Businesses, even start-ups, in order to be successful, will likely have little choice but to accept customer payments through debit or credit cards. This means you would need to hire a third-party credit card processing company in order to manage the transactions that take place between you and the credit card providers.
Businesses typically accept MasterCard and Visa cards, as well as Discover and American Express, since they are the major players in the debit and credit card networks. However, you, as the business owner, can’t work with these card giants directly. These companies outsource their services, such as sales and customer support, to credit card processors. These processors are commonly known as aggregators or merchant account providers. While some business owners find the aggregators to be confusing rather than helpful, they are a crucial part of your credit card payment processing.
How To Choose a Credit Card Processing Company
Choosing the right system for your credit card processing is critical for any business. Credit card processors allow your small business to accept payments through credit and debit cards. However, choosing the processor that is right for your business is the tricky part, and that is why we are here to help.
When looking to secure a credit card processor, you must first thoroughly read the contract; make sure you understand the terms and conditions, as well as the fees that come with their services. Be sure to check out the month-to-month terms, key features, and the interchange pricing.
Almost all types of business need credit card payment acceptance because it is one of the most common and convenient methods of payment. Statistics show that most customers prefer paying this way and if you do not offer this as a payment option, you may lose some of your potential customers. Moreover, getting paid by check generally takes several days for the check to clear the customer’s bank before the funds are made available to you.
Even so, though credit card payments are fast and convenient for your customers, accepting the payments can be costly at your end. This is because the credit card processors charge a small percentage of each and every sale. Moreover, most credit card processors charge a monthly and annual fee, as well.
Different processors use different pricing models. Obviously, when looking for a credit card processor, you want the one which will give you the best deal. You will also have to consider what processing equipment will be used. That begs the question, does the service you intend to choose come with free terminal use or is a free placement program available? And, if not free, is the equipment for lease or is it available for a low price, allowing you to spread the costs? Consider the following before signing your card processor’s contract.
Finding the Best Credit Card Processor For Your Business
Here are some things that you should consider before deciding which credit card processor is perfect for you:
Know which card processor type is ideal for you.
The key to this will depend on how small or large your transactions are likely to be. For instance, if you estimate that your monthly credit card payments will be less than about $3,000, it may be in your best interest to go with payment channels like PayPal or Square, as they do not charge a monthly or annual fee. Instead, they get a percentage of what you receive, meaning you pay only for what they process. On the other hand, if you will be processing $3,000 plus in credit card payments, retaining a full-fledged credit card processor is likely to be more economical and practical.
How are you going to accept credit card payments?
How you plan to accept payments through credit cards depends on whether you are operating a brick and mortar store or online. If you have a physical store, getting a terminal for a checkout station located at the counter is one option, or you can get a mobile card reader as an alternative.
If you plan to accept credit card payments using multiple ways, you may want to consider the services of a single card processor that can provide both methods. It would be easier and less “risky” to obtain the service of a single provider, as some card processors may consider your retention of a second processor a breach of contract.
It is best to call as many processors as possible, at least three companies should be your minimum, to give you more options in terms of pricing quotes. You can usually view rates and fees of mobile credit card processors online, which would allow you to compare the best prices available. Even if the first processor seems as though they are offering you the best deal, you may want to call a few more providers to help make you feel more confident with whichever decision you make.
Ask them to quote you the interchange-plus rates.
When calling the credit card processor for quotes, be sure to request the interchange-plus rates. Interchange-plus plans are typically the cheapest pricing model they can offer you, and industry experts swear by this method. With interchange-plus rates, the rate they will give you is the markup, or the percentage, plus per transaction fee. This fee is added to the published interchange rates that everyone pays. Other pricing models do not allow you to see how much the actual rates the processor is charging you. Knowing what the interchange-plus rate is could help make your negotiations more favorable to you, and will allow you to compare the actual rates more effectively.
Learn about hidden fees.
In many online reviews of credit card processors, users have complained about undisclosed fees. You can avoid this problem by reading all parts of the contract, to ensure you won’t be surprised by any hidden fees. Read the contract carefully to determine whether any additional fees were written into the contract, which the sales representative failed to disclose. Call the sales rep right away and ask how much these fees will cost you and how frequently you will be charged. You could also ask if they would be willing to waive those fees.
Typical credit card processing fees include the batch fee, a monthly fee, PCI compliance fee, gateway and charge-back fees. There may also be various network fees, depending on the card provider. Opaque additional fees such as a membership fee, setup fee, online report fee, quarterly technology fee, audit and access fees and postage and handling are non-standard fees that you should be wary of and which you should avoid.
Ask for a month-to-month contract rather than one which locks you in for a longer term. Most processing contracts with standard terms are not only difficult to exit, they can be expensive, too. Three-year contracts, for instance, only have 30- to 90-day cancellation windows and automatically renew after one to three years. These types of contracts have termination fees with “liquidated damages.”
If you look for a more flexible monthly term it will allow you to move elsewhere without too much difficulty, in the event their processing rates have suddenly gone up or if there is any other problem with their service. With monthly terms, you can easily find a better deal as and when needed. Remember that credit card processors want your business, and they may be more than willing to give you the terms you want if you know to ask for them. Ensure that the contract’s terms are updated to your requests before signing.
Purchase processing equipment.
The basic equipment used for credit card processing is not expensive and buying it in advance can save you from having to pay for a leasing contract and other issues. Choose an EMV-compliant terminal that also has NFC compatibility. This type of processing equipment can accept contactless payments and chip cards. Leasing may start out cheap but you can end up paying several times over the actual cost of the equipment. Furthermore, leasing the equipment won’t pay off the unit and you won’t end up owning it. The leasing contracts are non-cancellable, too, which means you will continue to pay for the unit until the contract is ended, regardless whether or not you continue with the business.
Assess free offers, if there are any.
Some credit card processing companies will offer free equipment or waive some fees as a deal sweetener. However, there are some things you might want to consider before accepting these so-called freebies. For instance, some may require you to accept a certain contract in order to qualify for the deal. You should also check whether or not you will be required to return the “free” equipment once you close your account, or if you will be charged certain fees by not doing so.
5 Questions You Must Ask Your Credit Card Processor
There are important questions that can help you prepare for the retail business. Ask these five questions of your credit card processing company to ensure you are getting the best possible deal:
Question #1. Do you charge for early termination or cancellation of service?
Ideally, you want to look for a processor that does not charge for this. However, if they do charge for early termination or for cancellation, the fees will probably range between $200 and $400. You should avoid processors that demand a termination fee for “liquidated damages,” which means you will be charged for early termination in case you cancel before your contract expires.
Question #2. Are you compatible with my business’ online shopping cart?
Carefully check whether the processor’s proprietary software will effectively work with your online shopping cart. The card processor should use a compatible software that will allow them to become the payment gateway to your shopping cart. A universal software is the best choice for this, as it will work with any type of online shopping payment.
Question #3. Can I opt in for the interchange-plus fee?
If the interchange-plus pricing is not an option, it is better to look for another credit card processor that does offer it. This pricing option allows you to see what the major credit card providers actually charge, plus what you are actually paying the processor. You won’t be able to identify these fees if you choose a tiered payment system.
Without the interchange-plus pricing option, you could be charged up to three different fees for each transaction; these will vary depending on the card type used and how the card payment is processed. Without the interchange plus fee option, the credit card processing company is more likely to charge excessively without you even realizing it.
Question #4. What fees and other costs will you charge me, apart from the per-transaction processing fee?
Some processors may add in monthly or annual fees, as well as compliance fees, regulatory fees, and statement fees, to name a few. Generally, the total cost for these fees should not exceed $200 annually for brick-and-mortar businesses or $300 a year for e-commerce merchants (because of the additional fees associated with maintaining an online shopping cart). Processors also add in interchange and assessment fees, which are the largest expenses you are likely to deal with.
Also, do not agree to lease your terminal since purchasing one outright would only cost about $200 to $350 as a one-time expense. Meanwhile, leasing the terminal can be as expensive as $139 a month, for the duration of your contract.
Question #5. Is your customer support team readily available?
Make sure that, when you need help with terminal malfunctions or some such similar circumstances, you can easily and quickly get help from your credit card processor. Choose a processor that has 24-hour phone support, seven days a week.
A credit card processing company with a reliable payment processing feature is very important, but access to dependable, round-the-clock support that can guide you from setting up the terminal to troubleshooting payment processing failures is an absolute must.
Choosing a reliable and dependable credit card processor can be one of the more difficult challenges to the successful establishment of your business. While credit card payment processing can make payments easier and more convenient for your customers, it can be a stressful undertaking if you don’t select your provider wisely.
Therefore, before deciding on the credit card processor, study the ins and outs of credit card processing first, and then weigh your options. Compare the fees and charges, the features, and the add-ons they may offer to gauge whether or not you need it or if they are worth the extra cost. Your goal should be to find the credit card processor that can give you the service you need at the best possible cost so that you can grow your business.