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.
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.
