There’s a widespread perception that we’re heading toward a cashless world as more Singaporeans use next-generation payment methods like touchless purchases or smartphone payments. However, many small businesses continue to rely solely on cash—and will continue to do so for many years to come.
It’s never been easier to decide whether or not you should take credit card payments. While accepting credit cards may not be the best option for your business right now, you should be informed of the process in case you wish to accept them in the future.
The procedure for accepting credit card payments will differ depending on the type of business you operate, how you presently accept payments, and the credit card processing system you select. This guide will assist you in determining whether or not you should take advantage of the millions of open credit card accounts in Singapore.
Why Should You Accept Credit Cards
As a small business, banks, credit card firms, and financial media outlets will tell you that accepting credit cards is a must. There’s a lot of evidence—and presumably your own personal experience—to support the idea that businesses who accept credit cards make more money.
Consider your personal shopping experiences: you’ve certainly encountered circumstances where you didn’t have enough money or didn’t have enough cash to buy everything you wanted. Furthermore, getting cash can be hard, expensive, or impossible.
Credit card users make more purchases and spend more each transaction, according to years of research and polls. According to a recent analysis by the Boston Federal Reserve, the average non-cash transaction in 2016 was $112, compared to the average $22 value of a cash transaction.
The so-called “payment coupling” is another economic phenomenon associated with credit card use. Payment coupling is the link between a customer’s purchase decision and the actual separation of their money. Credit cards lessen the “painful” portion of purchasing, such as seeing your wallet or bank account shrink, according to a landmark 2008 study.
The American Psychological Association study claims that “payment mechanisms range in transparency or the vividness with which individuals can experience the outflow of money, with cash being the most transparent payment mode.” “We propose that the more transparent the payment outflow, the greater the aversion to spending or the ‘pain of paying,’ resulting in less transparent payment modes such as credit cards and gift cards (rather than cash) being more easily spent or seen as ‘monopoly money.'” Furthermore, to the extent that payment transparency underpins disparities in spending behavior, changing the importance of parting with money should reduce the disparity across payment modes.”
Why You Might Not Be Able to Accept Credit Cards
Accepting credit cards could be difficult—or perhaps impossible—for a variety of reasons. To accept credit cards, you’ll need a good internet connection unless you want to utilize a manual credit card imprinter. Consumers who are used to carrying large amounts of cash may frequent your brick-and-mortar store. Retailers in metropolitan or very rural regions may service customers who are used to carrying large amounts of cash.
Why You Might Avoid Accepting Credit Cards
For many business owners, the tiny cost charged to handle each credit card transaction is the most compelling argument to refuse to accept credit card payments. These fees pile up, which is why some companies still only accept cash, particularly in places where clients carry a lot of cash. With credit card payments, there is also a considerably larger paper trail—and there may be reasons why you desire to reduce this trail, albeit these motives are frequently illegal. It’s also possible that your company is entrenched in its ways and lacks a culture of adjusting to new methods of doing things.
How Can My Small Business Accept Credit Card Payments?
There are a few options if you decide to accept credit card payments. You should consider how your company functions and is organized. Because there are so many ways to do credit card transactions these days—in recent years, revenue-minded payment processors have been aggressive in making the procedure as simple as possible—shopping using a credit card is becoming more frequent. You may locate a credit card payment system that works for you with a little effort and study.
What Are the Different Types of Businesses That Accept Credit Cards?
Credit cards can be accepted by almost any business that sells goods or services. This is true whether you have a small firm with employees or if you are a sole proprietorship with no employees. Credit card payments are accepted by brick-and-mortar establishments, e-commerce retailers, and mobile enterprises such as food carts, but there are different alternatives based on how you’re set up.
Businesses Accept Business Cards in a Variety of Ways
There are possibly various choices for accepting credit cards depending on how you run your business. If you run an online-only firm, for example, credit cards may be the most convenient method of payment. Many brick-and-mortar shops have converted to mobile payment providers instead of traditional credit card processors, so you may have some options here as well.
Begin With A Merchant Account
You’ll need to open a merchant account before you can accept credit card payments. A merchant account is a sort of bank account that accepts credit card payments from clients and deposits funds into your company’s bank account.
Each transaction is charged by a merchant account, however the fee varies greatly depending on your circumstances. Expect to pay a percentage of each purchase (typically between 0.5 and 5%), as well as a flat fee each transaction (generally between $0.20 and $0.30). Some organizations also charge a monthly or annual fee.
Credit Card Payments Made in Person
A Point of Sale (POS) system is required if you wish to set up standard in-person credit card transactions like those found at a normal restaurant or business. You may accept credit cards using this set of hardware and software. Credit card readers that connect with your merchant account are included in these systems.
Payments Via Mobile Devices
Payment Service Providers (PSPs), often known as mobile payments, demand less capital than a traditional merchant account. Square and Stripe are two common examples. Many PSPs now offer both a merchant account and a point-of-sale system, which is why they’re so popular with small enterprises. Because PSPs are disrupting the POS industry, you should carefully consider your alternatives’ terms and prices to make the best decision. PSPs are typically simple to use and affordable to start up, but as your business grows and expands, a regular merchant account system may be more negotiable and less expensive to utilize.
Online Credit Card Payments
Accepting credit cards is essential for e-commerce businesses because there is likely no other simple way to collect payment. However, no special hardware is required. You might be able to accept credit card payments through the website you use for your store, such as Etsy. Many PSPs and e-commerce gateways, like as PayPal or Shopify, have apps or widgets that may be embedded in a website. Many of them even let you sell things on social media.
What is the most cost-effective method of accepting credit cards?
The most cost-effective method of accepting credit cards is determined by how much money you want to save. If your company is small or new, a PSP is likely the most cost-effective method to accept plastic. PSP hardware is inexpensive, and services typically charge a percentage of each transaction as well as a fixed fee per transaction. As a result, if you run a high-transaction firm, PSP costs can quickly pile up.
In the short run, a merchant account may be more expensive than a POS system because a POS system typically requires a big upfront investment. However, the per-transaction fees are frequently lower than those charged by a PSP over time. Before making a decision, you should examine your options and prices.
What Is the Cost of Accepting a Credit Card?
Every transaction is charged a tiny percentage by each credit card issuer, such as Visa and Mastercard. This processing cost typically ranges between 1.5 and 3.5 percent. You’ll also have to pay fees to your merchant account or PSP. These fees range from 1.5 percent to 3% of the transaction amount, plus a flat fee of $0.10 to $0.30 each transaction. Instead of a fixed transaction cost, some processors prefer a monthly flat fee. After all of these fees, a credit card purchase will most likely cost you between 4% and 7% of the transaction amount.