In 2022, the number of credit card transactions in the United States exceeded 50 billion, roughly double the number in 2012. Offering credit cards as a payment option is no longer just for customers’ convenience; it’s a necessity for businesses.
Below, we’ll explain the benefits of offering credit card payments on invoices, how they can help with customer retention, and the practical steps for getting started. We’ll also look at some of the costs and potential challenges so you can make an informed decision about whether to accept credit card payments on your business’s invoices.
What’s in this article?
- What are the benefits of offering credit card payments on invoices?
- How can credit card payment options improve customer retention?
- How do you implement the option to pay with a credit card on invoices?
- What are the costs of accepting credit card payments on invoices?
- How does Stripe support credit card payments on invoices?
- What are the challenges of invoicing with credit card payments?
What are the benefits of offering credit card payments on invoices?
By allowing customers to pay invoices with credit cards, you can accommodate customers’ changing payment preferences. Here are the benefits of offering credit card payments on invoices:
Improved cash flow: Credit card payments help improve cash flow since these payments are authorised almost immediately and processed quickly, compared to other payment types. This means you won’t be left waiting for cheques to clear.
Convenient international transactions: Credit card payments simplify cross-border transactions by eliminating the need to navigate exchange rates or unfamiliar banking systems.
Built-in security measures: These payments also come with built-in security features to manage the risk of fraud or disputes.
How can credit card payment options improve customer retention?
Offering credit cards as a payment option can boost customer retention by making payments faster and easier for customers, which makes them more likely to return to your business in the future.
If your business relies on a subscription or recurring billing model, credit card payments make it simple to bill clients automatically when their fees are due. Customers might not remember to make manual payments each time, but with their credit cards on file, they don’t need to worry about service being interrupted. This convenience also enables businesses to maintain a more consistent cash flow.
Credit card payments also support flexibility, which can boost customer retention. For example, if clients can spread the cost of a purchase over time, they might be more willing to commit to larger purchases or ongoing service. Flexible payment options make customers feel more in control of their finances, which can strengthen their commitment to your business.
Customers might also appreciate the opportunity to earn rewards through loyalty schemes. Many payment processors allow businesses to securely store customer card information, making it easier to provide special promotions, discounts, or other loyalty perks. Rewarding your customers for their repeat business encourages them to return.
Offering credit card payments is a simple but powerful way to create a positive interaction that builds trust with customers.
How do you implement the option to pay with a credit card on invoices?
Accepting credit card payments on invoices starts with choosing the right payment processor, connecting it with your invoicing system, and educating your clients about how to pay.
First, select a payment processor that offers invoicing features or integrates with your existing invoicing system. Most invoicing platforms (e.g. FreshBooks, Xero, QuickBooks) allow you to link payment processing directly with your account through a simple integration.
Next, when you create an invoice for your client, there’s usually an option to add a “Pay Now” button that links directly to the payment processor. This is where you can offer credit card payments. Ensure your customers know they can pay via credit card by making the option visible in your invoices and providing any instructions they might need.
What are the costs of accepting credit card payments on invoices?
The most common fees for accepting credit card payments are transaction fees, which are usually a percentage of the payment plus a fixed amount per transaction. You can pass on credit card processing fees to clients by adding a small percentage or flat fee to the invoice to cover those costs. However, these fees can upset clients, so carefully weigh the pros and cons of this tactic and consider building these costs into your pricing model.
Some payment processors also charge monthly fees to use their services or setup fees for more advanced features or integrations. If you accept payments in multiple currencies, you might also need to pay conversion fees, which are often about 1% of the transaction amount.
Research your payment processor’s chargeback fees. If a customer disputes a credit card charge, your payment processor might charge you a fee (usually $15–$25) to resolve the dispute. Chargebacks happen, but being diligent about invoicing and communicating with customers can help minimise them.
How does Stripe support credit card payments on invoices?
Stripe Invoicing makes it easy to create invoices that support credit card payments. Setup is fast, secure, and simple.
Stripe supports a wide range of credit card types, including Visa, Mastercard, American Express, and some international cards. Here’s how to accept card payments:
Set up Stripe: Sign up for a Stripe account. After you’re onboarded, you can start sending invoices from the Stripe Dashboard. Stripe can also integrate with e-commerce platforms such as Shopify to accept online payments.
Create and send an invoice: Stripe adds a payment button when you create an invoice. When your client receives the invoice, they can click the button, enter their credit card details, and pay instantly. Stripe securely handles every aspect of the payment in compliance with payment standards like the Payment Card Industry Data Security Standard (PCI DSS).
Get paid: Once a customer pays via credit card, the funds are processed and then deposited into your Stripe account before being paid out to your bank account. Stripe allows you to track payments in real time so you know when to expect payment.
What are the challenges of invoicing with credit card payments?
Before you accept credit card payments on invoices, it’s important to understand the following potential obstacles:
Chargebacks: If a customer disputes a payment, they can initiate a chargeback in which the credit card company refunds the payment. This can happen for several reasons. For example, maybe the customer didn’t recognise the charge or the product or service received wasn’t as advertised. If chargebacks become a pattern, they can affect your relationship with your payment processor, potentially leading to higher fees or even account suspension.
Risk of fraud: Credit card payments are generally secure but there’s always a chance of fraud, especially if you work with international clients or handle large payment volumes. Payment processors have extensive tools to detect fraud, but you still need to be vigilant. Fraudulent charges can cause financial losses and potentially damage your business’s reputation.
The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent lawyer or accountant licensed to practise in your jurisdiction for advice on your particular situation.