Small Business Credit Card Processing Tips
So you think that just because you have a small business you can't get the competitive credit card processing rates that big businesses get? Think again! Follow these five tips and you'll be able to secure credit card processing rates for your small business that will make Walmart jealous. Alright, that's a bit of a stretch, but you get the idea.
- Act Like Your Small Business is Huge!
- Know Where Your Money Goes.
- Stick with Interchange Pass-Through Pricing.
- Just Say No to Contracts.
- Buy Equipment Cheap and Avoid Leases.
If you like these five small business credit card processing tips, you'll love our list of 101 credit card processing tips.
Act like your small business is huge!
Size may matter for some things, but it's out the window when it comes to finding the best credit card processing companies. The ridiculous level of competition in the industry will have processors fighting tooth and nail for your business no matter your size.
Don't let sales people push you around because just because your business doesn't process a ton of money (yet). The bigger you think, the smaller your rates and fees will get -- regardless of the actual size of your business. Beofre you talk to processors, remind yourself that your business deserves competitive pricing.
Know Where Your Money Goes
Before you can negotiate the best credit card processing fees for your small business, you have to know what's flexible. There are two areas of cost that even processors can't change. The first is interchange, and the second is assessments.
Interchange is the same for all processors and it's the rate that card-issuing banks charge processing banks (called acquiring banks) to accept their credit cards. Interchange rates are a fixed component of credit card processing expense, and they're the same for all processors.
You can check out the actual interchange fees for Visa and MasterCard on their websites.
Assessments are a series of rates and fees charged by Visa and MasterCard, and they are the same for all processors. You can see a list of the different assessments at our credit card processing fees page.
The only area of processing cost that is negotiable is the processor's markup over interchange and assessments. The markup is where you want to attack, and here's how to do it.
Read more: CardFellow's Guide to Credit Card Processing.
Stick with Interchange Pass-Through Pricing
Don't make the mistake of focusing just on rates and fees when negotiating. The first place to start is with the pricing model on which the processor's markup is based.
Processors often use two types of pricing models, called tiered and interchange pass-through. Tiered pricing is opaque and expensive. If your business already accepts credit cards, you're probably familiar with tiered pricing because it's the one that results in expensive mid and non-qualified surcharges.
Processors prefer to offer tiered pricing to small businesses because tiered pricing generates higher profits even on lower volume businesses. While processors need to make money, too, there's no reason you have to help them make huge profits at your expense.
Interchange pass through pricing, on the other hand, results in lower costs and it doesn't have any surcharges or pricing tiers. This makes interchange pass through more transparent and much less expensive than tiered pricing.
Big businesses in the know are paying credit card processing fees via an interchange pass through pricing model, and there's no reason why you can't get the same money saving pricing for your small business. Just be sure to ask for interchange pass through pricing by name. Be sure you're getting interchange plus with true pass-through. Without true pass-through pricing, interchange plus isn't a silver bullet.
Need the basics? Check out Credit Card Processing Basics: Pricing Models.
Just Say No to Contracts
Small business or not; no one likes to be locked into a long-term merchant account contract with a cancellation fee. Many processors attempt to impose a contract term with a cancellation on the merchant accounts that they offer. Some may even say that it's standard practice. Well, it's not.
Just say "no" if a processor tries to lock you into a contract with a hefty cancellation fee. You will find that most processors will be willing to waive the cancellation fee if that's what they have to do to earn your business. Just be sure to get any contract fee waivers in writing. You can also choose a certified quote through CardFellow to be assured of no early termination fees.
Buy Equipment Cheap and Avoid Leases
If you've followed the first four steps you're well on your way to getting the best credit card processing for your small business, but you've done a number on processors' profit margins along the way. To compensate, processors may try to hike the cost of your equipment or software, or perhaps attempt to lease you a machine.
Credit card processing machines are pretty cheap compared to even a few years ago. You should be able to buy a new basic chip-capable terminal for roughly $300-400. Anything beyond that and the processor may be padding the price.
Leases are something that you shouldn't even consider for your small business. There's never a good reason to lease a credit card machine for $50 a month over four years when you can buy the same machine for $250. A processor that tries to lease you a machine is one you don't want to do business with.
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