We all know how challenging it is to take a great idea and turn it into a real business. You need funding, a business plan, a website, a business model—the list goes on and on. But have you thought about the little things, like how you’re actually going to take payments from your customers?

You have options, and choices to make. And regarding credit card payments, you probably haven’t thought farther than, “Of course I’ll take credit and debit cards!” But how? There are more ways than ever to accept credit and debit cards, and it seems like a new one pops up every day. This fast-changing environment can be daunting to a small business that’s rightfully more concerned with finding customers than thinking about how to process a payment. But making the right choice is critical to maximizing revenue and cash flow.

If you are going to accept credit cards, the first thing you’ll need to decide is whether you will swipe them or enter in the card information manually. That means you either need a physical terminal or a virtual terminal:

Physical Terminal (POS)

One of the most common forms of accepting payments is through a physical Point of Sale (POS) system. You’ve done this a million times as a consumer, swiping your credit card through a card reader and authenticating the transaction with your signature. And recently, you’ve probably used one of the new mobile swipers that turn a smartphone or tablet into a POS system—that’s also part of this category.

For retail businesses with face-to-face transactions, a POS system is usually the most cost-effective option for processing credit cards. However, if all you have is a POS system, manually typing in card information when you don’t have the physical card in hand will generally result in a very high transaction fee for a “non-qualified” transaction (i.e., if a customer called and wanted to buy something from you, you might pay more in fees for taking their credit card information over the phone rather than in person—would you pay the higher fees, or risk losing the sale by asking them to stop by instead?).

Virtual Terminal

In today’s world, plenty of businesses don’t transact face-to-face with their customers and/or don’t have the luxury of swiping a physical credit card. These businesses—usually service providers and online sellers—typically end up using a virtual terminal. A virtual terminal provides the ability to accept credit cards online, through the mail, and over the phone. It also enables you to process these transactions as “card-not-present”, which costs you far less than the “non-qualified” rate described above. Collecting a payment through a virtual terminal is achieved when either the business or the customer keys in the credit card information (either in your payment software or on your website) and clicks submit.

But the story gets more interesting! On top of the benefits above, a virtual terminal also lets you do great things like set up recurring payments, send electronic invoices, and securely store customer data for future transactions. These are important tools that can help you increase your revenue and improve your cash flow, so consider using them for your small business Let’s take a closer look at each tool:

Recurring Billing

If your business will charge your customers on a set time interval, tracking down customers each time to get their payment information (or relying on them to pay promptly on the due date) can be a huge hassle. It can also make your cash flow more unpredictable and inconsistent than it needs to be. A huge advantage of virtual terminals is that many include recurring payment functionality, letting you enter the credit card information, set a payment schedule (which can extend either indefinitely or until an end date for a set payment plan), and not have to touch it again. It can also be way more convenient for your customers, since they don’t have to take time out of their schedule to send or call in a payment.

Electronic Invoicing

Paper invoices are a thing of the past. Why print, mail, and store paper documents when you don’t have to? Electronic invoicing gets both you and your customers away from paper clutter while reducing costs and eliminating errors. Not only can you email professional-looking invoices to your customers, but a virtual terminal can also allow them to click the invoice and pay you online with their credit card. No paper checks, no “It got lost in the mail…”, and no forgetting to keep track of who paid!

See Also: How to Create an Invoice: A Starter Guide

Securely Storing Customer Data

You’ve surely seen it in the news lately—storing credit card information securely is a big deal. Many business owners unknowingly put themselves and their customers at risk by writing down or electronically storing their customers’ credit card information for future use. Virtual terminals handle and store customer credit card data so you don’t have to. This allows you to charge them for future purchases without asking for credit card information every time and without putting your business at risk of data breaches. Not to mention allowing you to keep customer information (like addresses and payment history) easily organized in one place.


Credit cards are everywhere nowadays and pretty much everyone is comfortable using them. As a small business owner, you probably want to make payments as convenient as possible for your customers, so it’s a good idea to take credit cards. But the truth is that offering that convenience to your customers will cost you a lot of money in transaction fees. A great alternative is ACH (also called eCheck, electronic check, or direct debit).

ACH is basically the same as a check, but without the paper. You or your customer enters the bank account and routing numbers (the same information at the bottom of a paper check), submit the payment, and money is automatically debited from your customer’s bank account and deposited into yours. Not only can you still process one-time payments, set up recurring payments, invoice electronically, and save account information, but it’ll also cost you way less. On average, credit cards will cost you somewhere between 2 and 3 percent of the sale. However, processing ACH transactions can often come with lower, or flat, fees, which will save your business money.


Each payment processing solution can offer different rates as well as stipulations around the types of payment forms they accept, so make sure to take inventory of the payment options you will want to offer to your customers when you are making a decision. In addition, how the payment solution integrates with your other business tools can be important to streamlining all of your business processes. Keep these points in mind when you’re shopping around for what provider to use.

AvatarKeah Kalantari

Keah is Strategic Operations Manager at PaySimple, the leading provider of automated receivables and payment solutions to small businesses.