Why should general contractors and home service businesses accept credit cards? There are many advantages!
To start with, it’s one of the quickest ways to improve cash flow. Second, the ability to accept credit card payments lends credibility to your business. Plus, it’s convenient and saves time for you and your customers.
If you’re new to accepting credit cards, here’s an overview of how payment systems work. We’ll also examine the costs and how accepting credit cards streamlines business operations.
Let’s get familiar with the terms you’ll encounter when you start accepting credit card payments.
Types of Payment Systems
A payment system is how a business accepts payment. Traditionally, customers paid in cash or by check. Then credit cards came along. With credit cards came new technology and service providers, including payment processors.
Payment processors handle the logistics of transferring money between the buyer and seller. If you’ve ever bought something using a credit card, you’re already familiar with this service.
A payment gateway is where customers pay. In a brick-and-mortar store, this is the POS (point-of-sale) terminal. Either operated by a cashier or a self-serve checkout.
For online purchases, the gateway is where credit or debit card info is collected. The best payment processors and gateways make the process easy. They provide customers with a simple, hassle-free experience. This reduces the number of purchases abandoned in the online cart.
Mobile Apps & POS Systems
Some large companies build their own payment systems. But most small-to-medium-sized businesses use mobile apps and POS systems. Getting started with mobile app payment systems is usually simple and speedy. Download the app, set up your account, and start accepting payments. That’s it!
For many businesses, a payment mobile app is all they need to keep a healthy cash flow. But others need to also manage data along with collecting payments.
From Paypal, Stripe, Square, and Venmo to Google Pay and Apple Pay, payment apps and POS systems make digital payments fast and secure. Yet, on their own, these apps aren’t integrated with your business operations.
That’s where Joist’s mobile app stands out. It allows you to estimate, invoice, and collect payments through PayPal all in one place.
Need an easier way to get paid?
Things to Think About When Choosing a Payment System
When you accept credit cards, there are factors to consider that differ from accepting cash and checks. You need to be aware of transaction fees, fraud and fraud protections, and the possibility of chargebacks. Let’s take a look at each in more detail.
Payment Processing Fees
As a business owner, you may wonder, “How much does accepting credit cards cost?” The short answer is that it varies.
But you need real numbers, right? At the time of writing this article, these are some typical fees for online transactions:
- Square: 2.9% + $0.30 per transaction
- PayPal: See Here
- Stripe: 2.9% + $0.30 per transaction
Each payment processor has different rates depending on how the sale is processed. For example, an in-person transaction where a card is presented has a slightly lower fee than if the credit card number is keyed in.
The difference is due to the fact that there is a higher risk of error or fraud with keyed-in card transactions.
When comparing payment processors, be sure to look at all their fees. For example. Merchant One advertises tiered fees of 0.29% to 1.55% plus a transaction fee but also charges $6.95 a month, with a three-year contract and charges for early termination.
If you opt for a POS system that is also a business management tool, you’ll pay more. How much depends on the provider and how you use the service.
POS fees may include the following:
- Software fees ($0-$300/month)
- One-time fees ($49-$1,000 per POS register or card reader)
- Monthly register fees (charged per register, one provider charges $59/month)
- Fee per employee (for example, with systems that provide work scheduling services)
Can I pass payment processing fees on to customers?
When considering adding credit card payments, processing fees is a common objection. Business owners worry about cutting into their profits.
So, can you instead pass the added cost along to customers? The short answer: maybe, but there are limits.
Some states regulate if businesses can charge fees for accepting credit card payments. Five states—Colorado, Connecticut, Kansas, Maine, and Massachusetts—have declared this practice illegal.
Before you charge for accepting credit cards, check out the legalities in your state.
Rather than charge customers fees for paying by credit card, you can build the cost into your pricing. This prevents a loss in profits while avoiding the hassle of added-on fees.
For customers who pay in cash, you can offer a discount because you don’t have to pay a payment processing fee.
Sometimes it seems like there’s a new way to commit fraud every day. No matter how you accept payment, there’s a risk of fraud. Cash and checks can be counterfeit. Credit cards could be stolen.
If you unknowingly take a fraudulent credit card payment, what happens next?
According to Nerd Wallet, banks are more likely to be liable for fraud when a card is physically present. That could either mean swiped or tapped. Merchants are more likely to be responsible if the transaction occurred without a card. Hence, the risk of keyed-in transactions.
Businesses that use payment processing systems get the advantage of built-in fraud protection. PayPal monitors every transaction to prevent fraud, email phishing, or identity theft. Plus, their seller protection program covers merchants when account holders claim fraud. This includes unauthorized payments or failure to receive a product.
Payment gateways can also reduce fraud with address verification and CVV code verification. Device identification and lockout mechanisms are used for many online payments too.
Be Aware of Chargebacks
Not every transaction goes as planned. An item could be lost in transit, and the customer never receives it. The item might not match its description. In situations like these, a chargeback is necessary. Besides returning the purchase amount, the chargeback will come with a fee. It’s often at least $20 and as high as $100.
Frequent chargebacks can result in higher fees. Rack up too many chargebacks as a merchant, and your account could be closed.
Respond to Disputes Quickly
In every business, there’s a risk of disputes. Credit card payment disputes may be mediated through the payment processor. And you may not have much time to respond to a dispute claim. For example, Square allows only seven days for responses.
Your best defense in disputes is to have as much supporting evidence as possible. This includes contracts or purchase agreements, invoices, and emails. It’s good to have correspondence, like notes from phone calls and signed proof of delivery.
Other Contractor Payment Tips
Getting paid on time requires that contractors have the right systems in place. Here are some bonus tips to help you keep a healthy cash flow.
Keep Records Using a Client Management System
One key to effective business management is keeping accurate customer information. A client management system (CMS) like Joist helps contractors stay organized.
It provides an efficient way to store, access, and export customer information. Joist’s robust CMS integrates estimates, eSignatures, invoices, and payment options. You can also keep track of accounts receivable.
Tracking incoming payments and accounts past due with a CMS is invaluable for keeping a healthy cash flow.
When to Contact Holders of Past-Due Accounts
Even with multiple payment options, some customers don’t pay on time. Payment terms should be clearly stated on your invoice. When a payment is late, send a friendly reminder email or make a phone call. Follow up every seven to ten days.
If the customer continues ignoring your communication, you have a few options. You can consider filing in small claims court when accounts are 90 days past due. You can also turn the account over to collections or potentially write it off.
Offer Financing to Land More Jobs
One way to improve your bottom line is to increase your average sale by doing bigger jobs. Offering financing can help you land higher-value projects. With Joist, it’s easier than you think. We partner with over a dozen lenders. Clients apply directly with lenders, and you receive funds within two days. Learn more about offering flexible payment options.
Link Your Estimate, Invoicing, & Payment Processes
You didn’t go into business to spend all your time organizing customer data and invoicing, but we did. Our business is to provide contractors like you with a system that allows you to estimate, invoice, and accept credit card payments easily.
We invite you to try Joist for free and find out why we’re the #1 app for contractors
Struggling to manage customer payments?
With financing & built-in invoice payment options, Joist could be just what you need.