How Payment Processing Works
We think setting up an online store should be easy and fun, but there are some steps along the way that tend to cause confusion. One of those steps is how money is handled.
Figuring out how payment processing works shouldn’t trip you up, so let us give you the scoop on how it works to help you get started in style.
What are payment processors?
Handling online payments is complex. Banks communicate with each other, funds are transferred safely, account numbers and personal details are kept confidential, and sometimes currency needs to be (accurately) converted. The companies who handle all of that in the few seconds or less that it takes your order confirmation screen to appear are payment processors.
Some payment processors are everywhere, some only operate in select countries. They keep a small percentage of each sale, a fee that covers their costs, and also provides protections for issues like fraud.
What does it cost?
Usually you’re charged a small fee for each transaction, but the exact amounts or calculations can vary, so definitely double check the numbers as you get set up.
At the time of publishing, PayPal and Stripe charge identical fees for each transaction: 2.9% plus $0.30 USD. Depending on how you’re processing sales, Square offers card readers for in-person transactions and charges 2.75%, or 3.5% plus $0.15 USD, per transaction. These fees are deducted from the proceeds of each sale, so keep them in mind as you calculate your prices.
Pro-tip: if you’re using the Big Cartel app for your in-person sales, you can use Stripe or Square (or both). Stripe keeps things simple as a single payment processor that handles both in-person and online sales for your shop. Square lets you swipe, dip, or tap practically any credit card with their various readers for added security. You choose what works best for your business!
While we’re talking about transaction fees: Some ecommerce platforms charge a small commission on each of your sales as well. Those fees can add up if your products get some great press or a holiday sale really takes off. Big Cartel does not charge any listing or transaction fees.
How do I get paid?
Sometimes you can set up your payment processors to automatically transfer funds to your account. Other times you can manually issue yourself a payout. Either way, it’s best to start out with some cash reserves: there can be a delay of several days between when the order comes in and when your bank account gets that infusion. If you’re counting on that money to produce each item, this could slow down production. If you decide to wait for the transfer before shipping each item, just make sure the delay is noted in your shop’s order confirmations and/or on a frequently asked questions page.
You got this!
At the start, it can feel intimidating to choose and sign up for a payment processor when setting up your checkout. But it’s a crucial part of running your business, which is why we try to keep the options simple. Take a few minutes to look at what’s available in your country, and you’ll be up and running in no time.