How to Pick a Credit Card Processor for your Business

If you have a business and sell services or goods to your customers, you should think about investing in a credit card processor. These allow you to safely and securely receive credit or debit card payments.

Unfortunately, all credit card processing machines are not created equal and there are pros and cons to each one. In addition, each credit card processing company offers different merchant services and it is a good idea to think about what you need before you begin shopping around.

We highly recommend thoroughly investigating each one before signing on the dotted line as you will need to understand their fee structure and the service you receive from them. Most companies will be more than happy to discuss their service offerings and cost structure with you, so this should be an easy task.

Generally speaking, a month on month contract is always better as you could cancel the service if you are not happy. In addition, interchange-plus pricing and other features are something to consider.

Everyone knows that accepting a credit card payment costs you, the seller, more money than accepting a check. However, what you pay for in fees, you receive back in customers as most people will look elsewhere if you don’t accept credit card payments.

Your credit card processing company typically charges you a processing fee for each transaction, plus an annual fee.

When evaluating quotations from credit card processing company, beware of hidden costs! For example, they may offer you a so-called free terminal, but this may not actually be the case. Other companies allow you to rent equipment so that you don’t have to buy it outright but is this really worth it?

How do you find the right credit card processor your needs?

First off, you need to think about what kind of machine you would like to work with. If you don’t receive a high volume of payments, a mobile credit card processing facility may be more suitable. These processors normally only charge a minimal monthly fee but you will pay more per transaction than with a regular processing fee.

For a larger volume of sales per month, we recommend using a processor offering a full-service as your monthly rates will be lower.

Obviously, if you have a traditional store, a credit card terminal plus a mobile card reader is more convenient for customers. However, if you receive payments in store, as well as online, a processor that allows both would be best, since having two processors may pose a problem with potentially violating your merchant services contract terms and conditions.

When comparing quotes, take a look at the website as most processing companies publish their rates online. This will give you a good feel for the costs and if you are interested, it is advisable to contact the company for a detailed quotation.

It is always a good idea to ask for interchange-plus rates as this is normally the most inexpensive option. The price quoted is usually the credit card processor’s markup amount as they take a fee per transaction and a percentage thereof. This is in addition to the interchange rates charged by credit card networks that you cannot get around.

Sometimes, you will be quoted an interchange rate that includes the company’s markup and you will not be able to break the price down to see the actual charge to the processor. This is a problem as you can usually negotiate the markup you pay. It also makes it difficult to compare markup quotations from the various companies.

Many companies offering merchant services have hidden fees that you only discover later on. Before signing a contract, read through it very carefully to ensure that you are aware of any potential fees or costs. When dealing with salespeople, they often do not necessarily reveal the hidden fees unless asked and it is therefore a good idea to ask the question and negotiate better fees, if possible.

Undisclosed fees normally include costs like a chargeback fee, batch fee, a gateway fee, a monthly fee or other network fees. If you notice a fee such as a set-up cost, membership dues or anything else that looks strange, don’t be afraid to question this with your salesperson.

A month-on-month contract is almost always the safer option as if you are unhappy with the service, you could always cancel the contract. Some contracts require a 2 or 3 year term and will charge you a ridiculous amount to exit.

At the end of the day, there are many credit card processing companies and they would all love your business. Use this to your advantage to negotiate the best rates and contract terms.

When it comes to the actual credit card processing equipment, we recommend purchasing it yourself or finding a great partner that offers free terminals, since this can prove to be a great deal cheaper than leasing it and entering into a contract. When you lease or rent equipment, you normally end up paying 5 or 6 times what it is actually worth!

By shopping around, you can easily find compliant terminals and equipment that would work well for your business.

Finally, keep your wits about you and be aware of any “too good to be true” offers that advertise anything for free. In terms of credit card processing, these offers almost always have exorbitantly high hidden fees and contracts that are almost impossible to terminate!

Hannah Cohen is a Senior Relationship Manager with Host Merchant Services.  A graduate of University of Michigan, Hannah has extensive experience in the merchant services industry.  At Host Merchant Services, she specializes in working with small to medium sized businesses to streamline their payment processing, reduce costs, and to implement payment technology to enhance customer experiences and drive revenue.  She is an expert on the topics of customer service and payment processing trends.