When You Suddenly Need to Be Able to Accept a Payment By Credit Card

Sometimes a short-term problem, once solved, becomes a long-term business advantage. I have never had a need to take credit cards other than maybe once or twice here and there over the last few years, and we’ve always found a solution that gets us through. But just last week I had a government customer that wanted to pay by credit card, and I knew this in advance, so before performing the work I configured various settings in PayPal to enable it to act as my merchant processing company. All appeared to be well.

There were a few minor drawbacks associated with my decision to shoehorn my personal PayPal into being my business’s payment processing company – I knew that this being a government purchase meant they would want to make their payment to a company and not an individual, but I was able to generate an invoice as coming from my small company, billed to them. I then emailed the invoice to myself, and then collected the credit card data at the customer site.  Once back at my office I pulled up my emailed invoice and attempted to pay it with the card information I had collected, but the card would not go through. Rather than a “declined” it gave a more cryptic “this card will not work”.

After doing some research on government payment by credit card and PayPal, I quickly found that it simply was not going to work. For various reasons government cards are not allowed to be used with merchants who use PayPal as their merchant processing, either by repurposing a personal PayPal account as I had done or even by creating a full-featured business account. Now that I had done the work and paid my help I was stuck for a simple way to process the payment. In the past getting an account through a bank or through a card processor like NPSMerchant could take several days and often involves an on-site business premises inspection.

The Solution

So I called a friend who works for a merchant processing company, and he agreed with me that the fees associated with setting up a card reader and monthly account would cost more than the payment I was trying to accept, and so he told me about new company called square.com. In under an hour I had an account completely set up, processed the credit card payment information successfully, and saw the money in my account, ready to be sent to my bank.

I do happen to have an iPhone, and the Square (TM) card reader and software uses a smartphone to do it’s functions. They will send you a reader device for your phone that is small enough to be easy to carry around. In my case I downloaded the app to my phone and keyed in the card number – this cost approximately 3.5% of the transaction, and using the swipe reader only costs 2.5%. The fact that there are no monthly fees, no long application process, and no waiting from start to finish made it perfect for my single transaction and now that I have it on my phone I can with confidence tell any customer that payment by credit card is fine.  I still haven’t made up my mind whether to pass along the 2.5% fee for customers who pay by credit card. If it’s not going to interfere with the sale I think I will.

Small businesses often need to act quickly, or the opportunity can be lost. Letting credit card processing get in the way of an opportunity can cost you, and so I hope that by sharing my experience you’ll be able to either be ready or respond quickly when you next need to do a transaction involving a credit card.

Sole proprietors doing everything on their own may not have had time to check into their credit card options. I was lucky enough to have a friend in the business who told me about Square, but most banks or others in a position to give advice are not going to mention it because it’s directly competing with their own slice of the merchant processing pie. I would say that even if you already have a merchant processing company in place, take a careful look at your past bills, including if you can any annual fees, and see if the simpler smartphone cardreader (free, by the way), is a better solution for you and your frequency of accepting cards. Since most businesses will be under a multi-year contract it may make sense to use the Square system alongside and give it a trial run.

Even Faster

My iPhone reader is on it’s way, and as I mentioned I was able to just key in the credit card information and it was immediately approved, but in looking a bit deeper to share what I’ve found for SHY Entrepreneur, I discovered that the Square reader is available at Walmart, Target and Radio Shack locally. Click the link for “Store Locator” to find one near you. I’m not sure how much the retail version costs, but mine was free. Although the money showed up in my Square account within minutes, There is still a slower process to get past which is bank verification. You give Square your bank routing number and account number, and they make a tiny couple of deposits to your account. If you can correctly report back those two amounts then that proves your have access to that bank account, and they will transfer your money to you (transfers are done once daily).


This is by no means to say a traditional card processing company isn’t the way to go for your business if you currently do that or are planning to, but knowing about this easy-entry option just might help your growing business expand easily with out feeling the pinch from the bank.

Written by guest columnist Eric Kinney, who’s regional small business Specialty Prefab sells and installs gazebos by Creative Gazebos.


About Eric

Entrepreneur and long time Web guru.