The majority of purchases are no longer with cash or checks, but with some form of electronic payment. With the introduction of debit cards acting as credit cards and the explosion of online commerce, credit card processing has become a must for all businesses, whether big or small, online or mortar-and-brick. Not offering credit card payment processing could result in lost sales, large enough to affect your bottom line.

With the sudden increase of credit card sales also comes an influx of credit card processing options. Whether considering first-time credit card transactions or switching your existing service, the options are overwhelming with confusing benefits and transaction fees.

This Credit Card Processing Buyer's Guide is specifically aimed at small businesses to help the decision process by outlining different processor types, merchant accounts, mobile options, and rate plans.

1. Accepting Credit Cards

First, determining whether accepting credit cards is beneficial for your business is crucial. Chances are yes, but pros and cons still need to be weighed in order to make a sound decision. Your evaluation should focus on your type of business, sales volume, and comfort with technology.

Certain business types are tied to particular types of financial transactions. If you typically invoice customers and payments are made via check or bank wire, you probably do not have an urgent need to accept credit card payments. If you conduct instant sale transactions with your customers, credit card processing is a must as most customers today expect the option to pay electronically. This is evidenced by businesses that only accept cash or checks, and are forced to post signs that credit and debit card payments are not accepted.

If your business transactions are conducted online, credit card processing is without a doubt essential. Remote customers can pay instantly with a sense of secure transaction for both parties involved.

Depending on your knowledge of technology, you can also tailor your online payment system to fit your business. If you anticipate low amounts of credit card payments, third-party merchants like Square or PayPal may be a good fit. A large amount or number of credit card payments may be better suited for merchant accounts but are more difficult to integrate with your business, whether physical or online.

2. Processor Types

After identifying your small business credit card processing needs, you need to identify the processor type that best suits those needs. Available processor types are bank, third-party, independent, and service providers.

Banks offer credit card services and can be a great accessory to the existing financial services they handle for your business. Many banks bundle services geared toward small businesses to offer better values at lower fees, even when outsourcing to merchant services or third-party processors. The downside of this option is that it may be harder to have your application accepted, simply because banks analyze applications more carefully than other providers.

Third-party processors require no merchant account as they handle the credit card processing internally, from payment authorization and settlement to reporting the transactions. Other options include independent sales organizations (registered merchant broker, representing multiple third-party processors), financial service providers (American Express, MasterCard, Visa), and small business and trade associations. International merchant accounts are an option for businesses that cannot obtain approval through other processors due to location or credit history.

3. Merchant Accounts

When applying for a merchant account, the provider will conduct a background check to ensure the legitimacy of the business and business owner(s). This serves to limit credit card fraud for which they would be liable. Merchant accounts also review the type of credit card transactions your business will process. Transactions without the card holder present for payment are considered less safe than in-person transactions and therefore carry higher fees. In addition, payment for tangible goods to be delivered are considered less risky than payment for services.

4. Mobile Credit Card Processing

Mobile credit card processing allows payments to be processed anywhere and anytime wireless communication is available. This can be a very useful option for small businesses, as it allows on the spot sales at conferences, trade shows, and special events. Depending on your comfort-level with technology, mobile processing can be very basic or use state-of-the-art equipment.

In addition, mobile merchant account services are compatible with most mobile phones and platforms, such as Apple and Android devices. Popular mobile small business credit card processing solutions include smart phones, laptops, tablets, and wireless terminals. Many mobile payment providers also offer free credit card readers than can be used to scan cards rather than type the information manually.

5. Pricing

Credit card processing prices include a primary fee as well as per-transaction fees. Some providers also set monthly minimum and transaction summary fees.

The primary fee is a small percentage on each transaction, based on your company's evaluation as part of the application process. Typically, there are separate rates for card-present (0.35%-2%) and card-absent transactions (0.98%-3%), with a lower rate for the less risky card-present transactions. Per transaction fees range from 10¢-30¢ for card-present to 20¢-50¢ for card absent transactions.

Depending on the need for credit card equipment, you may be charged for credit card terminals to swipe credit cards, receipt printers, and related equipment. Also, make sure to ask about other fees, including but not limited to set up, programming, software, and customer support fees.

6. Negotiating Fees

You should negotiate lower charges to best fit your expected credit card transactions. If you anticipate a small amount of electronic payments, you should aim for low monthly fees. A large volume of credit card transactions will benefit from lower per-transaction fees, but make sure they are long-term and not introductory rates. If you need credit card processing equipment, inquire about purchase versus lease options.

7. Choosing a Processor

When choosing a small business credit card processing provider, several items should also be considered. Price, of course, is important but not the ultimate deciding factor. Other issues include the processor's customer support, reviews from current and past customers, and reputation within the industry.

8. Buying Tips

When buying a merchant account, keep the overall picture of your business needs in mind. Compare fees between different merchant accounts as well as the time for funds to be transferred to your account. Fees may be lower with one account but if you need your funds immediately, it may be worthwhile to pay slightly higher fees.

Also, read the entire contract in detail before signing. Make sure you understand all fees, terms, and termination clauses so there are no unpleasant surprises in the future.