Small business basics: getting set up to accept credit cards

In this article:

• What kind of payment processing solution is best for your business?
• What does the application process look like for payment processing?
• What documentation do you need to get approved to accept credit cards?
• How much does credit card processing cost?

Accepting credit card payments is table stakes for today’s businesses, even for small, local shops or roadside stands. If your business isn’t accepting credit cards as a form of payment, then you are losing out on valuable opportunities to gain more revenue and valuable customer data that can power your marketing and customer retention efforts. 

Let us help you make this process easier by walking you through the application and approval process to start accepting card payments.

What kind of payment processing solution do you need?

Before you can ever apply and get approved to start accepting credit cards, you need to decide what you want and what you need. What solution is going to work best for your business?

Asking yourself these questions can help guide you down the right path:

• What type of payments do you need to accept? (Cash, checks, gift cards, credit cards, online payments, etc.)
• What are the pros and cons of each payment type?
• What are the fees associated with processing credit cards using different providers?
• How quickly do you need to start accepting credit card payments?
• Do you need any equipment like a terminal or mobile card reader?

Do your research to determine which solution will be best for your business. And don’t just stick with the first payment processor you come across. Call at least two or three other service providers and processors to get an idea for their rates, approval process, and setup time, and then make a more informed decision from there. 

What does the application process look like?

Depending on the type of credit card processing solution you choose, your application and approval process can vary a lot. 

Most credit card processors, whether merchant account or third-party solution, have an online application that you can fill out. 

Traditional merchant accounts through a financial institution often have a much more in-depth and rigorous application process than other third-party payment processors. 

Whichever solution you decide to go with, you will need to have specific information ready in order to even apply. Oftentimes, your service provider will also ask for additional information to help mitigate their risk of doing business with you.

Most providers have some sort of underwriting process to help them gather and validate the information they need. 

In order to give your business the best chance to get approved, you’ll need to provide in-depth information about your business, including

• Business information
• Articles of incorporation
• Financial statements
• Bank account information 
• Credit cards you want to accept 
• Other supporting documents

Once you’ve completed the application for your desired solution, then the approval process begins. For some providers, the approval process can happen as quickly as the same day and for others, it can take up to several weeks. 

What do you need to get approved to accept credit cards?

Let’s go into a little more detail about each of the items above that you may need for the application process. Understanding what these service providers are looking for and providing as much information as possible will give you a better chance to be approved. 

Business/personal information

The application you fill out will ask for several pieces of information regarding your business, and depending on your circumstances maybe even a few personal items. Most credit card processors will ask for at least the following information:

• Official business name (this should match what your bank account has on record)
• Business phone number
• Business email address
• Business address
• What you are selling (this is important because some payment processors won’t work with certain types of products like live animals, firearms, adult entertainment, etc.)
• EIN, tax ID, or social security number

These are the basics that most credit card processors will ask for, or start with anyway. For several third-party solutions, you may be able to sign up for your account with this information, provide your banking information, and get started the same day. But you should be aware that you will generally pay more for processing with a third-party payments provider than you will if you get set up with a traditional processor with competitive rates.

Read more in our article explaining all the different credit card processing fees.

Articles of incorporation

If you are applying for a merchant account or other provider that requires more in-depth information, you may want to have your articles of incorporation ready. Of course, this only applies to corporations. This will help your service provider to verify that your business is legit. 

Along with this, whether you have a corporation or not, providing your business license and other permits can be helpful to prove your legitimacy. 

Financial statements

Financial statements can help a service provider further determine how risky it will be to work with you. Depending on the statements they ask for, these may reveal your debts, your income, and other financial obligations that you have. 

Some documents to have ready:

• Bank statements
• Processing statements (which might include transaction history, refunds, and chargebacks)
• Credit report (not all providers will ask for this, but it’s good to have ready just in case)

Merchant account providers are generally looking for fraud risk when they ask for this information. 

Bank account information 

In order to get the money from your transactions, you’ll need to provide your business bank account information. This will usually include your business name, a checking and routing number, and sometimes a voided check. 

Have all of this ready before you start filling out your application so that you can get through the process as quickly as possible. 

Credit cards you want to accept 

Some service providers will accept most credit cards (Visa, MasterCard, AmEx, etc.) and you won’t have to worry about this. 

However, some providers may only accept certain credit cards or require you to choose the credit cards that you want to accept. The reason for this is often the fees associated with each credit card network. They each require interchange fees for the use of their networks, which are the fees that your service provider has to pay them—and this is usually passed on to you. Some networks are more expensive than others.

Other supporting documents

It’s always a good idea to be overprepared, so try to have as much information ready as possible. Depending on the service provider you choose, you may be asked to provide additional information after you’ve submitted your application. 

This additional information is just to help mitigate the provider’s risk of doing business with you and help them see that you run a legitimate business. 

Some of the supporting documents you may be asked for:

• Marketing materials with your branding and business name
• Business plan
• Business policies, like returns and cancellations or shipping policies
• Sales forecasts
• Inventory reports

Ever service provider may handle this process differently, so it’s always a good idea to ask upfront what kind of information they require to approve your business to start accepting credit cards. But this list will give you a good starting point and idea of what to expect. 

How much should I pay for credit card processing?

Different processors and payments providers all have different rates and ways of determining your costs for accepting credit card payments. Let’s go over the main options briefly. 

Interchange plus pricing

Some base their fees on what is called “interchange plus” pricing, where they pay the current “interchange rate” charged by the big credit card networks and add a markup to cover their cost and profit margin, and generally a per-transaction fee on top of that.

Flat rate pricing

Other payments service providers charge what is called “flat rate” processing, which means that you simply take a percentage of the total cost of an item, generally between around 2.4% and 3%, plus a per-transaction fee, typically between $.10 and $.30. The percentages and fees can change depending on how you process the payment (for example, manually entering a card number is usually more expensive than “dipping” or inserting a chip card), but you can generally count on the fees for each type of transaction being the same for all of those types of transactions.

Subscription flat rate pricing

There’s another processing pricing model called “subscription flat rate processing,” where you pay a monthly subscription fee, generally between $20 and $60, and a flat percentage above the interchange rate, plus a transaction fee per transaction. Some businesses can get competitive rates using this model, depending on how large your typical sale is and how many sales you process per month. Read this article comparing credit card processing costs for more details.

Generally though, a traditional processor using a competitive interchange plus pricing model will be able to get you a lower overall cost… and you can save up to 20% or more compared to third-party payments providers with faster setup and “simpler” rates. 

Be sure to read our article explaining all the different credit card processing fees so you understand what to look for… and what to watch out for.

Solo makes it easy to accept credit cards

Solo is not a bank, but is a financial super-app for small businesses, freelancers, sole proprietors, contractors, and more. Solo is the easy way to pay and get paid. Your customers don't have to sign up to pay you, and can use several payment methods, including Apple Pay, Google Pay, and cards. QR codes make it easy to get paid, and you can easily cash out your Solo account balance for free, or spend it using your Solo Cash Card anywhere Visa is accepted. Learn more at Solo.co.

Sources:
https://www.businessnewsdaily.com/4394-accepting-credit-cards.html
https://paymentdepot.com/blog/merchant-account-requirements/