How do I accept credit card payments on my phone?

Credit cards are widely used by the general public due to their convenience, as it is much easier to make a purchase with a plastic or metal rectangle than constantly carry around a wad of cash. These days, credit cards have gone mobile, and cardholders often use their smartphones as virtual wallets instead.

Unsurprisingly, credit card payments can also be accepted on your mobile phone, as it is an easy, inexpensive way to get paid. You can accept credit card payments on your phone by  partnering with a payment processor that offers mobile credit card processing solutions, such as Square, SumUp and Paypal ― each company offers mobile credit card readers and pay-as-you-go terms for mobile credit card processing. However, most mobile credit card payment providers require applicants to prove that they have a business to use this service.

To get started, you first download an application from the processor and sign up for an account. Many processors will ship you a free mobile credit card swiper, but you should order a mobile card reader that accepts chip cards to protect against counterfeit fraud.

Mobile credit card readers connect to your phone by Bluetooth or through your phone’s headphone jack so that when you accept credit card payments, the transactions are encrypted and transmitted to the processor without storing sensitive card data on your phone. The money from the transaction is then deposited into your bank account, minus the processor’s fee.

What if my business doesn’t yet accept credit card payments or is already using a point-of-sale system?

If your business doesn’t yet accept credit card payments, you can open an account and purchase a card reader from a payment facilitator. Working with a payment facilitator is generally simple, as businesses can simply fill out a form online, and there are usually no credit checks or requirements to submit processing statements or marketing materials.

If your business already processes credit card payments using a point-of-sale system, you can set up mobile credit card payments through your current full-service payment processor. However, partnering with a full-service processor can be more complex, as businesses will need to apply for an account. More information and documentation is required, although sales representatives are often eager to assist businesses in filling out the application. Once you submit your application, there will be a waiting period prior to approval or rejection.

What about those extra processor fees?

If you work with a payment facilitator to accept credit card payments on your phone, you will pay flat-rate pricing, which is usually expressed as a flat percentage of the transaction value or a flat percentage plus a small per-transaction fee. Flat-rate pricing is a better value for businesses that process less than $3,000 per month.

If you work with a full-service credit card processor, you will likely be given a choice between interchange-plus or tiered pricing. For interchange-plus pricing, the merchant pays the wholesale rate and the processor’s markup. The wholesale rate consists of the interchange fee, a rate set by the card networks that all processors must pay, and the assessment fee, which is another non-negotiable rate charged to processors by card brands. The processor’s markup represents its profit on facilitating your credit card transactions and is negotiable. Interchange-plus pricing is preferred by industry experts because of its transparency.

For tiered pricing, all transactions are categorized into tiers: qualified, midqualified and nonqualified. Qualified transactions are basic credit or debit cards swiped at the point of sale and often have the lowest rates, typically the rate advertised by the processor. Midqualified transactions are usually rewards cards swiped at the point of sale, while nonqualified transactions usually include premium rewards cards, corporate cards and keyed-in or card-not-present transactions (such as cards accepted over the phone). Nonqualified transactions have the most expensive rates.

Additionally, if you work with a full-service payment processor, there are additional fees and you will often be asked to sign a service contract. Here are some of the fees full-service credit card processors charge:

• Monthly fee, also known as a statement fee- covers the processor’s cost for preparing monthly statements and customer service, often ranges from $5 to $15
• Gateway fee- you will need a payment gateway to accept online payments. This fee varies depending on the gateway you use, but it is usually a flat monthly fee and some providers charge an additional small per-transaction fee
• PCI compliance fee- the payment card industry sets strict regulations to prevent fraud and make sure your credit card transactions are secure, so you are required to annually certify as compliant. Most full-service processors charge a fee to help you do this; it is usually charged annually and costs around $100
• PCI noncompliance fee- you will be charged this fee monthly if you fail to certify PCI compliance. This fee is expensive and will be charged until you certify
• Monthly minimum- charged by some processors and means that you must process a certain dollar amount of transactions each month. This is usually based on processing fees rather than transaction value

Overall, most processors’ rates range from 2% to 4% for each transaction. The rates you pay will vary depending on your monthly processing volume, your average transaction value and the industry in which your business operates. Processors may also look at your history and business and personal credit.

Conclusion

You can accept credit card payments on your phone through a variety of ways. You can do so by partnering with a payment processor that offers mobile credit card processing solutions, working with a payment facilitator or partnering with a full-service processor. They all come with extra fees, whichever one is best depends on your situation.