The Best Small Business Credit Card Processing

This article isn’t going to just give you a list of “best credit card processors” for one simple reason: the “best” credit card processor for small businesses varies depending on the business. That’s right. Your industry, average transaction size, monthly volume, and more all play a role in the best fit. The best processor for Jane’s restaurant won’t be the same as the best processor for Mike’s online furniture store.

However, that doesn’t mean you can’t get some good tips on finding the best processor. Follow these credit card processing tips for small businesses 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.

Determining the Best Processor for YOUR Small Business

A mistake many small business make is taking “top processor” lists as gospel. The truth is, it doesn’t matter if a processor is generally good if they’re not a good fit for you. We’ve written before about the dangers of credit card processor reviews, so we won’t go into it again here, but remember that processor ratings don’t give the full story.

What matters most to you?

Is it price? Customer service? Simple processing statements? Compatibility with a particular POS system or software? Different processing companies will be better fits depending on your actual priorities and needs. For example, if you don’t mind paying more for simpler processing statements, a flat rate company will be a better choice. However, if paying as little as possible for processing is your biggest concern, you’d want to look into companies that offer competitive interchange plus.

Think about your top priority. That will help guide your search for the best processor.

You can also sign up for a free business profile with CardFellow to get instant quotes from multiple different processing companies and take advantage of our expert assistance at walking you through your options. Give it a try here.

General Tips for Finding the Best Small Business Processor

Okay, it’s true that finding the best small business processor is a business-specific task, but there are still some general 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. Before you talk to processors, remind yourself that your business deserves competitive pricing.

Volume Needed is Smaller Than You Think

Some businesses think that they have to reach a certain monthly sales volume in order to get good pricing. In fact, since more expensive flat rate processors like Stripe typically don’t negotiate rates until you reach $80,000/month, many businesses think that’s a threshold they have to reach to negotiate with any company. Not so.

Believe it or not, you can negotiate competitive pricing even when you’re only taking a few thousand/month in credit cards. (Anything under a few thousand, you’ll likely be best going with a flat rate processor.)

So don’t worry if you’re not pulling in huge sums. You can still get great pricing. If you need help, we can steer you to competitive solutions using our free quote comparison tools.

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.

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

Once you’re on interchange plus pricing, it’s all about securing the lowest markup over cost, and making sure that interchange will be passed to you at true cost. If that sounds complicated, not to worry. You can plug in your numbers and compare markups easily by requesting quotes from any processor you’d like. You’ll just need to set up a free comparison account through CardFellow so that our software can show you the real costs side by side in an easily readable format.

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, and make sure it’s in the final contract that you sign.

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 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.

At the end of the day, the best credit card processor for your small business is the one that offers a transparent pricing model, competitive markup, no cancellation fees, and low cost equipment sold outright. If you’re not getting any of those benefits, keep looking. It’s not impossible to secure a great processing solution even when you’re a single location store just starting out.

14 thoughts on “The Best Small Business Credit Card Processing”

  1. All good points — but remember, a merchant account gives you access to the banking system … and that isn’t going to happen unless you (the merchant) actually signs a written contract with your processor. All processing agreements include pricing terms and other requirements that all merchants must follow in order to have access to card processing, and you have to give your processor written permission to set up the account on your behalf. The contract may not have a cancellation fee, but there is always (no exceptions, ever) going to be an agreement to sign when you open a merchant account.

  2. I recently had a very bad experience with a merchant processor. They tried leasing me a machine for $40/mo for 5 years which I could buy online for $300. I refused but when I tried to terminate them (after 5 years) they charged me $600 in fees and told me that it was because the contract automatically renewed each year. When I posted a complaint in Better Business Bureau they emailed me and told me that they had documented all these issues properly and would send a copy of my comments to their legal department. I have asked my bank to remove their charges and am considering filing a complaint with the attorney general’s office. Reading reports about them on BBB and Ripoff Reports they appear to be capable of anything. Any advice would be appreciated.

    1. Hi Ilan; I’m sorry to hear about your run in with a less than reputable processor. Unfortunately, we hear stories like yours all too often here at CardFellow. I’ll shoot you an email today to get the details on the situation, and to see if there’s anything we can do to help.

  3. I agree with everything you say with exception of one point. If there are no terms to an agreement, aka a contract, how am I to be sure this processor will not raise my rates whenever they feel like it. I have dealt with so called processors that will do just about anything to earn your business…including intro rates that ARE to good to be true.

    I have found a great rate with a direct processor and had no problem agreeing to 3 year terms. I feel comfortable knowing that my rate is guaranteed.

    I think you should inform your readers that avoiding “middlemen” is another good practice. Many banks and other companies claim to be processors. This however is NOT true. They resell processing done by a handful of actual processors. I am not saying that your bank can’t give you a good pricing model but I am saying a direct processor is more likely to pass through true Interchange.

    I buy my products at cost and sell them to my customers at a marked up price. If they bought my products from a bank or 3rd party, there would be a second mark up. Same goes with processing!

    1. Hi Greg,

      Thank you for your comments. There is a lot of confusion when it comes to contracts and cancellation fees. People often assume the word “contract” is synonymous with “cancellation fee” when in fact the two words refer to two completely different things.

      All merchant accounts have contracts, but not all have cancellation fees. Also, you are making the mistake of assuming a merchant account contract guarantees that a processor’s rates will not increase under the term of the agreement. This is not the case. Merchant processing agreements provide no such guarantee. Check out the article about merchant account contracts here at CardFellow to learn more.

      It is a common misconception that it is more beneficial for a small business to obtain processing services from a “direct processor.” It’s true that companies such as First Data resell processing services through sales organizations, but it is not true that sales organization cannot provide the same if not more competitive pricing than the larger “direct processor” for which it sells services.

      Take the quotes that businesses receive here at CardFellow, for example. Smaller resellers of processing services often beat the larger company’s quotes. Beyond simply pricing, smaller outfits also provide a higher level of expertise, service, and product and software diversification than larger processors. Not only are you likely paying the same, if not more with a larger company, you’re limiting other aspects of a processing account that don’t have a clear monetary value.

  4. I am trying to find the right credit card processor for my small business. What do you suggest? I am reading all the comments and see a lot about fees. I am finding more and more companies/people are doing their best to take your money and it is so hard not to be taken advantage of.

    I was looking at the smartphone credit card terminal and wondered if this would work for me. I know you can purchase it for about 70.00 but how do you set it up with your bank account and what types of fees are charged?

    Would appreciate you getting back to me.


    1. Hi Diane,

      CardFellow’s sole purpose is to help businesses find an honest, competitive credit card processor. Just sign up for free to receive instant, private quotes from multiple processors, and then we will help you choose the most competitive option.

  5. I am one year into my new business. I unfortunately was talked into a 5 year lease on my wireless charge machine. Now no one will touch me to change my services because of this. I do currently have a gentleman getting back to me that may possibly let me use my machine and their reprogramming of it. He says they work on a month to month contract for the processing with a qualified rate of 1.29% and mid-qualified at 1.37% and non-qualified at 1.39%. Not sure if I should just ride out my contract with my current processor with rates of qualified 1.57%, mid-qualified .57%, non-qualified 1.52% with a .22cents per transaction fee. What is your opinion?

    1. Hi Nancy,

      I’m sorry to hear that you’ve been locked into a lease. As you’ve probably learned, leases cause a business to pay roughly five times more for a credit card machine than it’s worth, which is why CardFellow has banned leasing in its marketplace.

      The first thing you need to do is to dump bundled pricing. You do not want to pay for processing based on qualified, mid-qualified and non-qualified rates. Check out that last link for a comprehensive explanation of what bundled pricing is and why you want to avoid processors that use it.

      Besides, the representative that is offering rates of 1.29%, 1.37%, etc. is playing a bait-and-switch. Check out our article about credit card processing bait-and-switch.

      CardFellow’s sole purpose is to help business people like you to get an honest, competitive credit card processing solution. You should really sign up to get instant quotes. Our service is 100% free, private, and you will get quotes instantly. We are also available to help you decided which option is best, and to answer your questions about processing without all of the sales jargon.

      1. Hi Ben, The credit processing guy is here right now and claims my business makes too little to be on an interchange (roughly $3000/month) he says I will pay less $ doing the tiered program
        Qualified 1.29%
        Mid-qualified 1.95%
        Non-qualified 1.32%
        $95 Annual fee
        19.95/month wireless fee
        $15.95/month service fee
        $4.95/month compliance fee
        $5/month debit fee
        What do you think?

        1. Hi Ben, The credit processing guy is here right now and claims my business makes too little to be on an interchange (roughly $3000/month) he says I will pay less $ doing the tiered program
          Qualified 1.29%
          Mid-qualified 1.95%(NOW THIS IS .57%)
          Non-qualified 1.32%(NOW THIS IS 1.47%)
          $95 Annual fee(NOW HE DROPPED THIS)
          19.95/month wireless fee(NOW $15.00)
          $15.95/month service fee(NOW $10.00)
          $4.95/month compliance fee
          $5/month debit fee(NOW DROPPED THIS)
          $10.00 WIRELESS FEE
          What do you think?

  6. I am a hair stylist, and I am currently using Square. I’m starting to get more and more busy, and I’m charging about $1200-3000 a month just in credit card sales. As volume grows so too are Square’s fees. What are my other options? Should I buy my own machine, and if so, which one is the best? Please help!

    1. Hi Brittney,
      The answer to your problem is right under your nose. CardFellow is exactly what you need. CardFellow allows credit card processors to compete for your business under terms that we require, making it easy to find the most competitive, reputable processor for your business. Just sign up here at CardFellow for free to receive instant offers from as many as six different processors.

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