top of page

How to choose a credit card processing system for your business

The Insider Picks team writes about stuff we think you'll like. Business Insider has affiliate partnerships, so we get a share of the revenue from your purchase.

  • Credit card processors help your small business accept credit and debit card payments, but choosing the right processor can be tricky.

  • Before you sign an application, read the full contract to make sure you understand all fees and receive the terms you were promised.

  • You should look for month-to-month terms, interchange-plus pricing, and a number of other key features, which we outline below.

Nearly every business needs to accept credit and debit card payments because it's often the most convenient payment method for your customers. If you don't have this technology in place, you may have to wait longer to be paid by check.

Even though paying by credit card is easier for your customers, accepting credit card payments is more expensive for you, as the processor takes a small percentage of each sale. Many processors also charge monthly and annual fees on top of that.

There are several different pricing models that processors use, so when you're shopping around for quotes, it can be difficult to know which company is offering you the best deal — especially if you're only quoted a teaser rate that applies to one type of payment method.

You may also wonder about the processing equipment offers. Is the "free terminal" really free? What is a "free placement" program? Should you lease equipment, so you can spread out the cost? Before you sign on the dotted line, consider the following key points we outline below.

How to find the best credit card processor for your business:

  • Decide which type of credit card processor you want to work with. If you'll be accepting less than $3,000 per month in credit card payments, a mobile credit card processing company (sometimes called a payment facilitator) like Square or PayPal that charges a flat rate and no monthly or annual fees is usually your best bet. Although the percentage rate that you pay for each sale is higher, there aren't regular fees, so your costs stay low. If you process more than $3,000 in sales each month, working with a full-service credit card processor that has lower rates may save you money, even though it charges regular fees.

  • Consider how you plan to accept card payments. If you have a brick-and-mortar location, you may want either a terminal for a countertop checkout station or a mobile card reader that allows you to check out customers anywhere in the store or restaurant. If you plan to accept payments multiple ways, such as online and on the go, you want to look for a processor that supports both methods. Not only is it cumbersome to manage two processors instead of one, it may also violate a contract, as many have exclusivity clauses that prohibit you from working with another processor. If you already have a website or a point-of-sale system, or if you're planning to get one, you want to check with these companies to find out which credit card processors they're compatible with.

  • Call at least three processors for pricing quotes. Most mobile credit card processors post their rates and fees online, as do some of the best full-service processors. However, in many cases, you need to call companies and speak with sales reps to get pricing quotes and request contracts to review. Even if the first processor you call offers you what sounds like a great deal, you want to call a few more companies so you can feel confident in your decision.

  • Request interchange-plus rates. When you call processors for quotes, you may have to specifically request interchange-plus rates. This is usually the most cost-effective pricing model, and it's the one industry experts recommend. The rate you're quoted is the processor's markup — a percentage and a per-transaction fee — that's added to the published interchange rates set by the credit card networks that everyone pays the same amounts for. In other pricing models, the markup is combined with the interchange rate, so you can't see how much you're actually paying the processor. Since the markup is the only negotiable part of the rate, these are the numbers you want to see and compare when you're shopping around.

  • Find out about fees. If you read online complaints about credit card processors, you'll notice many are about undisclosed fees. To avoid this problem, you want to read all three parts of the contract to make sure you're aware of all possible fees. If you find fees the sales rep didn't disclose, call the rep back and ask how much the fees are, how frequently they're charged, and whether the rep is willing to waive them for you. Common fees include a monthly fee, batch fee, PCI compliance fee, chargeback fee, gateway fee, and various network fees such as Visa's Fixed Acquirer Network Fee (FANF) and Mastercard's Merchant Location Fee. Nonstandard fees that you should avoid include application or setup fees, club or membership fees, vague "additional services fees," quarterly technology fees, online reporting fees, postage and handling fees, audit fees, and access fees.

  • Get a month-to-month contract. Standard processing contracts can be difficult and expensive to exit. Most have three-year terms, automatically renew for one- to three-years and have 30- to 90-day cancellation windows. They also have early termination fees, some with liquidated damages. You want the flexibility of monthly terms because it allows you to move on if there's an issue with the service or if your rates go up and you find a better deal elsewhere. Keep in mind that processors want your business and many sales reps are willing to give you month-to-month terms if you ask for them. Before signing the application, make sure the contract's terms have been updated or that you've received a written waiver.

  • Buy processing equipment. Basic processing equipment is affordable and buying it upfront saves you the headache of a leasing contract and other entanglements. An EMV-compliant, NFC-enabled terminal that allows you to accept chip cards and contactless payments usually costs a few hundred dollars and most EMV-compliant mobile card readers cost less than $100. Leasing isn't a good idea because you pay several times over what the equipment is worth, and at the end of the lease, you don't own it. Also, the contracts are noncancelable, so if you sell or close your business and return the equipment, you're still stuck paying for it until the end of the lease.

  • Vet any "free" offers. Although many companies offer free equipment or have free placement programs, there are a few things you need to consider before you accept, such as whether you must sign a lengthy processing contract to qualify, if the rates are different under the free program, and if there are any monthly insurance, service or maintenance fees. You'll also want to find out if you're required to return the equipment when you close your account and if there are any restocking fees or wear-and-tear penalties.

Fairbanks, Lori. "How to choose a credit card processing system for your business". Business Insider. Insider Picks Jun. 20, 2018, 10:35 AM

bottom of page