What to look for in a merchant processor

There are many factors in determining what processor is the best match for a given business. After working in the merchant processing industry for 20 years, I believe I have a good perspective on what a merchant should look for. I have worked with thousands of businesses over my 20 year tenure in the credit card processing/banking industry. My approach has always been to educate my sales team to know their business in order to effectively evaluate a business’s needs. If you know your business, you will be able to evaluate the specific needs from a financial standpoint in order to customize the program.  Someone who does not work with merchant processing on a daily basis, will find guidance helpful to ensure a cost-effective program for their business needs.

Know your contract:

By this, I mean know the terms of the contract

Is there a cancellation policy or an early termination fee?  Is it a three-year contract, five-year contract or seven year contract, etc.? Can they increase your pricing at any given moment?  When can they raise the pricing?  How does that affect your rate? How does that affect your bottom line? Is there a monthly minimum? A monthly minimum indicates the minimum amount in fees that a processor will collect in any given month. If actual fees resulting from processing activity don’t meet or exceed the minimum amount, the processor will charge however much is necessary to meet the minimum. The tricky part of monthly minimums is how the processor determines which fees count toward the minimum and which do not.

Know your rate:

what pricing plan are they proposing to you? Is it an interchange plus pricing plan, three or 6-tier pricing plan, flat rate, or interchange with a bill back? How do you determine which pricing plan structure meets your business needs?

Here are the most popular rate plans available

  • Flat Rate– This is where the merchant is billed a flat rate for processing. Most providers now break it out into a swiped rate and a key entered rate.
  • Interchange Pass Through Plus– This is where the merchant is billed the card brands interchange and association fees at pass through cost. There is a markup added. Normally this markup ranges from .10% to 1.50% depending on your type of business and processing volume.
  • Cash Discount– This program passes the processing cost to the cardholder. The fee is disclosed in the business and added to the total cost of goods and services. This program is considered a zero-processing fee program because the business does not pay the fees.

Should you sacrifice service for price? 

Service versus price? A question many business owners ask themselves. In some cases, if your buying equipment or goods service may not be a primary concern. However, when a service impacts your businesses cash flow, service is a primary concern. Be sure to ask questions of your sales agent. Know how to get the help when you need it.  Service is just as important as the bottom-line price you’re getting for services. From a service standpoint the smaller reseller Independent Sales Organizations seem to have a better service model. The primary reason is because they have fewer customers and support is their primary concern.

If you choose a zero-processing fee program such as a cash discount program service is a primary concern to any new program. Be sure to check out your prospective provider on BBB ratings.  If a processor is not a member and you cannot find any ratings be cautious. Having a good service provider is a game changer when starting a new program like cash discount.

This article is meant to assist business owners in finding the right program that fits their business needs for the merchant processor. Take the time to evaluate who you choose to process your credit cards with. Too often small businesses get stuck in contracts and paying fees they do not want to. Many of these troubles can be avoided by doing some homework on the front end. Regardless of what program you chose for your business we hope this information is useful in finding the right one for you.