E-commerce is a huge contributor to small business revenue. From setting up shop on a marketplace site to building your own online store for your small business, accepting credit card payments is essential to staying competitive online. Consumers are accustomed to paying online with a credit card; if your shop isn't set up to accept major credit cards, you risk losing customers and money.

According to the Census Bureau of the U.S. Department of Commerce, retail e-commerce sales have increased by more than 39% compared to a year ago. With the rising number of consumers filling their shopping carts online, you need payment options to suit their needs.

Today, credit card processing for online merchants is a fairly simple process. With the help of e-commerce platforms like Shopify and Wix, business owners can create, run, and grow their online businesses. But that isn't the only way to accept credit card payments. There are several options available that don't require an e-commerce website, such as using a mobile card reader. In this article, we'll cover how you can set up and accept online credit cards for your small business.

Why Should You Accept Online Credit Card Payments?

A growing number of online shoppers use their credit cards to pay for online orders. If you can't offer a convenient credit card payment method, you are more than likely losing a huge number of potential sales and customers.

There are several service providers that can help you set up merchant services so your business can accept Visa, Mastercard, and all major credit cards and debit card payments. For instance, Square is a processing company that helps online and brick-and-mortar business owners run credit card transactions. With several pricing options, including a no monthly fee plan, Square offers valuable solutions for small business owners.

To accept online credit cards for your business, you'll need to set up a payment gateway with a processing service. But what exactly is a payment gateway? That question gets asked a lot, so let's go over what a payment gateway is and why you need one to accept credit card payments.

How to Accept Online Credit Card Payments

To get started accepting online credit payments, you'll need to set up an account with a payment service provider to establish a payment gateway between you and your customer. A payment gateway is like a virtual terminal that takes the place of a brick-and-mortar point-of-sale system (POS system) — the machine you swipe your card through.

Here, we'll cover online payment gateways, how they work, and how to sign up so that you can accept credit card payments through your online store.

What's an Online Payment Gateway?

As mentioned, an online payment gateway is a substitute for a brick-and-mortar POS system terminal. You insert the credit card chip into the credit card processor and it does all the work to approve the transaction. The online payment gateway works similarly to run and approve credit card transactions. It's a virtual gateway for customers to pay for your product or service.

How Do Online Payment Gateways Work?

Online payment gateways are at work each time a consumer makes an online purchase. When the customer clicks "Checkout" or "Pay," they are directed to a new page to enter their credit card information. The credit card information and the transaction details are securely submitted to the issuing bank for approval through a process called encryption. Encryption pretty much scrambles all the information into an unbreakable code that only your bank can make sense out of. The bank replies to the transaction by approving (or declining) the sale and the customer is notified through the site that the purchase is complete.

There are a number of online payment gateways for small business owners to choose from, but not all are created equal. When accepting credit or debit card payments, you want to stick with a reliable and trusted payment service provider, such as PayPal, Square, or Stripe. We know these companies for their comprehensive security features, such as data security and encryption, and expert customer support.

When you choose Stripe, Square, or PayPal, every transaction is PCI compliant. PCI stands for "payment card industry." It's a set of standards developed by the major credit card companies to ensure security standards are met when processing credit cards.

For all the work they perform, the cost of online payment gateways is fairly low. A payment processor charges credit card processing fees for each transaction that goes through your business. For all major credit cards and digital wallets, such as Apple Pay, Stripe and Square collect 2.9% plus $0.30 for each approved transaction.

PayPal is a widely known choice for consumers and business owners. You can sign up for free with no setup fees and you're never locked into a long-term contract. In fact, you can cancel at any time. PayPal transaction fees are also 2.9% plus $0.30 per transaction. Be sure to review the benefits of each and compare them to your business needs before settling on a payment processing system for your online store.

How to Sign Up for an Online Payment Gateway

Once you've decided on the best online payment gateway for your business needs, you'll need to set up an account with your email or username and create a password. Have your Social Security number or employer identification number (EIN) and business bank account number handy to enter when asked. Other information that may be requested is your business structure, address, and your full legal name. Follow the prompts to complete your account setup.

If you have any trouble activating your account, contact the company's customer support team for help.

Accept Online Credit Card Payments

How you receive your money will probably depend on the online payment pathway you choose. For the most part, each will share a similar method of transferring funds into your linked business bank account.

Typically, you'll need to log into your account and transfer the balance (or a portion of it) to your bank account or the debit card linked to your account. They may hold payouts for a few business days to verify funds in the account. For instance, when using Stripe, there is a seven-day hold for the first payout. In certain industries, this hold can be up to 14 days. Subsequent payout requests are available in two business days.

A holding period is a standard practice among online payment gateway systems. PayPal's processing time is up to 21 days for new business accounts, and Square's transfer schedule is within 36 hours of requesting payout. For those times you're in a pinch and need the money faster, take advantage of instant transfers with Square. For an additional fee, you can instantly send funds to your linked bank account for immediate deposit.

Keep Track of Your Small Business Finances With Skynova

Adding credit cards as a preferred method of payment can help boost your business revenue, but you need a way to manage all that cash flow. Look no further than Skynova's accounting software. Skynova's software solution is designed with small business owners in mind to help with the day-to-day running of your business. With user-friendly features, such as invoicing, online receipt storage, and a general ledger, you can stay organized and keep accurate accounting records for your small business.

You can also accept online payments for your invoices using Skynova.

Skynova's modules work together; you can create any combination to fit your business needs. Whether it's packing slips for delivering goods or all-in-one accounting software, Skynova helps small businesses get things done.

Notice to the Reader

The content within this article is meant to be used as a general guideline for accepting online credit card payments and may not apply to your specific situation. Always consult with a professional business adviser to ensure you're meeting standards for your business needs.