Should you accept card payments as a sole trader?

With debit and credit card transactions nearing 2 billion per month in the UK, according to UK Finance, it’s never been clearer just how popular card payments are.

And with cash payments on the decline, those who don’t yet accept card payments could be set to suffer.

But sole traders are in an interesting situation. On the one hand, cash-in-hand payments were the preferred method for decades. But, on the other, the public shift towards card payments presents the need for change for those that still don’t accept card payments.

In this blog, we’ll examine whether or not sole traders should accept card payments and the specifics involved in the card payment process. So if you’re a sole trader who’s wondering whether or not you need to start accepting card payments, keep reading…

Should sole traders accept card payments?

In short, yes. Sole traders should absolutely accept card payments in 2023.

Cash may be the way you’re used to doing things. But, the truth is, you’re closing off a huge portion of your potential client base if you don’t accept card payments.

Simply because most of the British public prefers paying via card, with 90% of customers paying for retail services via card, according to the British Retail Consortium.

Add to this the fact that physical cash is becoming rarer and rarer in our pockets. Gone are the days of people reaching for the tenner in their wallet. Today, they’re reaching for plastic instead.

Cash payments could fall below 10% within 15 years, according to the financial advice platform Unbiased, as we shift towards a fully digital payment society.

This means you may struggle to take payments from your customers at all if you don’t have card payment options on the table.

But you don’t need to worry. Accepting card payments for sole traders has never been easier and businesses everywhere now have multiple options if they want to start accepting card payments.

The benefits of accepting card payments for sole traders

Money is easier to track for tax purposes

If you’re a sole trader, you’ll be used to filing tax returns every year to let HMRC know how much you earned, so they can tax you accordingly.

It’s not something anyone enjoys doing. But having to work out the figures involved can be a stressful and time-consuming process.

It makes things even more difficult if you’ve not kept proper records of the cash payments you’ve received, and you’ve stashed all your cash away to count it at a later date.

Or, even worse, you could have spent it without taking the time to count it, so you’ll have no chance of giving an accurate number on your return.

But with card payments, there’s no need to flick through loose tenners, quids and pennies. Because everything is conveniently listed for you in your bank statement.

With the modern advantages of online banking, you can simply log into your account and see what you were paid and when. Then, it’s a simple case of adding the figures together and accounting for any deductibles before submitting your tax return.

Contactless payments are fast and convenient

People lead busy lives, so the more time you can save them the more likely they are to like you and appreciate what you can do.

91.2 per cent of transactions were completed using contactless technology in 2022, according to Barclays.

One of the reasons contactless payments have shot up in popularity so quickly is because of the convenience they offer the modern consumer.

Instead of having to dig in your pockets for cash, or even having to put your card in a card machine to enter your pin, contactless payments are a true “tap-and-go” experience, costing the buyer very little in the way of lost time.

But they’re not just fast at face value, contactless payments are super-quick behind the scenes, too.

With most contactless payments taking less than a second to go through, according to Lloyds Bank, it’s the fastest way you can collect cash from your customers quickly and safely, while offering them convenience at the same time.

Are there any disadvantages to sole traders accepting card payments?

The only major disadvantage to accepting card payments as a sole trader is the processing fees you’ll need to deal with.

These are fees charged by your credit card processing provider as their payment for the role they play in the technical elements of accepting card payments. These generally range between 1.5 and 3.5 per cent, depending on your services and your provider.

Every card transaction your business takes will result in fees, which lower your overall takings, if only marginally.

And while the charges are marginal, it’s important to choose a card processing provider that gives you the services you need, while not charging you a fortune for fees. So do plenty of digging into the fees you’ll pay when making a decision.

However, the overall benefits of accepting card payments far outweigh the disadvantages.

How to start taking card payments as a sole trader

So, we’ve established it’s a wise move for you to start accepting card payments, but what do you actually need to accept card payments?

You’ll need some specific tools, so here’s a quick rundown for you:

Merchant accounts

If you want to accept card payments – whether that’s in person, over the phone or online – you need what’s called a merchant account.

When you make a payment to a business, that money is temporarily stored in a merchant account while the transaction is authorised by the bank.

Think of them as a middleman who steps in every time you make a payment, holding onto the money until they’ve been told it’s safe to pass it over.

Because they’re different from standard bank accounts, merchant accounts can’t be used to access money directly, like a current account.

But one of the benefits of a merchant account is that there’s no need to set up a separate business account if you don’t already have one. Your merchant account can send payments straight to your current account once payments have been approved.

Much like any other bank account, you’ll need to be approved for a merchant account before you open one, but it’s not a difficult process.

An acquirer (the bank that processes card transactions for you) is the one who’ll need to approve you.

They’ll let you accept payments from your customers’ banks (which need to be linked to approved card networks, like MasterCard and Visa), through your merchant account, into your personal or business account.

Payment gateways

If you plan to accept payments online (for example, if you sell products through a website) you’ll need a payment gateway. It’s an essential step in the purchase process if you want to protect both yours and your customer’s data.

A payment gateway is a piece of tech that gathers your customers’ sensitive payment details and moves them onto the acquirer by going through your merchant account.

When your customers make a payment online, the payment gateway double-checks the customer’s card details, ensuring they have enough funds to make the purchase, as well as encrypting their data so it can’t easily be stolen by criminals.

Because this information is so sensitive, your payment gateway needs to be PCI Compliant, so the information is properly protected. These are a set of security guidelines that businesses must follow. You can read more about the specifics of PCI compliance here. (LINK TO PREVIOUS HANDEPAY BLOG ON PCI COMPLIANCE)

Card machine options

Depending on the type of sole trader business you run, there are different card machines you could take advantage of to accept card payments from your customers.

Countertop card machines

If you’re classed as a sole trader, but you run a physical business with set premises like a shop, a countertop card machine could be the best machine for you.

These are the machines that usually sit beside the cash register, with customers heading over to the register when they’re ready to pay.

These are perfect if customers are free to roam about your business, but you want to have a single, clear point within your premises where customers can pay for their goods.

Portable card machines

Portable card machines work best if you need to move your card machine around your business regularly to take payments from customers, rather than them having to get up and come to you to pay.

They use Wi-Fi to process payments, making them a quick and easy payment solution anywhere with a stable internet connection.

A prime example where this technology is useful is restaurants, where the servers can take the card machines directly to the customers at their table, instead of them having to pay at another counter or the bar.

Mobile card machines

Tradesmen and women of all kinds can boost their payment prospects with a mobile card machine.

Because these card machines don’t limit you to a specific location. They’re battery-powered and use mobile data to process payments wherever you happen to be.

This is ideal if you move between jobs in different locations regularly. For example, you could run a stall and visit different markets on different days.

There’s no direct electricity and no Wi-Fi, but mobile card machines allow you to work with these conditions and accept payments in seconds.

While customers used to be limited to a cash-in-hand deal, mobile card machines mean your customers can pay for your services by card, even though you’re away from business premises.

The perfect choice for those that need flexibility and ultimate portability.

Are you ready to accept card payments?

With the number of cash payments in the UK almost halving between 2009 and 2019, according to the Payment Systems Regulator, now is the time to start accepting card payments in your business if you want to maximise your chances of raising profits and earning new customers.