Many businesses need to take payments while they’re on the go, whether they’re working trade shows, making deliveries or meeting customers in the field. That makes accepting credit cards with your phone an appealing option. In this guide, we’ll walk through how mobile payment processing works, what it costs and what to look for before you get started.
Can I use my phone to accept credit card payments?
Yes. With the right payment processor, your phone can double as a mobile checkout tool, letting you accept credit cards, digital wallets and other contactless payments wherever you do business. Providers like Square and PayPal offer mobile apps, card readers and flexible pay-as-you-go pricing that make it easy to get started.
“Mobile card processing is especially valuable for small and medium-sized businesses that provide services on-site, such as home repair, personal training or delivery services,” said Bob Legters, chief product officer at Paysafe. “It allows businesses to go cashless, enabling customers’ payment choice and allowing businesses to collect payments in real time.”
Check out our comprehensive
review of Square to learn how a payment facilitator can help businesses start accepting mobile payments quickly.
How to accept credit card payments on your phone, step-by-step
Getting started is usually faster than many business owners expect, especially if you’re already accepting credit cards online or in person. While the exact setup process may vary by provider, the steps below will help you get your phone ready to accept payments in the field, at events or anywhere you do business.
1. Sign up with a credit card processor or payment facilitator.
Before you can start taking payments with your phone, you’ll need to open a merchant account with a credit card processor or set up an account with a payment facilitator, if you don’t already accept credit cards.
- Credit card processors: Partnering with a full-service processor for mobile credit and debit card payments usually means applying for a merchant account. Many of the best credit card processors will ask for detailed business information, financial documentation and underwriting approval, and businesses in high-risk industries may face additional scrutiny or higher fees.
- Payment facilitators: A payment facilitator, such as PayPal or Square, acts as an intermediary between your business and the credit card networks. These providers usually offer a faster, easier setup with less upfront underwriting than traditional merchant accounts. Most businesses can start accepting payments shortly after signing up online, which makes them a popular option for startups and small businesses just getting started.
2. Download the payment app.
Most credit card processors and payment facilitators have their own mobile app, and this is where your setup really starts to come together. After downloading the app, you’ll typically enter some basic business details, link your bank account and finish activating your account.
Most apps work on both iPhone and Android devices and walk you through setup step by step, so you usually won’t need much technical experience to get started.
Along the way, you may also be able to set tax rates, build a simple inventory list, turn on tipping or customize digital receipts — features that can be especially helpful for retailers, contractors and other service-based businesses.
3. Get a mobile reader.
Many payment providers now support Tap to Pay, which lets you accept contactless payments directly on a compatible smartphone. Others offer mobile card readers — sometimes at no upfront cost for new merchants — that connect to your phone through Bluetooth or, in some cases, a physical dongle.
“Since [mobile credit card processors] utilize existing smartphones or tablets, they are cost-effective by reducing hardware expenses,” said Peter Galvin, chief marketing officer at payment solutions provider NMI. “Additionally, they are simple to set up, usually only requiring the download of an app, and features are easy to update through the app store.”
4. Enable a virtual terminal.
Not every customer will have a card ready to tap or insert. In those situations, a virtual terminal gives you another way to take payment by manually entering card details through a secure webpage or app provided by your payment processor.
To key in a payment, you’ll typically need:
- Credit card number
- Expiration date
- CVV (security code)
- Customer’s name as it appears on the card
- Billing ZIP code
- Billing address
5. Accept your first payment.
Once your app, reader and account are fully set up, you’re ready to start taking payments. The process looks a little different depending on whether you’re using a mobile reader or keying in a transaction manually.
- Mobile reader: Add the customer’s items in the app or enter the sale amount, then have them insert, tap or swipe their card and follow the on-screen prompts to complete the transaction.
- Virtual terminal: Manually enter the customer’s payment details, review the total and submit the charge through your processor’s secure payment form.
6. Send the customer a receipt.
Once the payment goes through, provide the customer with a digital or printed receipt. Most payment apps and virtual terminals make it easy to email or text receipts directly from your phone.
If you’re regularly taking payments in person, a mobile receipt printer can add a more polished touch, especially for businesses that work events, pop-ups or on-site service calls.
After the transaction settles, your payment processor will deposit the funds into your bank account, minus any applicable processing fees.
Benefits of accepting credit cards by mobile phone
Accepting credit card payments with your phone can do more than help you make sales on the go. For many businesses, mobile payment processing makes it easier to meet customers where they are, work more flexibly, speed up checkout and collect payments faster.
Here’s a look at the benefits of accepting payments via your phone.
Customer convenience
Cash is becoming less common in everyday transactions, so accepting cards, digital wallets and other contactless payments gives customers more ways to pay and helps create a great customer experience.
“[Mobile phone payments] don’t just provide the best customer experience — they [help businesses] build stronger, lasting relationships with their clientele, improving their operational model and creating flexibility in how they do business,” said Matt Downs, president of Integrated & Platforms at Global Payments.
Flexibility
One of the biggest advantages of mobile payment processing is how easily it lets you take your business beyond your usual setup. Even if you normally work from a storefront, office or restaurant, accepting payments on your phone can open the door to new sales channels, events and off-site opportunities.
A restaurant owner might use an iPhone to take payments or an Android payment app to process sales at food festivals, catering events or community pop-ups. Retailers selling clothing, jewelry or handmade goods can test new markets through trunk shows and temporary shops. Independent sales consultants can collect payment on-site during client visits — no countertop hardware or fixed checkout station required.
Shorter customer wait times
Mobile payment devices aren’t just useful for businesses on the move. Stores, restaurants and other brick-and-mortar businesses can also use them to speed up checkout lines, especially during busy seasons, product launches or major promotions.
Long lines can test a customer’s patience, and in some cases, cost you the sale altogether. Giving employees mobile payment devices lets them check out customers wherever they are in line, helping transactions move faster when traffic picks up.
Improved bill collection
Getting paid on the spot can solve one of the biggest headaches for service-based businesses. Instead of tracking down overdue invoices, waiting for a check to arrive in the mail or dealing with the debt collection process, you can collect payment as soon as the job is done.
That means less time spent following up on unpaid balances and fewer write-offs tied to late or missed payments.
Service-based businesses may also benefit from SMS (text-to-pay) options. With an
SMS payment setup, you send customers a payment link by text, and they can complete the transaction through a secure, mobile-friendly payment page on their device.
How much does it cost to accept cards using your phone?
For most businesses, mobile payment processing costs fall somewhere between 2 percent and 4 percent per transaction, though your actual rates can vary quite a bit depending on your provider, pricing model and how your business processes payments.
The numbers your business sees on paper may depend on things like:
Pricing models
Not every provider prices mobile payment processing the same way. Payment facilitators often keep things simple with flat-rate pricing, while traditional credit card processors may use interchange-plus or tiered pricing instead.
Here’s what those pricing models typically look like:
- Flat-rate pricing: This is the easiest model to understand. You’ll usually pay either a flat percentage of each transaction or a flat percentage plus a small per-transaction fee, regardless of the card type.
- Interchange-plus pricing: With interchange-plus pricing, you pay the card networks’ base costs, plus your processor’s markup. Those network costs generally include:
- The interchange fee, which is set by the card networks and paid by all processors
- The assessment fee, another non-negotiable fee charged by the card brands
- Tiered pricing: Tiered pricing groups transactions into categories, usually qualified, midqualified and nonqualified.
- Qualified transactions may include standard debit or credit cards accepted in person and typically carry the lowest advertised rates.
- Midqualified transactions may include rewards cards or transactions with additional processing requirements.
- Nonqualified transactions often include premium rewards cards, corporate cards or keyed-in transactions, and they usually come with the highest rates.
Additional fees
Transaction rates are only part of the picture. Depending on your provider, especially if you work with a full-service payment processor, you may run into additional fees like these:
- Monthly fees: Also called statement fees, these charges help cover administrative costs, such as account maintenance, monthly reporting and customer support. Some providers charge $5 to $15 per month, though pricing varies.
- Gateway fee: If you want to accept online payments, you’ll likely need a payment gateway. Some providers charge a flat monthly fee, while others add a small fee to each online transaction.
- Payment Card Industry (PCI) compliance: The Payment Card Industry Data Security Standard (PCI DSS) sets security standards designed to help protect cardholder data. Businesses typically need to validate compliance each year, and many full-service processors charge a separate PCI compliance fee.
- PCI noncompliance: If your PCI validation lapses, some processors charge a monthly noncompliance fee until your account is brought back into compliance.
- Monthly minimum: Some processors require you to generate a minimum amount in processing fees each month. For example, if your monthly minimum is $25 and you only generate $12 in fees, you may be charged the $13 difference.
- Contract termination fees: Month-to-month agreements are generally easier for small businesses, but some traditional processors still use multiyear contracts with early cancellation penalties.
“Beyond the basic pricing models, businesses should evaluate processors based on their transparency, contract flexibility and ability to scale with business growth,” Downs explained. “Payment processors that offer customized fee structures or volume-based discounts can provide significant savings as your business expands.”
Mark Fairlie contributed to this article. Source interviews were conducted for a previous version of this article.
