was a glass artist, creating exquisite hand-blown glass bowls and spiraling faucets. About five years ago, a visitor to Jim’s St. Louis studio was so impressed with his work that he wanted to make a $2,000 purchase on the spot. Without the cash on hand, the customer offered to pay with a credit card. Unfortunately, Jim didn’t have a way to process a credit card payment. He lost the sale.
The difference between Jim and most of the rest of us is that he was well-connected. In fact, one of his best friends is Jack Dorsey, the creator of Twitter. Jim told his good buddy the story of his lost sale and the two collaborated to create Square, the first mobile credit card processor.
You may have the same challenge. If your business goes wherever you go: to trade or arts and craft shows, on service calls or contract jobs, then you know just how difficult it is to collect payments without taking plastic. Thankfully, that’s all changed. Mobile credit card readers are small devices that simply plug into a smartphone and allow you to immediately process a credit card payment. Here the guide to how you can be swipe-ready and get paid on the fly.
The Basics of Credit Card Processing
Accepting credit cards has been a tangled mess for small businesses. is an industry layered with one middleman after another. Take a look at the players in a typical credit card transaction:
- The customer – She wants to buy your widget and is happy to pay your price. Thank the heavens for customers.
- The merchant – You’re just trying to make a buck, so you’re happy to take her credit card.
- The merchant service provider – Hello profit-skimmer #1. These guys charge a monthly fee to process credit card payments and sell or lease you the payment terminal.
- Payment gateway – Middleman #2. This service transfers the data from your merchant service provider to the next link in the expensive chain.
- Processors – Layer of confusion #3. Processors handle the transmission of data that is required to obtain authorization for payment from the card issuer. They will charge a fee for each transaction.
- The issuing bank – Margin thief #4. These are the folks who issue the credit card. They take the biggest chunk of your profit.
- Card association – An optional layer of bureaucracy. This is a network of issuing banks that may or may not represent a credit card brand.
- Merchant bank/acquiring bank – And the fifth and final player in the transaction. This is the financial institution that handles the acceptance and payment of each transaction. Of course, there’s a fee for that.
With all the moving parts come a small army of fees including an interchange fee, which is usually a percentage of the value of the sale, as well as a flat fee per transaction. The discount rate is the primary cost for each credit card sale and can include a bundled fee for the processor, issuing bank, card association and everybody else who skims a little off the top.
Optional fees can include downgrades for charges that represent higher risk, chargebacks for disputed charges that are refunded, and authorization fees for transactions where the cardholder is not present in-person at the time of the sale.
Kind of makes you want to hang out a “cash only” sign, doesn’t it?
The Benefits of a Mobile Credit Card Reader
You’re going to like this section much better. Even though you may be wary of mobile credit card readers because they are so new, the fees are much simpler. Check out this list of benefits:
- The technology is elegant – The hardware for a card reader is a simple, plastic card-swiping device plugged into your smartphone or tablet. No bulky, expensive, old-school credit card terminal. Mobile readers are usually free, sometimes after the use of a rebate. Square has just launched a reader called the Stand that attaches to your tablet to transform it into a sleek, flat-screen cash register of sorts. You swipe the card at the bottom of the stand while inputting the sale details in your horizontally positioned tablet.
- Simpler fees – Because normal credit card processing fees are so complicated and contain so many layers, it’s hard to nail down a definitive average price. So we can’t say the mobile card readers are necessarily cheaper, but one thing’s for sure: the pricing is simpler. The major players — Square, Intuit, and PayPal — all charge about 2.75% per transaction. Simple. (Pricing and offers may vary from the date of this publication.)
- Flexibility – If you have a seasonal business or are just building a concept, a mobile credit card reader can be perfect. You’re not locked into some annual contract with monthly charges for service and equipment that you might not use every day.
- Portability – The most obvious benefit. Your point-of-sale can be wherever your customer is.
Money360 Approved Credit Card Readers
Here are the providers you can count on for your mobile money-making:
- – The originator. With clean, user-friendly software and 4 million users, Square leads the pack. The reader attachment can seem a bit flimsy at times and swipes can be finicky, according to users. Square assesses a 2.75% per transaction fee. Downside? No telephone support is available, only 140-character help through Twitter.
- – This reader features a sturdy swipe attachment and similar pricing. Pay 2.75% per transaction with no monthly fee, or pay $12.95 per month and get a discounted rate of 1.75%, though higher rates apply for key-entered rather than swiped transactions. Intuit works with Apple and Android products the same as Square does – but it works with BlackBerry devices too. Bonus: an enormous company can expect capable Intuit phone support and full integration with Quickbooks, also an Intuit product.
- – Full-featured software and national name recognition makes PayPal a real contender in the mobile payments space. Some users report the swipe attachment seems a bit lightweight, though. Instead of waiting three business days for deposits to reach your bank, you can access sales immediately with a free PayPal debit card. And you’ll pay a competitive 2.7% transaction fee. Upside: Full integration with your regular PayPal account and customer trust in the brand.
A Pocket Full of Payments
Not only is your smartphone perfect for extended sessions of Angry Birds and the usual Twitter, Facebook and Instagram updates – but now you can actually earn money with it. The rapidly evolving mobile credit card reader technology can get money in your pocket fast and make sure you never lose a sale.