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For some business owners, being able to accept credit cards on the go may be the difference between making a sale and missing out.
Few people pay with cash these days. A Gallup poll conducted in 2016 found that only 24% of Americans reported making all or most of their purchases with cash, down 12% from 2011.
Given the shift toward credit cards and electronic payment methods, one thing seems clear: Accepting credit cards is a no-brainer for most small businesses. That’s where mobile credit card readers come into play.
A mobile credit card reader is a dongle that connects to your phone or tablet via a headphone jack or Bluetooth. The vendor typically types in the transaction amount, swipes or dips the customer’s card, obtains a signature, and emails or texts a receipt.
There are many mobile credit card processing options to choose from, and pricing structure isn’t the only factor to consider when picking one. We’ll run down some of the features and other factors you should consider before deciding which one is best for your business.
Credit card reader features
Every business is different. Whether you’re a freelancer who needs to accept an occasional credit card or an artisan selling your work at festivals, there’s a mobile credit card reader to meet your everyday needs.
Here’s a look at some features to consider when choosing a credit card reader for your phone.
Ease of set up
Some mobile credit card readers make it easy to start making sales. Others may require you to jump through some extra hoops, like credit checks and background checks. Keep that in mind if you’re hoping to start processing transactions as soon as possible.
You’re probably familiar with the newer chip-and-PIN debit and credit cards. They follow a global standard — EuroPay, MasterCard and Visa, or EMV for short — by using chips to authenticate transactions.
The better modern credit card readers have two slots: one for accepting magnetic strip cards and another for EMV chip cards. Just be aware: If you run a customer’s chip card through a magnetic strip reader instead of inserting it into an EMV chip reader, you (i.e. the merchant) will generally be liable for any counterfeit or fraudulent transactions.
Speed of bank deposits
Some credit card readers require you to set up a merchant account, which acts as a holding tank for your money. Funds from your credit card sales are held in a merchant account before being transferred to your business bank account, typically on a daily or weekly basis.
Other credit card readers link directly to your bank account, allowing for deposits to be made as soon as the next business day. The process your reader uses could impact how long you’ll wait for funds to get to your bank account.
Connection to accounting software
Many mobile credit card processing solutions can also be integrated with your accounting software, such as Xero, QuickBooks or FreshBooks. This could make it easier to keep track of your finances without manually entering transactions.
Some credit card processing companies offer 24/7 live support. Others are only available during standard business hours. If you process a lot of transactions on nights and weekends, you could have an issue reaching some customer support teams when you need them most.
Lauren Hansen, owner of Lunabear Studios in Phoenix, Arizona, says she researched her options when she decided to start accepting credit cards. She ultimately decided to use PayPal Here. Because she was already using PayPal for online transactions, it made for easy, seamless transfers to her bank account.
Pricing considerations for mobile credit card readers
Pricing structure is one of the most confusing aspects of accepting credit card payments. Pricing varies from one mobile credit card processing solution to the next.
Here’s a look at the different cost components and other fees you should look out for.
- Processing costs: This is the amount of money you’ll pay for each transaction. It may include a small percentage of the sale amount plus an additional flat fee for each transaction.
- Monthly fee or pay-as-you-go: Some mobile credit card processors charge a monthly fee in addition to the processing fee, and others just charge per transaction. If you handle very few credit card transactions, you may be better off choosing a pay-as-you-go plan.
- Keyed-in card fees: Most mobile credit card processors allow you to manually key-in card information if you don’t have a reader or are having issues with the reader. Heads up: Most processors charge a higher processing rate for keyed-in transactions than they do for swiped or dipped transactions.
Hansen says she felt most credit card readers have very similar pricing structures. Cost wasn’t a huge differentiator, so Hansen focused on features like ease of use and simple integration with her online banking, which ensures she gets paid in a timely and efficient manner. “I didn’t want to spend a lot of time getting paid,” she says.
Any one of the major credit card readers should meet your most basic needs. Here’s a look at some of the most popular readers on the market right now.
At a glance: Mobile card readers for your phone
|Credit card reader||Per U.S. swipe transaction fee for mobile||Keyed U.S. transaction fee for mobile|
|PayAnywhere||2.69%||3.49% plus 19 cents|
|PayPal Here||2.7%||3.5% plus 15 cents|
|QuickBooks GoPayment||2.4% plus 25 cents on a pay-as-you-go plan||3.4% plus 25 cents on a pay-as-you-go plan|
|Square||2.75%||3.5% plus 15 cents|
In the end, only you can decide which credit card reader is right for your business. Before signing up for an account, it’s a good idea to call the companies directly and get pricing quotes specific to your business.
Also, be sure to read through all contracts and user agreements so you understand exactly what your processing costs will be and whether you’re locked into a contract for a longer time than you need or want.