Accepting card payments – small business guide

take card payments

It’s estimated that around two-thirds of small companies in the UK don’t accept card payments and as we head ever closer to a cashless society that adds up to a lot of missed opportunities.

Clearly, many still harbour the perception that card payments involves a daunting and expensive process, but getting started has become both simpler and cheaper thanks mainly to app-based card machines. So, how exactly do card payments work and what are the best machines?

What’s involved?

The card payment system involves a three-step process. First, you’ll need to have a merchant account which is a ring-fenced account where the customer’s transaction sits until the payment has been authorised. The merchant account will be provided by your own bank or your payment service provider (PSP). Without this account in place, you won’t be able to accept card payments.

Step two involves a payment gateway, an integral part of the chain that authorises the customer’s payment. Again, your bank or PSP will usually offer this along with your merchant account. The final step is choosing a card machine. The type of machine you go for will depend on the nature of your business, for instance, if you run a restaurant a wireless card machine will be ideal.

Different types of card machine

Here are some of the most popular card machines that are suitable for small businesses:

  • Smartphone card machines that enable you to accept payments from an Android handset, iPad or iPhone. Typically the most affordable, this type of card reader is ideal if you operate on the move, in large venues or at different locations.
  • Wireless card machines are perfect for coffee shops, bistros, bars, restaurants or for catering and hospitality environments. Operated using Bluetooth or a phone connection, the machines are compact and allow staff to easily accept payments at the table.
  • Virtual card machines or terminals are designed for accepting payments over the phone. Their ease of use, functionality, and the fact that they don’t require expensive hardware (all you need is an internet connection) means they are also being used more and more by shops.

How much does it cost?

The cost of card payments to the business is twofold: the cost of the machine itself and the transactions fees – what you’re charged each time you process a card payment. You can either choose to rent a card machine or buy one outright. Expect to pay around £30 a month to rent a wireless terminal or from £100 up to £300 to buy one. Fees will depend on how many transactions you make and whether you are paying a flat fee or a percentage of each transaction. Flat fee rates are typically around 40p for each transaction while you’ll pay up to 5% on a percentage basis. Some providers also charge a minimum monthly fee although as the market has become more competitive, new entrants often waive this as a way of attracting new customers and use a simple pay-as-you-go system.

Card machines for small businesses

Below is a list of some the leading card machines that are designed for use by small businesses. Before deciding which one is right for your business, shop around by comparing not only fees but the complete service each supplier provides.

  • iZettle: A popular choice with small businesses due to its affordability, sleek looks and portability. Connected via Bluetooth to an iZettle app, this reader accepts chip & PIN, magstripe (swipe), and contactless payments on smartphones and tablets. Payments take a few seconds to process and the reader has a battery life of up to eight hours.
  • SumUp Air: Claims to be the most economical app-based reader on the market, with the lowest fixed transaction fees. The reader accepts contactless, chip & PIN, and chip and signature but not magstripe. Good choice for businesses processing a relatively small number of transactions but may not be the most cost-effective for processing larger volumes
  • PayPal Here: A well-known brand and if you’re already using PayPal one of their terminals may be an obvious choice. The reader is inexpensive and payments will appear in your PayPal account in seconds. No monthly fees or fixed term contract with this reader.
  • Square: The most compact of all the readers mentioned here, the device weighs only 56 grams and accepts contactless cards, mobile wallets, chip & PIN and signature cards. Comes with a plug-in magstripe reader for international cards. Payments appear in your bank account the day after the transaction.

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