When it comes to spending money, cash is no longer king for most shoppers. The majority of consumers prefer using a debit or credit card to make their purchases. This means that being able to accept these forms of payment is critical for businesses today.
This guide will walk you through how to choose the best credit card processor from the many options available on the market, including information on costs, processor types, and what factors you should consider.
When a customer makes a purchase with a debit or credit card, the processor acts as the go-between for the customer's bank account and the merchant's bank account. Although the process takes only a few moments, it involves a complex sequence of steps for the credit card processor, the customer and merchant's respective banks, and the credit card network. The credit card processor's role includes security verification, routing the transaction and acting as a clearinghouse for funds.
Given that the majority of consumer purchases are made with debit and credit cards (and an ever-shrinking percentage made with cash), the vast majority of small businesses must provide a way for customers to pay with cards. Most credit card processors provide several methods for accepting payments. Consider these examples of credit card usage in action:
It's important to understand the differences in pricing between credit card processing and other types of business services. The majority of credit card processors employ either interchange-plus pricing or flat-rate processing or a combination of both.
Interchange-plus pricing is when the credit card processor takes a small percentage of each sale, along with a modest fixed fee. The transaction percentage can vary, ranging from approximately 0.29% to more than 3.5%. The fixed fee may be as minimal as a few cents or escalate to 25 cents or more. For some businesses, this fee structure is advantageous because there are no upfront costs. However, it may be less workable for low-margin businesses.
Meanwhile, flat-rate pricing entails paying a fixed monthly subscription fee for unlimited credit card transactions. While this model eliminates concerns about the credit card processor cutting into revenue, it may pose a financial challenge for fledgling businesses due to high monthly fees. Flat-rate prices typically range from $59 to $199 monthly and are often accompanied by high fixed fees on a per-transaction basis.
Additionally, some credit card processors impose incidental and recurring charges, such as Payment Card Industry (PCI) compliance fees, payment gateway fees, network fees, monthly minimum fees and statement fees. Business owners are strongly advised to review the terms of service carefully before committing to any processor.
Furthermore, it's important to note that specialized POS hardware is required to accept credit cards through swipe, tap or chip methods. While some credit card processors offer free hardware, this path usually involves entering into a contractual agreement. Note also that certain processors provide proprietary POS equipment for purchase while others rely on third-party vendors for their equipment.
The main benefit of accepting credit cards is the massive positive effect on sales. The majority of purchases are made with cards and consumers are increasingly going cashless. For businesses that operate primarily online, the ability to accept credit cards is an absolute necessity. Besides the obvious, credit card processing offers many other benefits:
To accept credit cards, you will need a device or program for inputting credit card information at the POS. Both physical devices and digital solutions are available:
Whatever processor you choose should have a few key features. Card acceptance, security, hardware options, and basic POS tools are a few features that you should look for during your search.
Make sure that the credit card processor works with all major card brands, including Discover and American Express. This ensures that you don't lose out on sales and frustrate customers.
The credit card processor should comply fully with the PCI Data Security Standard, which will help you maintain PCI compliance.
EMV-compliant card readers reduce your vulnerability to fraud and help shield your business from liability in the event of a security breach.
Confirm that the credit card processor's software works with the type of equipment that you will need to accept payments.
Most credit card processors include basic POS software. If you don't plan to purchase a separate POS system, then you should look carefully at which features are included as part of the processor's software.
In addition to the criteria above, when choosing a credit card processor you should consider several other important factors, such as pricing, ease of use, third-party integrations, customer service and features, such as a mobile app.
Estimate how much your business generates in monthly revenue and use that figure to evaluate which pricing model makes the most financial sense. Whether you choose a processor that follows the interchange-plus pricing model or a flat-rate model will depend on your profit margins and sales volume.
The best credit card processors sport sleek, modern user interfaces (UIs) that are easy to learn and navigate. If you accept payments in person, make sure that the POS hardware is user-friendly. The best equipment is plug-and-play and ready to accept credit cards immediately. On the e-commerce side, ensure that the processor's software is compatible with your existing technology stack for easy integration.
Some credit card processing software programs integrate with accounting, POS, human resources and other business productivity software. Make a list of apps that you use for your business and check for compatibility. A few processors also feature open application programming interfaces so that you can build custom solutions.
Credit card processors vary widely in terms of customer service. While some stand out on user review sites for providing top-notch technical support, others score poorly. The standouts in customer service often provide 24/7 phone support and a dedicated account manager. Other options include live chat and email support. If being able to reach the company at any time is important to you, make sure that the customer support options reflect that.
Many credit card processors specialize in servicing a particular type of business. Some focus on providing tools for retailers or restaurants while others are more geared toward e-commerce businesses. Business owners who like to work on the go should ensure that the processor provides a dedicated mobile app. When reading about a credit card processor's features, think about what your business needs.
Clover provides a variety of pricing plans for different business types, particularly restaurants, retailers and appointment-based businesses. The company is best known for its range of POS hardware, including mobile readers, handheld terminals, and registers. Clover's POS software integrates with more than 500 third-party apps.
Merchant One customizes plans for individual business needs and offers highly rated customer service. With a low monthly subscription fee of $6.95 and integration with more than 175 online shopping carts, it provides cost-effective solutions.
ProMerchant offers fair deals for businesses that would otherwise struggle to secure credit card processing services. The company stands out with excellent customer support, including a dedicated account representative. ProMerchant's willingness to work with any business type, including those with low credit scores, makes it an excellent choice for high-risk businesses.
Stax offers a subscription-based model without taking a percentage of revenue, which makes it particularly well-suited for high-volume businesses. With compatibility across various POS hardware options and a mobile app for on-the-go transactions, Stax also provides a great deal of flexibility.
Payment Depot's membership-based model is perfect for a business that wants to avoid high processing rates. With prices ranging from $59 to $99 a month, Payment Depot doesn't take a cut of your business's sales. The company collaborates with SwipeSimple for its software needs and is compatible with many third-party POS device makers.
As one of the nation's largest banks, Chase leverages its massive treasure trove of credit card data to provide insights for business owners. With Chase, you can better target customers with data on demographics, purchase habits, and more. Chase also includes fast payouts, synchronization with financial services and Health Insurance Portability and Accountability Act-compliant payment solutions for healthcare businesses.
Helcim's all-inclusive platform includes an intuitive UI, diverse payment options and no contracts or monthly fees. It integrates with third-party devices, allowing flexibility as businesses expand.
The PayPal brand name is widely recognized and trusted, offering plug-and-play solutions for online transactions. With various ways for customers to send money and integration with popular business apps, PayPal greatly simplifies online payment processes.
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