10 Questions to Ask Before Choosing a Credit Card Processing Provider

Discovering the most optimum methods of accepting credit cards through the internet and selecting the correct payment processor can be daunting in the early stages. This is something essential for the success of your ecommerce business–you need to bear in mind the cost of taking payments over the internet. Without the facility to make and receive payments digitally, your operation will not be viable.

Before we dive into your payment options and how to get started, did you know:

• More than 1/3 of consumers hesitate to shop online because of security concerns.
• The average business loses 5% of its revenues to fraud every year.
• Resolving fraud costs an average of $114,000 each time.

5%average revenue loss

It is estimated that the typical organization experiences a loss of five percent of their profits annually due to fraudulent activities. Resolving fraud costs more than $114,000.

Your choice in credit card processing can prevent your brand from expanding internationally, going beyond issues of fees, fraud, and conversion. Do international buyers trust your chosen solution? Does that solution work cross-borders?

Include the fees for each service, the binding agreements, and a close examination of the details and you are faced with a bewilderingly complicated decision. Take into account multiple aspects and think about the implications they have on your company. There is no single definitive solution – it just depends on the specific situation you’re dealing with.

Investigate different options before selecting a system to process debit and credit cards.

Prior to getting started, be aware that there are three different forms of payment processors: comprising of a merchant account linked with a payment gateway, a single integrated solution, and a simplified credit card processor.

10 Questions All Businesses Should Ask a Payment Provider

If you are trying to quickly learn the basics of payment processing and which processor to select, these are the essential inquiries to ask the provider before deciding to use them.

1. Are there different rates or fees associated with different types of cards?

Different services can have unique fees for processing different card deals, such as ones from individual customers, businesses, debit cards, or rewards cards. They also charge different amounts for each transaction. Ensure that you are comprehensively aware of the precise cost incurred while processing each type of transaction.

2. Do you charge “bill backs,” or are all charges related to a transaction billed in the same month?

It is common for a payment processing company to attract customers by advertising low fees. Occasionally, the low rate is only suitable for particular kinds of cards (look at inquiry one). You may not know until afterward that some of your purchases during the month were not eligible for the reduced rate.

For instance, at the beginning of the year, you are expecting a 1.7% rate on your credit card buys, however, you handled several loyalty program cards. Although the payments were made in January, your processor will charge you a higher rate when you get to February. Having two distinct declarations with various rates for the same transaction has rendered it much more complicated to ascertain the real rate you’re paying.

3. What rates or fees do you charge when I swipe credit cards, enter them manually (key-enter), or accept them online?

Processors vary their fees depending on the type of payment method used in order to reduce the chance of deception. Swiping a card in a terminal is associated with less fraud in comparison to other means due to the ID check process. Thus, the rate is usually lower. If someone contacts you and offers you their details to arrange a purchase, there is a greater possibility of it being a scam, as well as likely to incur additional costs.

The rate imposed by payment processors is higher due to the elevated risk posed by online purchases with a high rate of scams. Ensure you understand the rates and calculate the amount of each type of processing you’ll use to estimate a total rate.

4. Do you charge a separate fee for your gateway?

It’s typical for processors to assess an additional cost for using their payment gateway, which is usually calculated per transaction. You’ll pay a separate gateway fee on top of the usual transaction fee, which is usually around 2.9%, and an extra $0.30.

5. When I refund a transaction, do I get back any of the initial fees?

The majority of credit card processing companies will not return any fees for returned transactions, and will in all likelihood even demand an additional fee for the refunding process. You may suffer a monetary loss whenever a customer brings back an item. Ensure that you have a complete understanding of the way this procedure works in order to make the right choice regarding your return policy. Many merchants avoid this expense by giving out store credit for returned products instead of money back.

6. What are the contract terms and are there early termination fees?

Most credit card processing services have a length of agreement that typically ranges from one to two years. Frequently, you agree to pay a fee if you decide to end the contract or cancel services before the specified time. It will be challenging for you to alter processors if you are not satisfied with how your account is managed.

7. What fees do you charge each month?

This query appears straightforward, but there can be a slight initial cost to some processors every month. Make sure to look closely – there may be hidden costs in the details. Fees may be charged for the collective processing of transactions or the movement of funds from a vendor’s account to your banking account, in addition to fees for account statements. Processors could grant an exemption from some of these charges to attract you as a customer, but might later reinstate them once the promotional period is over.

8. Is there a monthly minimum processing requirement or fee?

Certain processors require a minimum amount to be paid each month, which will be needed to be paid if the total amount of transactions done that month is lower than a certain level. This decision can be especially costly for startups that do not handle a great deal of credit card payments every month.

9. Is there a limit on how much I can process?

Many processors have restrictions on how much you can process based on the authorization they give you in the beginning. Clearly, this can be exasperating if your company increases rapidly or has a thriving season – not to overlook the adverse effects of declining orders on your company.

10. What type of support is offered?

Will the processor stay with you and assist you if your payments become delayed? An automated phone system isn’t equal to conversing with a real person, so be certain to find out if they have customer service provided by actual people. Processing fees at a low rate don’t make a great deal of difference if you can’t access someone to give assistance at the most important times.

Best Credit Card Processing for Small Business

You must compare your needs with the expenses associated with accepting payments in order to decide on the most suitable credit card processing provider for your small business. The cost and quality of service offered by credit card processing companies differ. The top choices provide clear and inexpensive prices, minimal to no charges, adjustable terms, and the capability to increase as your business advances.

We noticed that certain credit card processors have numerous payment options, come with reporting solutions and e-commerce services, and expeditiously transfer money from credit card sales into a linked bank account. It may not be the least expensive option, but the additional elements make these services a more attractive option for small businesses. Here’s a look at 12 credit card processors worthy of consideration:

COSTS, FEES, AND EQUIPMENT FOR CREDIT CARD PROCESSING

The price of the credit card processing service should be heavily considered when making the determination of which one to use. It would be unwise to shell out a large amount of money simply to provide patrons with the opportunity to pay with credit or debit cards.

What Costs Should You Expect for Credit Card Processing?

Usually, there are three different expenses associated with picking a credit card processor: rates, fees, and the cost of the equipment.

• Rates: These are the processing fees you pay for each transaction. Rates are typically a percentage of the total sale amount. In addition to this percentage, card processors charge a few cents per transaction.
• Fees: Most processors charge monthly account service fees, which are reflected on your statement, but some processors may levy these fees quarterly or annually.
• Equipment costs: The cost of equipment is usually a one-time expense for the hardware needed to accept credit cards. We recommend buying processing equipment upfront whenever possible. Many processors offer leasing (or free equipment), but it’s typically associated with exorbitant costs.

Credit Card Processing Rates

The costs for using a credit card processor consist of three components: the interchange rate, the card brand’s assessment fee, and the processor’s added charge. The card networks determine the ratio of exchange and the service charge, and all must pay the same price. This portion of the rate is non-negotiable. Every processor, however, has the ability to adjust the margin, so that it is open to discussion.

Processors derive their rates or pricing model from these three components. There are three main rate structures to know.

• Flat-rate pricing: For businesses that process less than $5,000 per month or have very small sales tickets, flat-rate pricing is usually the most affordable option, because all you pay is a fee for each transaction; there may be no monthly or annual account fees. (However, some fees, such as a PCI compliance fee, may still apply.) 

• Interchange-plus pricing: Most industry experts recommend interchange-plus pricing for businesses that generate a lot in credit card sales. That’s because the price you’re quoted is the processor’s markup (the only aspect of pricing that is negotiable), which you can easily compare as you evaluate the pricing of multiple processors.
• Tiered (or bundled) pricing: With a tiered pricing model, the processor bundles the interchange rates, assessment fees, and the processor’s markup, and separates them into three tiers: qualified, mid-qualified, and nonqualified. Companies that use the tiered pricing model usually advertise only the qualified rate (which applies to regular debit cards accepted in person using a card reader) and disclose the other tiers only if you specifically ask for them. It’s impossible to determine the processor’s markup with a tiered pricing model, and the number of tiers (and the types of transactions that go into each tier) vary by processor, so it’s difficult to know if the rates you’re offered are competitive.

What Is the Average Fee for Credit Card Processing?

The ordinary credit card handling fee is between 2 and 4 percent of the total cost. Here are some of the factors that determine the per-transaction cost:

• The type of card your customer uses (debit, credit, rewards, premium rewards, corporate)
• How you accept the card (in-person using a card reader, manually keyed in, online)
• The pricing structure your processor uses (flat rate, interchange plus, tiered)

What Equipment Does a Business Owner Need to Process Payments?

At least, you should have a mobile phone reader or a payment card terminal in order to take credit cards. Extra hardware, often referred to as peripherals, is able to be connected to your system, including cash drawers, receipt printers, and barcode scanners.

When you are shopping around to find a card reader or terminal, consider options that will allow you to take payments from magstripe cards, chip cards, contactless cards, and phone applications. The most desirable credit card readers tend to be inexpensive, usually having a price point between $20 and $50. They also usually offer a range of features. If you’d rather have a credit card machine, a simple one that has these abilities typically runs between two and three hundred dollars.

WHY DO BUSINESSES NEED CREDIT CARD PROCESSING?

Payment processing with a credit card enables you to take payments from customers who pay to utilize a credit card, debit card, or mobile wallet such as Apple Pay or Google Pay. It is essential for you to embrace these payment approaches as the majority of consumers select them as a payment option. The pandemic has led to a decline in the use of cash, especially as customers and sellers prefer contactless and digital payments. Consumers can quickly complete a purchase by using their mobile phone, contactless credit or debit card, or wearable to tap the payment terminal. Paying in this way is more efficient and secure than exchanging money with a salesperson or using a credit card. Most of the best point-of-sale system suppliers and credit card processors can handle tap-to-pay technology.

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