If you’re in the process of setting up a new restaurant, or even if you’ve been in business for a while, you’ve probably thought about credit card processing. After all, accepting credit cards is practically essential for any business these days – but it can be complicated and expensive. Here’s everything you need to know about restaurant credit card processing, from the basics of how it works to the fees you can expect to pay.
What is credit card processing?
In a nutshell, credit card processing is how businesses accept payments by credit or debit card. When a customer pays with a card, the business owner runs the card through a credit card processor, which verifies the funds and deposits the money into the business’s account.
How does credit card processing work?
There are three main players in every credit card transaction: the customer, the merchant, and the bank.
The customer is, of course, the person who is paying for goods or services with a credit or debit card.
The merchant is the business owner who is accepting the card payment.
The bank is the financial institution that issued the credit or debit card to the customer.
When a customer pays with a credit or debit card, the merchant runs the card through a credit card processor, which verifies the funds and deposits the money into the merchant’s account. The credit card processor is typically a third-party company that specializes in handling credit card transactions.
What are the fees for credit card processing?
Credit card processing fees can be divided into two categories: transaction fees and monthly fees.
Transaction fees are charged every time a customer pays with a credit or debit card. The most common transaction fee is the interchange fee, which is charged by the credit card issuer. Interchange fees vary depending on the type of card used and range from 1-4% of the total transaction.
In addition to the interchange fee, businesses will also pay a processing or acquirer fee, which is charged by the credit card processor. Processing fees are typically a flat rate per transaction, ranging from 10-30 cents.
Monthly fees are charged by the credit card processor for access to their services and typically include a statement fee, a gateway fee, and sometimes even an equipment rental fee. Monthly fees can range from $10-100 per month.
Are there any other costs to consider?
Yes – you may also need to pay for equipment, such as a credit card terminal or POS system, and you may need to pay for software or plugins to integrate your payment processing with your accounting software.
You should also be aware that some credit card issuers charge foreign transaction fees for transactions that are processed in a currency other than the US dollar.
What are the benefits of credit card processing?
There are several benefits of credit card processing, including:
- Convenience: Credit card payments are quick and easy, which is convenient for both customers and businesses.
- Security: Credit card payments are more secure than cash or check payments, which reduces the risk of fraud.
- Access to capital: When you process credit card payments, you can access your funds quickly and easily. This is especially helpful for businesses that have a lot of expenses upfront, such as restaurants.
What are the risks of credit card processing?
There are a few risks to consider when you’re thinking about credit card processing, including:
- Chargebacks: A chargeback is when a customer disputes a charge on their credit card statement. If the dispute is successful, the merchant will be required to refund the customer’s money. Chargebacks can be costly and time-consuming to resolve.
- Fraud: Credit card fraud is a serious problem that can cost businesses a lot of money. It’s important to take steps to protect yourself from fraud, such as using a secure payment gateway and monitoring your account activity closely.
- Data breaches: If your credit card processor or POS system is hacked, sensitive customer data, such as credit card numbers and expiration dates, could be stolen. This can lead to identity theft and fraud.
What are some tips for choosing a credit card processor?
There are a few things to keep in mind when you’re looking for a credit card processor, including:
- Cost: Make sure you understand all of the fees associated with the credit card processor, including transaction fees, monthly fees, and equipment costs.
- Security: Choose a credit card processor that offers a secure payment gateway and fraud protection services.
- Customer service: Find a credit card processor that offers excellent customer service in case you have any questions or problems.
Restaurant Credit card processing can be a great way to accept payments from customers. However, it’s important to understand the costs and risks associated with credit card processing before you decide to use this payment method.
