Recently we received the following question about accepting payments from a GDB reader planning his freelancing debut:
Would you recommend I set up a credit card service to receive payments through my future website or is this unnecessary? Is check still the best way to go?
These days there are lots of ways to accept payment and the services that make it simple all want a portion of your profits. But all that paperwork nonsense is nonexistent.
So here’s a guide to ways of accepting payment, their advantages and disadvantages, and my take on how you should accept payment.
Far and away the fastest growing form of payment, online payment is simple, quick, and convenient for many business-to-business (B2B) transactions.
Sign-up for both parties is generally free; however, almost all take their cut (generally around 3.5%) out of your gross income.
Also worth noting: generally your “instant” payments are delayed several days for confirmation of funds and the transfer of funds to your bank account.
Examples: PayPal, Intuit Payment Network (IPN)
Personally, I couldn’t imagine doing business without using both PayPal and IPN. I prefer IPN because it syncs payments with my accounting software, QuickBooks, and provides a payment link on my invoices.
Online payment through your website
The second form of online payment is payment through a secure portal on your website. Depending on the service, you’ll probably have a subscription fee and transaction fees that are a bit less than PayPal-style merchant accounts.
But, you don’t have to send anyone to a third-party site because you have a nice, professional payment form on your very own website. And most of these also allow you to process plastic.
Examples: Authorize.Net, Cardaccept, ProPay, Charge, Ccbill
As a freelancer who isn’t selling products, I see no benefit (and a slight headache in setup and management) in having a payment portal on my website. Less “techie” folks tend to be skittish about online payments anyway, so they’re happier with big names they already know.
While personal checks, money orders, and cashier’s checks have declined sharply in popularity, many businesses still prefer to cut paper checks to vendors.
It’s paper, and there’s a lot of having to make time in busy schedules to deliver that check and then deposit it (try e-depositing from a mobile device for your convenience). And you can lose a check, which makes you look foolish and takes even longer to hit your bank account.
However, there are absolutely no fees involved. Woot! The hassle of getting to a nearby ATM is usually worth it.
If it were up to me, all of my clients would pay by check because that no fee thing is pretty sweet. A small fee might seem like chump change for one transaction, but over the course of the year it adds up (so far my merchant account fees for this fiscal year total over $340!).
Debit/credit card processing
Let’s face it, a lot of clients, especially smaller businesses or start-ups, want to pay with plastic. But accepting plastic outright is generally prohibitively expensive – a subscription/monthly fee, a transaction fee, and sometimes a card reader fee as well.
Examples: Authorize.Net, Cardaccept, ProPay, Charge, CCbill
True, some apps now cut out a lot of the subscription and reader fees, but generally you have to be face-to-face with your client to get paid.
Examples: Square, Intuit GoPayment, Swipe It
With merchant accounts like PayPal and IPN that already accept debit/credit payments, I don’t see the purpose in setting up yet another service specifically to handle plastic payment (although I do have a Square account that I’ve used exactly once before IPN would accept credit cards).
What’s the best option for your business?
It’s all about convenience for your clients without breaking your bank.
When your client receives your invoice, you want them to have a simple, quick, secure way to pay you so that they aren’t putting off paying you because it’s a 45-minute affair. They don’t want to have to figure out which payment method they’re supposed to use, have to make yet another online payment account, or be hassled by a complicated checkout.
Finally, you want them to trust that the method(s) you choose isn’t going to land them with a nasty case of identity/account theft.
How do you get paid?
Which payment options do you provide? Prefer? Share your thoughts in the comments on this post!