Credit card processing companies, also known as credit card processors, payment processors, or merchant services providers, are companies that facilitate all your credit and debit card transactions. Your credit card processor acts as an intermediary between your business and your customer’s credit card/debit card provider, enabling you to seamlessly and instantly collect payments.
Here’s how the top payment processors help you accept credit card payments:
The best credit card processing companies make this happen in the blink of an eye. Modern technology, eh?!
Not all credit card processors (CCPs) offer merchant services, but all merchant services providers (MSPs) offer credit card processing. A merchant services provider, or MSP, is an umbrella term for a company that offers services to merchants (businesses), including: credit card processing, online payment gateways, business financing, gift card programs, loyalty programs, and website design. The terms ‘merchant services provider’ and ‘credit card processor’ are used interchangeably, but it’s important to remember that credit card processing is only one service – albeit the primary service – from among many services offered by MSPs.
If you’re the sort of business owner who enjoys the convenience of a one-stop shop, then the best payment processor for you may be one also that offers a variety of merchant services. But if your main goal is to accept credit card payments, then you can freely choose from the best credit card companies without having to worry about whether they offer additional services.
Credit card processing fees can be complicated; the best credit card processing rates depend on your type of business and sales volume. The most important fee to know about is the interchange fee – which is the fee you pay for each transaction. Depending on your MSP/CCP, you could be subject to any number of other fees and charges. According to Square, a leading credit card processor, the average cost of processing payments for an American business earning $10,000 to $250,000 in annual payments volume is between 2.87% to 4.35% per transaction.
Some credit card processors charge the interchange/transaction fee and little else, while others charge dozens of fees. There is no right or wrong. However, one thing is for sure: the best credit card processing for small business involves transparent fees and charges. Before locking yourself into an agreement with an MSP/CCP, always read the fine print to be sure you know what you’re being charged. Obviously, the fee structure needs to suit your sales volume; the best payment processor for a small business isn’t necessarily the same as for a large business.
Here are the main types of fees and rates to know about:
Interchange is a wholesale fee that accounts for most of the cost of processing credit cards. Technically speaking, each card provider (e.g. Mastercard, Visa) sets its own interchange fees. However, many credit card providers charge the same interchange fee regardless of card provider, making it a lot easier for you to know what you’re paying. An interchange fee comprises two parts: a percentage of the transaction amount plus a flat fee, e.g. 2.5% + $0.10 per transaction. Additional fees apply for foreign currency transactions.
Some, but not all, credit card processing companies charge a flat monthly fee for using their services.
Some credit card processing companies charge a percentage of your estimated monthly sales volume, e.g., 0.1% of sales up to 1,000 sales, then 0.11% of the next 1,000 sales, etc.
To accept credit card payments, you need a physical terminal like a countertop register or mobile EMV. Your credit card company can sell or lease you the equipment, or you can purchase the equipment from a third party. Separate costs generally apply for leasing/buying bigger hardware. However, the best mobile credit card processing solutions involve a free mobile card reader that lets your customers chip, swipe or tap their card onto your mobile device.
If you don’t reach the minimum amount of annual transactions agreed to with the credit card processor, you may be charged an additional fee.
Even among the top credit card processors, you may find additional fees such as these:
Online payments are an important source of income for many businesses. Therefore, the best credit card payment system for small businesses is one that easily integrates online payments. Ecommerce payments are enabled by what is known as a payment gateway or virtual terminal. The best online payment services securely encrypt the customer’s data and send it to the payment processor. At the back end, the process works the same as with physical credit or debit card transactions, all the way up to the issuing of a receipt to the customer.
Here are things to consider when looking for the best payment gateway:
Getting approved to begin accepting credit card payments is straightforward. As long as you can show you’re a legitimate, lawful business, you shouldn’t have too much trouble opening an account with the best card merchant services providers. Charges generally depend on how much you earn each month or year. If you fail to make the amount agreed upon with the processing company, then you may be subject to additional fees.
The one group that can have trouble getting approved by the best merchant account services companies are ‘high-risk’ merchants: businesses that typically have lots of chargebacks or that do business in multiple currencies.
High-risk businesses include:
If you fall into this category, then what you need is a credit card processor or merchant services provider that caters to high-risk businesses.
Every business has different sales volumes and different needs, so it’s fair to say no two merchant services companies are ever the same. If you run a small business, then you should only be searching for the best merchant services for small businesses. What is the best merchant account for small business? One that charges low setup fees and doesn’t tie you into contracts with unrealistic monthly sales commitments.
Here are some things to compare when searching for best small business merchant services providers: