluetooth or your phone's headphone jack. When you accept card payments, the transactions are encrypted and transmitted to the processor, and no sensitive card data is stored on your phone.
4. Enable a virtual terminal.
If you do few mobile transactions and prefer to avoid buying a mobile reader, you can still accept payment by phone with a virtual terminal. This is usually a secure webpage hosted by the payment processor where you manually input the patron's credit card information. Although nearly every payment processor has this capability, you will probably have to enable it within your account. The exception is when it is incorporated into the mobile payment app, which will generally allow you to do this without additional setup.
5. Determine which credit card information is needed.
This only applies if you are using a virtual terminal and may include these items:
- Credit card number
- Expiration date
- Customer's name as it appears on the card
- Customer's billing ZIP code
- Customer's billing address
6. Enter the order.
Enter the order into the virtual terminal or process the customer's card with the card reader.
7. Process a receipt.
Send the customer a receipt or print one out if you have a mobile receipt printer. Most payment apps and virtual terminals give you the option to email receipts.
After the transaction is settled, the money is deposited into your bank account, minus the processor's fee.
How much does it cost to accept cards using your smartphone?
You'll likely encounter three main pricing models. The best model often depends on the type of business you run, and the volume and value of your credit card transactions.
If you work with a payment facilitator like Square, SumUp, or PayPal to accept cards using your phone, you will pay flat-rate pricing. If you work with a full-service credit card processor, you often have a choice of interchange-plus or tiered pricing.
Here's how each pricing model works.
- Flat-rate pricing: Flat-rate pricing is the simplest pricing model. Although its rates often appear higher than advertised prices for other models, there are usually no additional fees or lengthy contracts, which make it a better value for businesses that process less than $3,000 per month. Flat-rate pricing is usually expressed as either a flat percentage of the transaction value or a flat percentage plus a small per-transaction fee.
- Interchange-plus pricing: With interchange-plus pricing, you would pay what is known as the wholesale rate, along with the processor's markup. The wholesale rate consists of the interchange fee (a charge set by the card networks that all processors must pay) and the assessment fee (another nonnegotiable expense to processors by card brands). The processor's markup in this model represents its profit on facilitating your credit card transactions. This is the only negotiable part of the cost, and it's the rate you are quoted when you call for pricing. This pricing model is favored by industry experts because of its transparency.
- Tiered pricing: Tiered pricing categorizes all transactions into tiers: qualified, midqualified and nonqualified. Qualified transactions are basic credit or debit cards swiped at the POS. Qualified transactions have the lowest rates, which is typically the rate advertised by the processor. Midqualified transactions are usually reward cards swiped at the POS. Nonqualified transactions often include premium rewards cards, corporate cards and keyed-in or card-not-present transactions. Nonqualified transactions have the most expensive rates.
Ultimately, the rates you pay will be influenced by your monthly processing volume, your average transaction value and your industry. Processors may consider your history and your business and personal credit when determining your rates. With these factors in mind, expect most processors' rates to be 2% to 4% for each transaction.
If you choose to work with a full-service payment processor, be mindful of additional fees. In many cases, you'll be asked to sign a service contract. The best are month-to-month contracts; however, many contracts have three-year terms with expensive early cancellation penalties. [Learn more in our review of Payment Depot, which doesn't require contracts and has no early termination fees.]
Here are some of the fees full-service credit card processors charge:
- Monthly fee: This covers the processor's cost for preparing monthly statements and customer service. Also known as a statement fee, it's typically $5 to $15.
- Gateway fee: If you want to accept online payments, you'll need a payment gateway. This fee varies, depending on the one you use. Although usually a flat monthly fee is offered, some providers tack on a small per-transaction fee.
- PCI compliance: The Payment Card Industry (PCI) sets strict regulations to ensure that your credit card transactions are secure to prevent fraud. You are required to annually certify as compliant, and most full-service processors charge a fee to help you do this. It is usually billed annually and costs approximately $100.
- PCI noncompliance: If you fail to comply with PCI standards, you're charged this fee monthly until you certify. This fee is quite high – sometimes $50 or more – to discourage you from letting your PCI compliance lapse.
- Monthly minimum: Some processors charge a monthly minimum, which means you must process a certain dollar amount of transactions each month. For example, if the monthly minimum is $25, and you only have $12 in processing fees, you will be charged an additional $13. Remember, the minimum is usually based on processing fees – not transaction value – so you need to check with your processor about how much you must process each month to meet the minimum.
How can you accept credit card payments without fees?
There are always processing fees associated with accepting credit card payments – the banks, credit card networks and processing companies all want a small cut of every transaction you run.
In some states, you can pass transaction fees on to your customers as a surcharge, but the laws around this are tricky, so you should consult a lawyer before doing so. You should also be aware that this strategy could be a turnoff to your customers.
What is the best way to accept credit cards?
While most payment processors will send you a free mobile credit card swiper that scans the magnetic stripe, it is wise to invest in an EMV-compliant card reader. EMV chips work with card readers to encrypt the transaction data and protect it while it is in transit; EMV chip cards are far more difficult to counterfeit than magstripe cards.
EMV-compliant readers have become the standard in credit and debit card transactions; failing to use one opens your business up to liability for any counterfeit fraud that results from unwittingly accepting a fake card using a card swiper.
Even though it's not free, an EMV-compliant mobile card reader is affordable, costing $20 to $50. The best mobile card readers are also NFC-enabled, which allows you to accept contactless payments – such as those from digital wallets like Google Pay, Samsung Pay or Apple Pay, and contactless devices.
How do you accept credit card payments without a merchant account?
To accept card payments without a merchant account, you need to set up an account with an account aggregator – also known as a mobile credit card processor – like Square, PayPal and SumUp.
Working with this type of processor is usually less expensive because even though processing fees are higher, you aren't charged monthly or annual account fees. The only fee you pay are processing fees for the transactions you accept.
Accepting credit cards on iPhone vs. Android
The best mobile credit card processors offer applications that are platform agnostic. These apps work across all devices, and on iOS and Android operating systems. Some processors work exclusively with one platform, but most companies have mobile apps for both iOS and Android.
Some apps offer different functionality based on its operating system. Apple's iOS, for example, tends to be more popular, so some processors give the iOS-based mobile applications frequent updates. However, some mobile apps vary in functionality based on the device itself rather than the platform. For example, some mobile payment processing apps have more feature-rich offerings on a tablet than on a smartphone.
Mobile credit card payments improve POS transactions
Accepting credit card payments on mobile devices offers benefits to your small business. For new companies, mobile credit card processors lower the barrier to entry by cutting costs, allowing virtually anyone to accept a card payment from their customers. For established businesses that frequently travel to trade shows or that want to offer convenience and flexibility to their patrons, mobile credit card payments serve to increase sales and boost customer satisfaction.
Whatever your reason for accepting card payments using your phone, you have many options. Choose a credit card processor or payment facilitator that offers advantageous terms and a user-friendly app. Once you find the right vendor for your mobile card transactions, consider investing in hardware that is EMV-compliant and NFC-enabled.
By following these tips, you'll be processing mobile payments in no time. Your customers – and your bottom line – will undoubtedly thank you.
Jennifer Dublino contributed to the writing and research in this article.