Americans love plastic, especially when it comes to shopping. 78% of consumers say that they would rather buy with a card than cash, and doing so typically leads to a larger purchase.

Accepting credit card payments is basically a requirement for all businesses these days, both big and small. In 2016, there were over one billion credit cards in use in America alone, and between the two leading brands, Visa and Mastercard, Americans spent $1.28 trillion. Failing to accept this major form of payment would be an expensive mistake for an SMB.

Yet, many business owners are wary of risks associated with credit card processing. An accidental security breach involving customer payment information could be absolutely devastating for a small business. The average cost of a data breach is $141 per lost or stolen record.

Beyond security, there are several other risks that come along with processing credit cards. These include hidden fees, lengthy processing times that cut into cash flow, and a number of other limitations and complications.

So, what should small businesses do? Clearly, omitting credit card payment options is not really feasible in today’s market. Therefore, the best strategy for SMBs is to protect themselves against the most common risks associated with credit card transactions.

Let’s dive into the details.

Know the Process

Most consumers dread dealing with credit card companies, but things are arguably even worse for business owners who must deal with multiple processing departments just to receive their payments. Therefore, it is important that you understand exactly how the system works to make things simpler and avoid any unpleasant surprises.

There are five roles in the credit card transaction process that you must keep straight:

  • The customer, known as the cardholder.
  • The issuing bank that provided the card to the customer and is providing the payment.
  • The card network, such as Visa, Mastercard, Discover, or American Express.
  • The merchant, which is yourself as the business owner.
  • The acquiring bank or the processor who is the merchant account provider. Commonly called the ISO (independent sales organization) or MSP (merchant service provider).

Typically, the processor with your business partners will handle the transactions, and the funds from the customers’ credit cards should appear in your business account within a few days. However, if there is an issue with a payment, the POS system, or a chargeback, you will need to contact your ISO or MSP customer service department for assistance.

How credit card processing works


By understanding each player’s role in the process, it will be a little bit easier to understand where the issue is when a problem arises, as well as the course of action to take to resolve it.

Choose the Credit Card Processor that is Best for Your Business

There are plenty of options out there for SMBs when it comes to credit card ISOs and MSPs for processing. Each one comes with their own set of rules and fees, so trying to pick the right one for your organization can certainly be a confusing process.

In order to find the right one for your business, it’s important that you define your goals and customer segments first. If you are selling mostly online, that is an important factor to keep in mind when looking for an MSP. However, if your business is interested in flexible systems, like mobile POS for offsite sales or pop-up shops, you would want to go with a processor that offers these options. Be sure that your processor can also keep up with consumer trends, such as the option for mobile payments with Apple and Samsung Pay, which are becoming increasingly popular.

Smart phone users in the US by age and type of device


Some processors are better for specific companies based on their size, average transaction amount, or budget. For example, if your company has small transactions around $10 or less, PayPal actually offers credit card processing with minimal fees for small businesses. Square is a great option for SMBs that are in the retail or food industry. The program offers things like loyalty perks and card readers that plug into iPads or even iPhones.

You should also be aware of the various fees that may arise, depending on which ISO or MSP and issuing bank you are working with. Transaction fees are issued with each purchase and are also called wholesale fees. These may range slightly depending on which processer you partner with, and some may vary depending on your business size or average transaction amount. While these fees should be automatically calculated, be sure that you keep track so that you are not overcharged.

Be Careful with International Card Issues

Processing with an international bank can make your system more complicated, expensive, and time-consuming. However, it is a good way to expand your customer base. This is especially relevant when you are selling online, as many of your customers may be located overseas.

Since this certainly adds further complications, it may be best to start small when partnering with international credit processors.

Of course, beware of the risks and added fees that come along with international transactions. Check out this resource for processors that are able to handle overseas transactions with minimal fees.

Train Your Staff Properly

No matter which system or processor you use for your business, make sure that your employees know how to use it properly. Misuse of this sensitive information could lead to lost data, incorrect transactions, and even potential security breaches.

This also means that if your business is tracking customer data from your POS system, your staff should be aware of this strategy as well as the information that is important. For instance, if your team wants to create a database of customer accounts linked to the respective credit cards, your staff must be trained to create these accounts properly without compromising customers’ sensitive information.

Be sure that your employees are also able to handle any common issues with credit card transactions, such as refunding a purchase. Furthermore, they must also be aware of proper security protocol, as well as follow PCI compliance guidelines.




SMB owners don’t need to fear credit card processing. For every risk and issue, there is a solution. By taking the time to understand what goes into the transaction process and carefully doing research to pick the ISO or MSP that offers the ideal options, you can avoid a lot of headaches later on.