Define Best: What's Really Important
The problem with the word "best" is that it's subjective. Its meaning is unique to the person using it, and when it comes to credit card processing, many people don't really know what is truly best. For example, people generally feel the best credit card processing solution is the one that offers the lowest rates, and they feel this way based on the assumption that low rates will yield low cost. This is an expensive assumption.Best Rates — A Big Mistake
Low rates do not equate to low cost. There is no such thing as the best credit card processing rates. People tend to shop for credit card processing by asking several different processors the fateful question, "What are your rates?" when what they really want to know is, "How much will your processing cost?" As I will explain below, processors use several different pricing models to manipulate credit card processing costs independent of rates. For example, a processor that offers a rate of 1.59% can actually be more costly than a processor offering a rate of 1.89%. Therefore, what appears to be the best rate is actually the worst. A processor's rates are virtually meaningless. Cost is most important, and the way to achieve the lowest costs is through the lowest markup.Learn the Fundamentals of Processing
Don't make the mistake of shopping for credit card processing based on processors' rates. Instead, compare credit card processors based on which offers the most transparent pricing model and lowest markup. The three components of credit card processing cost are interchange, assessments and markup. Interchange is what a processor pays to an issuing bank, assessments are what a processor pays to the card brands (Visa, Mastercard and Discover), and markup is how the processor makes money. Interchange and assessment costs are standard for all processors. So, it helps to think of the sum of interchange and assessments as credit card processing's wholesale cost. Only the processor's markup will differ from one processor to the next. So, if best means lowest cost for you, then you're looking for the processor that offers the best markup.Focus on Markup
A credit card processor makes money by charging a markup over its costs of interchange and assessments. (That is, the "wholesale" cost noted above.) The lowest cost processor is the one that charges the lowest markup, and obtaining the lowest markup means understanding some tricks of the trade.Pricing Model
Credit card processors use various pricing models to pass the components of processing cost to businesses. By far the most widely used pricing model is something called tiered pricing. As explained in detail in CardFellow's credit card processing guide, tiered pricing allows a processor to conceal costs and levy hidden surcharges. Tiered pricing is also the pricing model that leads people to shop for processing companies based on the "best rates." For reasons outlined in the aforementioned guide, tiered pricing is expensive and opaque. It is not the ideal pricing model. Interchange plus pricing is the first step toward a low processing markup. CardFellow's article about interchange plus pricing explains the benefits of this pricing model in detail, and it outlines exactly why interchange plus is the first step toward securing a competitive processing solution.Terms
An often overlooked aspect of an advantageous processing solution is the terms a processor employs. Cost is important, but it's not the only variable to consider. Things like cancellation charges and longevity are important, too. You don't want to get locked in with an expensive processor that charges a hefty cancellation fee. Likewise, if you do obtain a good, low-cost solution, you want to be able to keep that processor at those terms for awhile. CardFellow does not allow processors in its marketplace to charge cancellation fees. We also require interchange vouchers on credit card refunds, and pricing is guaranteed to remain locked for the life of an account, so you're not subject to random markup hikes once you've locked in your low cost processing. These are important variables to consider if you're shopping for processing on your own.Search
Don't attribute low rates to low cost, and don't shop for processors based on which offers the best rates. Cost is the heart of the issue, and a processor's markup is what dictates cost. So, search for credit card processing companies based on which offers the best pricing model, terms and overall markup. CardFellow makes shopping for a truly competitive credit card processor quick and easy. CardFellow dictates the pricing model and terms processors are allowed to use to ensure visitors receive only the most competitive offers. Quotes are then delivered in a matter of seconds through a private online marketplace. Check out how CardFellow works and how it can help you reduce your business's credit card processing costs.
Ben Dwyer
Ben Dwyer began his career in the processing industry in 2003 on the sales floor for a Connecticut‐based processor. As he learned more about the inner‐workings of the industry, rampant unethical practices, and lack of assistance available to businesses, he cut ties with his employer and started a blog where he could post accurate information about credit card processing. As the blog gained in popularity, Ben began directly assisting merchants in their search for a processor. Ben believes in empowering businesses by providing access to fair, competitive pricing, accurate information, and continued support. His dedication to transparency and education has made CardFellow a staunch small business advocate in the credit card processing industry.
