What Is The Best Credit Card Processor For A Small Business?

Mirror, mirror on the wall, who’s the best small business credit card processor of all?

It would be nice if it were that simple…

Choosing a credit card processing company can be confusing at best, but it can become very costly if you don’t look at all your options and choose wisely. Before you start shopping for a merchant account, take the time to review your business model and your sales history, or your projected sales, and answer some questions:

  1. 1. Are all your sales card-present transactions?

    Why: Card-present transactions usually have the lowest risk for fraudulent use, and so they usually have the lowest transaction fees.

  2. 2. Will you or your sales or service representatives need to process transactions in the field?

    Why: If so, you may want to apply for a mobile credit card reader account. There are processing companies who service mobile card readers that attach to your smartphone or other mobile device. You simply swipe your customer’s credit card and the information on the magnetic stripe is relayed through your processor to the issuing bank for payment authorization. There are also apps for mobile devices that let you manually input credit card information. These services may be a better fit for you if you transact most or all of your business on the go.

  3. 3. Do you own and operate an on-line business and process card-not-present transactions?

    Why: By their very nature, card-not-present transactions carry a higher risk of fraud, and therefore have higher transaction fees. When processing card-not-present transaction you’ll need to gather the information necessary to pass address verification and other security measures provided by credit card issuers to detect suspicious credit card usage.

  4. 4. Do you run a high-volume, low ticket business (i.e. a busy restaurant with an average bill of $10.00 or less) or do you high-priced items but with less frequency?

    Why: Most credit card processors charge a set fee per transaction. If your $8.00 lunch special is a big hit with your customers, you’re going to see a big hit on your monthly credit card processing statement. So, if you run a business that processes a large number of small transactions, you want a plan with a small cost per transaction, even if the overall percentage fee is higher. On the other hand, if you own a business where you process fewer but higher dollar transactions, try to find a processor with a fee structure with a low percentage fee, even if your per transaction fee is higher. Or check into credit card processing companies that have a plan with a set monthly fee with no added transactions charges.

  5. 5. Do you have more than one terminal in your physical location or do you have more than one location?

    Why: You are required to rent or purchase each payment terminal. And as credit card processing evolves, you will have to update or purchase new terminals. For example, there is a new standard for processing credit card payments, known as EMV, that is being adopted around the world based on embedded-chip technology verses the old credit card magnetic stripe. Once the standard is fully in effect, you will have to update your payment terminals to be compatible with credit cards embedded with these microchips. And what will they think of next?

  6. 6. What is your merchant category code?

    Why: A merchant category code (MCC) is used to classify your business by the type of goods or services you provide. Certain businesses are classified as higher risk for chargebacks. A chargeback is issued when a customer contacts his credit card issuing bank to dispute a charge on his credit card statement. There can be many reasons for a chargeback, for example, the customer who claims he has cancelled a subscription or membership but continues to be billed. Not only are the initial transaction fees higher for companies at risk, but there are other costs involved to dispute a chargeback.

  7. 7. Do you own and operate a seasonal business?

    Why: You may think you can save money by terminating your credit card processing service during the months you shut down, but cancellation and start-up fees may cost more than you might save in recurring monthly fees.

What To Look For When Researching Credit Card Processing Companies.

There are plenty of credit card processing companies that would be happy to have your business. Some claim to be easy to set-up, some claim to be easy to use, some claim to have low per transaction fees, some claim to have no contract. But no matter what they claim they CAN do for you, you really need to know what they WILL do for you.

  • 1. Will they approve you? When you accept a credit card as payment for your product or services, you are actually borrowing money from the issuing bank. When you apply for a merchant account with a processing company, they will check your credit history. They want to know you have enough cash flow to cover returns or chargebacks. And you want to know how many applications they approve and what their approval turn-around time is.

  • 2. Will they structure a plan that allows you to manage the per-month costs, especially when you have a slow sales month? When it comes to comparing credit card processing companies, you need to understand what fees are negotiable and what fees are not. For example, interchange fees are set by the credit card brands and they are the same for all processors. But the processor’s markup and monthly fee are negotiable.

  • 3. Will there be start-up or cancellation fees? What is the term of the contract? If you are a seasonal business owner, ask if they support seasonal businesses. Will they waive these fees in certain instances?

  • 4. Will they work with you as your business grows to incorporate other features such as on-line credit card processing and mobile credit processing?

  • 5. Will they offer you low monthly leasing payments or free equipment options?

  • 6. And last, but certainly not least, will they help you get started and support you if you have problems? Customer support can make or break a company – yours and theirs!

    • Are There Other Ways To Accept Credit Card Payments Besides Contracting With A Credit Card Processor?

    Yes, there is. You can work through a third party company that accepts credit card transactions on behalf of your company, processes the transaction through their merchant account, and pays you the proceeds of the sale minus a commission. There are no transaction fees, monthly statement fees, minimum monthly transaction fees, contract fees or cancellation fees. Third party processors usually charge quite a bit more per sale than credit card processors, so as your business grows you will want to upgrade to a credit card merchant account, but it’s a good way for a new or small business to test the credit card processing waters.

    So, What Is The Best Credit Card Processor For A Small Business?

    The answer to that question is still not simple, but it does boil down to this: Whether you operate a big business or a small business, the best credit card processing company for your business is the one that offers you the best options at a price you can afford.