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10 Steps for Setting Up a Side Hustle - Step #8 Merchant Account or Non Merchant Account Payment Options

Authored By: Madeline Anderson-Balmer on 6/21/2021


Payment Options – Because Getting Paid is How You Grow!


When you're looking to expand your side hustle (or start one), you may not think about HOW you'll get paid. Just the fact that you'll be paid is something to celebrate. Especially if, up until now, you've been doing odd jobs for free. Or maybe at a discounted rate just for friends and family. But when you start to ramp things up, set up a website, or pop up store, wholesale, or get your product/service out there for others to help you promote, you'll need to consider all the ways you have open to receive payment. Once upon a time, it was a simple matter of having someone write a check. What's a check? Exactly, most people don't even HAVE checks anymore. Plus, if you're accepting orders and/or booking service online, people are going to expect you to have the ability to accept payment that way, too. Thankfully there are multiple options available, some without the need to set up a business account, because maybe you're not there yet. But with any luck, you'll get there soon, and it's best to be fully informed and ready when the customers start lining up.


The Pandemic Has Made Digital, Online, and Automated a Thing!

If you're looking for a good side to the last year-plus of craziness, this is probably one of the top points on the "good side." People have become accustomed to doing business, working, and even interacting with family "online." In fact, PaySimple provides a significant amount of information showing that acceptance of credit and debit cards for payment are now the #1 payment method for online transactions.

During the pandemic, more people got used to doing things online and using contactless payment options. For small businesses, offering a choice for payment is best. Since accepting credit cards and debit cards online is the #1 method for payment, in fact, in 2020, 45% of consumers used their smart device to shop online, you need to be able to offer that convenience if you want to keep your customers happy. But how are you going to do this? Read on to find out.

Do You Need a Merchant Account to Accept Online Payments?

Or perhaps your first question is, "what is a merchant account?" A merchant account or e-commerce merchant account is a contract between the merchant (in this case, you) and a credit card processing company, which will allow you to accept credit card payments quickly, and securely for your customers.

The Balance outlines its top 7 merchant account providers for 2021 and interestingly does include a few that don't require an actual "merchant account."

Those include:

  • Paypal (second-best on The Balance's list)
  • Stripe (Best for online-only businesses according to The Balance)
  • Square (Best overall according to The Balance)

The US Chamber of Commerce is also in agreement with the above placements, listing the above three as top providers of payment options for retailers/merchants (and side hustlers or freelancers).

Paypal - does require a card reader and for in-person payments, downloading their app. But for online businesses or with the app (for in-person), you're good to go without a merchant account.

Stripe - offers an easy, efficient checkout process. But I was hacked by a business using Stripe last year. They signed up under my social to receive their payments, and I ended up getting an IRS form supposedly showing that I'd received payments for that business for an entire month. I called them to find out what the form was and how we could correct the error or pursue the hacker. Unfortunately, they were challenging to reach—no phone number on their site, and a delayed response through email. I know people use them, but be aware of your business information security. They get rave reviews for handling customers, but businesses need to be wary as well.

Square - is the top choice if you're a brick-and-mortar business or make most of your sales in person and are looking to accept credit cards. You'll simply attach a Bluetooth card reader to your smart device, and you're good to go. 

The above companies, and many others are considered Online Payment Gateways, sounds kind of like science fiction but it is definitely a real thing, and provides a huge benefit to online merchants/sellers.

Risks of Accepting e-Payments or Plastic

Well, keep in mind that if yours is an e-commerce website, you are responsible for making sure consumer data is protected. In fact, any time you collect consumer data you need to keep it protected. The payment gateway you use should encrypt payment data on your page. But in the end, you are responsible for keeping your client data safe from hackers. If there is a breach on your database, you are responsible for handling it, notifying people, and taking responsibility if there are consequences for your customers. These days we hear about data breaches and businesses being shut down by hackers daily. Not to scare you, but the statistics on hacks and why consumer privacy should be a top priority can look overwhelming. As you'll see, outlines it all in pretty straightforward language. But there are ways to protect both your business and your customers. Just make sure you're informed about cybersecurity and stay up to date in regulations and responsibilities that can involve your business.

Increase Security - Avoid Collecting Card Data with Each Purchase

If you have clients making recurring payments or using a subscription service or billing plan, ACH payments may be an option. What does ACH mean? It's a term you've probably heard from your bank or credit union. To use ACH with your customers, you obtain their bank account and routing number once, and then use automated recurring payments. The data is then only at risk during that initial collection. You can also allow customers to set up subscription billing plans through their credit card. Some people are more comfortable with this for a small or newer business since they set up payment themselves rather than handing over personal information on their accounts. But you'll need to ensure those payments are set up and coming in. It's a measured risk on both sides in this case. In most cases, consumers are familiar with doing business online and via e-payments, so don't allow this complex process to keep you up at night. Find a service you're comfortable with, that works with your business's current status (with or without a merchant account), and start selling.

Checks are Still a Thing… e-Checks That Is

I've never even heard the phrase "e-Checks" before, at least not in "can I pay via e-Check?" But I have heard of companies asking for my bank info and account information and creating an eCheck, which is then collected through ACH. This transaction directly debits the customer's bank account for the amount of the "check." This is processed via an online payment form or payment software hosted on your website, and payment is processed electronically. This process can be less expensive than processing credit cards and a bit more secure and predictable than a check. It's worth looking into as another option to offer your clients/customers.

Are You Ready for Mobile or Contactless Payments?

So again, you may have another question first, "How do contactless payments work, and why should I offer them?" Two totally different questions, and I'll address the first, first (good idea, huh?).

Contactless payments allow someone to make a payment without swiping, dipping, or tapping a card. Instead, the contactless payment app uses NFC technology, allowing a payment reader to "read" the information on an app or credit card. Actual card information isn't used. Instead, information is stored as a unique token and that token is transferred and represents the card information. Actual card numbers are not involved in the transaction itself. Some contactless systems use a QR code which your customer scans and they then enter the amount of the transaction themselves, and authorize payment. Digital wallets, Google Pay, Apple Pay, and so many more options allow this type of transaction. It usually does require a point-of-sale terminal (POS), so it isn't as crucial if yours is not a brick-and-mortar business. Check out more details on how to use the most popular contactless payment methods, pros and cons of contactless delivery, and which businesses they're best for with The Balance. Due – according to Inc is one of the best digital wallets on the market and offers credit card processing as well as other features. Free to join and charges 2.70% transaction fee for domestic and international.  MIT Federal Credit Union does offer Wallet Pay which is one form of this Contactless Payment. 

Other Options for Accepting Payments

There are a few other options for accepting payments that allow you to put off getting any of the above solutions, but if you're looking to grow, and provide the highest level of customer convenience and service, you'll need to seriously consider multiple options for payment.

  • Click to Pay Email invoicing - this works with an online payment form, and usually offers fully integrated payment and records/reporting options.
  • Recurring Billing (reminds people to pay) - This is simply a reminder email or text letting someone know their payment is due and prompting them to send in their payment.
  • Offering your products and services through an online store or eCommerce site. This allows you to receive payments and orders all online in one place.

Where Does Your Money Go?

All this discussion of how you'll get paid can lead to a very obvious question. Where will your money go? What kind of account will you have? Personal? Business? Do you need a Tax ID? These are all important questions. Sure, if you've just been mowing neighbors' lawns, or walking dogs for friends you probably haven't obtained a Tax ID number. Maybe you file some income on your personal returns, but have you decided to name your business and the name isn't your own? It's important to make sure you're covering all your bases, receiving payments to an account that isn't going to get muddled up with your personal money and make it difficult if not impossible to track, record, and report. Entrepreneur offers some great pointers when it comes to these types of decisions. And it pays to constantly watch for the newest systems, options and expectations from your customers. Technology, client expectations, and ways to make things easier are always changing.

Based on this post, you can easily see that there are a lot of moving parts when it comes to accepting payments in other than cash or paper check form. And to stay competitive and keep your records straight, it's best to be fully informed, and offer your clients more than one way to make payments. There are a number of resources out there that can help. I've included a number of sites in the resources below. Find a few that you find work for you, and then keep up to date with changes. Even consider following a few of the blogs, or checking in on the magazines periodically to see what's new. 


Photo by Norma Mortenson from Pexels

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