How To Accept Credit Card Payments On Your Phone: The Complete Guide To Mobile Credit Card Readers
Right this moment, countless business owners share the same pressing concern: “I need to know how to accept credit card payments on my phone.” If this describes you, we wrote this article to address this concern.
Mobile credit card processing has been on the rise for some time now. With companies such as Square Payments taking the lead in North America, the use of mobile point of sale (mPOS) technology was already on the ascent.
Then, COVID-19 arrived, further accelerating this trend. In the wake of a devastating pandemic, it has quickly become the norm across the US to have your coffee/sandwich/cocktail order taken at the door (or window) of a place of business by an employee with a mobile credit card reader. As businesses scramble to adapt to our new shared reality, mobile POS systems are in demand as never before.
If you’re reading this, you’re probably looking to accept credit card payments on your phone or perhaps your tablet as well. So where do you start, and how do you decide which software/payment processor to choose? As Merchant Maverick’s mPOS software specialist, I’m here to help you figure out if mobile processing is right for you (spoiler alert, there’s a really good chance an mPOS could be a great choice for you). I’m also here to help you figure out which features are the most important.
We’re not including iPad POS systems in this post, as they don’t work on smartphones and tend to be designed more for countertop register setups than for mobile use. If that’s what you’re looking for, we recommend checking out our iPad POS reviews.
If you want a highly flexible POS that will run on a smartphone, read on! We’ll talk about software features as well as mobile credit card readers. And then, we’ll discuss some of the best mPOS options currently available in the US.
Table of Contents
- Why Accepting Credit Cards On Your Phone Will Make Your Business Run Better
- What Is A Mobile Credit Card Reader?
- How To Accept Credit Card Payments Using Your Phone
- Where Do You Get A Mobile Card Reader?
- How To Accept Credit Payments On My Phone: The Quick FAQ
- How To Choose The Right Credit Card Reader For Your Business
Why Accepting Credit Cards On Your Phone Will Make Your Business Run Better
You may have a specific image in your head of who uses mobile processing apps and mobile credit card readers to accept payments. And you’re probably right — but whoever you’re thinking of, they’re not the only ones who rely on that technology. Consider this: Back in 2018, a Juniper Research study predicted that by 2023 mobile POS systems will be responsible for almost a quarter of all POS transactions globally, which comes out to an estimated 87 billion transactions annually. And that number doesn’t even take into account the accelerating effect COVID-19 is having on this trend.
Point being, it’s not just a few industries that stand to benefit from being able to accept credit cards with a phone. However, let’s take a look at some sectors where mobile POS systems are most popular, if not essential:
Arts & Crafts
Do you sell your wares at conventions, art shows, and other pop-up events? You could be an artist, an author, a quilter/seamstress, or a jewelry maker, just to name a few. If you rely on local events rather than a storefront to sell your wares, a mobile POS system designed for low-volume businesses with no monthly fee is ideal for your business because it means you don’t need to pay for the software when you aren’t using it. You probably won’t need a lot of advanced features, but keep in mind that you can get pretty solid inventory management on a mobile system.
If you’re in direct sales — that is, if you are an independent consultant who sells makeup products, clothing, candles, kitchen products, and the like — you almost certainly rely heavily on parties to hawk your wares, in addition to selling online or at pop-up events. Instead of trusting your customers to bring cash or having to wait and hope checks will clear, the ability to accept credit card payments on the spot can help ensure you get those last-minute impulse buys. A mobile POS with intermediate to advanced inventory, discounting, and flexible tax settings will make a world of difference.
Food Trucks & Farmers Markets
Having a small POS system is a must in a cramped food truck. Whether you want a tablet stand with a small footprint or you opt just for a smartphone and mobile reader, the point is that a mobile system is undoubtedly the right choice. Being able to send digital receipts (SMS or email) means you don’t have to bother with a receipt printer taking up space — and you don’t have to worry about connecting it to the internet either.
Food trucks are far from the only food-related businesses that rely on smartphones and tablets. While I’ve encountered vendors at farmers’ markets who only take cash, most of them have a mobile POS to accept card payments these days. A mobile POS system with multiple user logins is definitely an advantage if you have a team that sells at several different weekend markets, too.
Even established restaurants have adopted mPOS apps. A handheld device with the entire menu loaded on it can make taking orders more reliable, especially if, for example, the POS prompts you to input preferences for sides and toppings rather than assuming the default. Even casual restaurants where you might place an order at the counter are using mobile devices, with roaming servers who can stop by a table and place additional orders rather than requiring customers to get up and go back to the counter.
And there’s another big advantage to having mobile card readers: the ability to process credit cards right at the table. There’s no more need to walk away with a customer’s card when the server can simply swipe it at the table and hand it back. Some restaurant-focused mobile POS systems now have a feature that lets tablets function as self-service kiosks where customers can place their orders and pay their checks at the table without a server present.
Additionally, coronavirus concerns make mPOS systems all the more useful in the restaurant industry, especially as take-out ordering and having customers use a credit card reader by the door/outside/at a walk-up window becomes the norm.
Service & Mobile Businesses
If you don’t have a brick-and-mortar office or base of operation where customers visit you, having a mobile app and credit card reader for phone use is essential. Being able to accept payment on-site means you get paid faster than if you were to wait on an invoice or check. Plus, it gives you a more professional image as well as greater credibility.
Just some of the service businesses that could benefit from being able to accept payment via smartphone or tablet include carpet cleaners, plumbers, lawn care, mobile dog groomers, exterminators, personal trainers, hairstylists, and makeup artists, web designers, and many more. I even know a massage therapist who sets up her massage chair in the game room of a local game and hobby store one night a week, and she uses a mobile POS to take payments.
Even businesses that do have brick-and-mortar shops are finding it advantageous to use mPOS systems with card readers. A smartphone or tablet with a card reader can be used for line busting or even allow customers to complete their purchases right on the sales floor rather than having to find a register.
What Is A Mobile Credit Card Reader?
A mobile credit card reader is a mobile device that accepts credit card payments. There are three ways a device can do this, and most modern credit card readers will accept some combination of these three payment methods — some will take all three.
Credit Card Swipers
A credit card swiper accepts magnetic stripe (magstripe) payments — the type of payment credit cards were originally designed for. While it’s good to have the ability to accept magstripe payments from customers still using this form of payment, you don’t want to limit yourself to accepting only magstripe payments. After all, the technology is dated. Of the three methods of accepting payments, magstripe payments are by far the least secure. What’s more, due to regulations enacted in 2015, if a merchant only has a magstripe reader and a customer uses a stolen or fraudulent card with both a magstripe and a chip, the merchant is responsible for the loss on the purchase. To shift the liability back to the credit card companies, the merchant needs to have an EMV card reader.
EMV Card Readers
EMV card readers are colloquially known as chip card readers. With EMV technology, your payment information is stored digitally on a square chip embedded in your card. It’s designed to be much more secure against fraud than magstripe technology. In fact, it’s the reason EMV technology was developed in the first place. Anybody doing business in the modern world will want to be able to accept EMV payments.
NFC Card Readers
NFC stands for Near Field Communication, and it refers to wireless payment technology that transmits payment information at close range. NFC payments are sometimes referred to as mobile wallet or digital wallet payments. Customers use mobile wallet payment apps, such as Apple Pay, Google Pay, and Venmo, to transmit their payment information via either a smartphone app or an NFC-enabled credit card. Unlike magstripe technology, it’s highly secure. However, contactless NFC technology is not yet as widely used as EMV and magstripe technology, so if you choose to accept NFC payments, you’ll want to be able to accept other types as well. Thankfully, most mobile card readers that can accept contactless payments are also able to accept chip (EMV) and/or swiped (magstripe) payments.
Square’s original iconic white magstripe card reader — the first mobile card reader in widespread use — was powered by simply connecting the device to the headphone jack on your smartphone. You can still use your phone’s headphone jack to power this device (and some others), but modern credit card readers can now be powered by either a Lightning connector or by a Bluetooth connection, depending on the reader you choose.
Essentially, one connection type is as good as another, though headphone jack connectors are the least future-proof since modern iPhones don’t even have headphone jacks. Additionally, Bluetooth connections can occasionally disconnect and will use up battery life, so you may prefer to use a direct connection via headphone jack or an iPhone’s Lightning jack.
How To Accept Credit Card Payments Using Your Phone
Your credit card reader is but one component of the mobile POS ecosystem. To summarize the system as simply and succinctly as possible, your card reader takes your customer’s payment information and transmits it to a cloud-based mobile payment app that runs on your mobile device. The mPOS app then securely transmits this data to your payment processor.
At this point, things get more complicated. Depending on the setup you decide to go with, you may be using a merchant account as your processor or an aggregator (a.k.a., a third-party processor), such as Square or PayPal.
Generally speaking, merchant accounts are highly stable and not prone to sudden holds or account terminations. The trade-off is that they can take a bit of time to set up, may require negotiation, and often want proof of an established business, ideally with a monthly processing volume upwards of $10,000/month.
By contrast, a third-party processor works by setting up one giant merchant account in the company’s name and signing up all merchants as sub-users of this account. The vetting process is less intense than with a merchant account, usually only requiring you to verify your identity, and you can be approved and set up to process payments in under a day. Typically, you don’t need to have any sort of processing history or meet a minimum threshold. However, in exchange for that convenience, you do face a risk of sudden account holds or terminations. Our article on how to avoid holds, freezes, and terminations offers some helpful tips on avoiding this.
When it comes time to collect your money, there’s no reason you should wait more than two business days to have your money in your bank account. Some processors now offer next-day deposits, ensuring that funds from a given day are dropped into your account the morning of the next business day. However, it is possible to access your funds almost instantly with some processors. Square and PayPal both have an option to transfer funds directly to a user’s bank account for a 1% fee, and they also can deposit funds right away into a mobile wallet linked to a branded debit card, which incurs no fees. Keep in mind that both are third-party processors. Most merchant account providers are limited to next-day transfers at the earliest.
Security-wise, modern mPOS systems sport advanced encryption and other security measures to keep your customers’ data safe (though no security system is bulletproof). Many processors won’t charge an extra fee for security, though some merchant account providers will. Read our article on mPOS security to learn more.
Where Do You Get A Mobile Card Reader?
You can get a mobile card reader in a few different ways. You can get an inexpensive card reader sent to you upon signing up with a processor such as Square or PayPal. In fact, you may be able to get one for free as part of a promotional offer. This is probably the easiest route to take for merchants just launching their business. Meanwhile, established businesses — those that already have a merchant account and are seeking to modernize their payment system — may find that the easiest route to using a mobile card reader is to add a mobile app to their existing setup by contacting their merchant account provider and inquiring about their options.
Ultimately, regardless of your business situation, it’s up to you to decide what kind of processor you want to work with. While yes, many merchant accounts are targeted at established, higher-volume businesses, that’s no longer exclusively the case.
For a detailed comparison between third-party processors and merchant accounts, our article, The Truth About Third-Party Payment Processing, contains a detailed rundown of the similarities and differences involved. In terms of the actual physical setup of your mPOS device and software, things aren’t going to differ much regardless of the processor. Pricing is where differences are most likely to present themselves.
Third-party processors typically feature flat-rate pricing. That means you pay the same amount per transaction (2.75%, for example) regardless of the card type or transaction size. Meanwhile, merchant account providers offer a variety of pricing schemes (interchange-plus is the one we favor). Generally, though, pricing is less straightforward than it is with third-party processors (though not necessarily more expensive overall; you may end up saving with interchange-plus pricing).
Additionally, with a merchant account, you’re more likely to encounter software, subscription, and/or service fees every month. And because most merchant account providers require you to sign a contract, some will charge you an early termination fee (ETF) if you try to drop your provider before your contract term ends. If you decide to sign up for a merchant account, we recommend finding a provider that won’t impose an ETF on you.
How To Accept Credit Payments On My Phone: The Quick FAQ
How To Choose The Right Credit Card Reader For Your Business
If your business has you on the go with any frequency, an mPOS app and mobile card reader offer significant benefits. For starters, if you can accept credit card payments on the spot, you’ll get paid a lot faster compared to waiting for a check or invoice. For small businesses that are just starting and may not be pulling in large volumes, some providers have no monthly fees, no payment processing minimums, and won’t subject you to extensive underwriting. Furthermore, even large, established businesses doing a high volume can implement mobile POS systems that will scale with them, affording both more flexibility and more mobility.
For more on choosing the right smartphone-friendly mPOS option for your business, check out the following resources!
- 5 Best Mobile POS Apps
- How Do You Find The Best Credit Card Reader For Small Business? Try These 7 Options
- Mobile Processing Comparison Chart
- A Cashless Future Is Coming. Is Your Small Business Ready?
Have questions about how to take credit card payments on your phone? Want to know more about how to accept mobile credit card payments? Drop us a comment and let us know.