A Buyer’s Guide to Securing Better Merchant Services

Growing your small- to medium-sized business depends on a steady flow of customers who happily buy your product or service. Whether you operate an online business or brick-and-mortar retail store, most of your customers will pay for their purchases with credit or debit cards.  

Completing those transactions quickly, and with zero errors or hiccups, is key to keeping customers happy and keeping your cash flow going. 

But what if you recently realized that your current payment processor isn’t making the grade? The transaction processing time seems slow, and you have to wait several days for the net proceeds to reach your business account. 

Or maybe you discovered that the per-transaction rate and fee structure of your current provider proven to be the wrong fit for your business stage. And, the payment processor’s customer service department isn’t always available.

If you can relate to the above, then it’s tike to shop around for a better merchant services provider — one that aligns with your business’ needs. 

Read on for our top tips to help you find the right credit card processing solution for your biz.

How to Find a Better Merchant Services Provider

With more merchant services providers jumping into the market every week, how can you find the right company? For starters, look for a merchant services business that’s affiliated with a respected bank. 

By following that path, you’ll have access to a robust customer service network that likely operates around the clock. When you have an issue, you’ll speak with a qualified representative who really understands the products. 

In addition, use these important criteria to find a better merchant services provider:

Bank-affiliated Merchant Service Contracts

Your bank-affiliated merchant services provider will require you to sign some type of contract. However, contract terms and lengths can vary between companies, and even within the same company. So, get complete details before making your selection.

Generally speaking, a longer-term contract provides a more favorable pricing structure. However, if your business circumstances change during the contract’s duration, and you decide to cancel the agreement, you’ll likely face a substantial early-termination penalty. So, if you’re just starting your business venture, consider choosing a shorter-term contract offering more flexibility.

Merchant Services Provider Pricing Structure

Each merchant services provider likely offers several pricing structures. Before evaluating each plan, step back and decide how many credit and debit card transactions you expect to process monthly. 

If you’ll just be an occasional user, consider declining a monthly service package offering a reduced per-transaction rate. Ask if other options are available.

In the opposite case, let’s say you expect your credit and debit card sales to start off strong, and keep increasing. So, look for a provider that discounts your per-transaction rate if you reach a certain monthly revenue target.

Speaking of transaction volume, determine (and double check) whether the provider places caps on your monthly transaction volume. If they do have this restriction, and you reach that volume limit, you could be prevented from processing additional card sales until the following month. Or, the provider could charge you a higher rate for any additional card sales during the current month. Either outcome is highly undesirable.

Common Card Processor Pricing Models

Let’s dive deeper into pricing structures, and briefly examine four common card processor pricing models. While reading this snapshot, consider your business’ size and type, along with your current and projected card transaction volume.

Based on those variables, weigh each pricing model’s pros and cons. Making the wrong decision could mean you’ll pay unnecessarily higher card processing rates – and that negatively affects your business’ bottom line.

Tiered pricing: This seemingly simple model separates transactions into qualified, mid-qualified, and non-qualified groups. Qualified transactions receive the lowest rates, while non-qualified transactions draw higher rates.

Debit cards, along with non-rewards credit cards, fall into the qualified category. High-rewards cards and business credit cards are considered non-qualified cards. The card processor determines the tier structure.

Tiered card processors lump their fees with bank/card network processing fees, so there’s no way to determine the processor’s markups. And, these companies often lure businesses by advertising the lowest “qualified” rates. Later on, the business learns that most of its transactions are in the “non-qualified” category, resulting in higher processing fees. For those reasons, stay away from tiered card processing providers.

Flat rate (aka blended) pricing: This model also combines your bank/card network processing fees with the processor’s markups. However, you’ll pay a fixed rate regardless of your customers’ card types. So, the processor’s advertisements won’t have any misleading rates, and your card statement will be much easier to read.

With that said, however, you could pay higher-than-needed processing costs if you sell high-ticket products or have a high-volume card business. Smaller, lower-volume businesses could benefit from this pricing model. Evaluate your business’ current and expected card volume rates before choosing this option.  

Interchange-plus pricing: This model separates the bank/card network fees from the processor’s markups. The bank/card network charges the interchange fee, while the “plus” component reflects the processor’s portion.

Your card processor determines your “plus” rate based on your business type and general credit-worthiness profile. A large, high-volume business could save some cash by using this model. To avoid any surprises, get your questions answered before signing on the dotted line.

Membership pricing: This model also separates the bank/card network costs from the processor’s markups. However, a membership-based processor charges a fixed membership fee to its customers.

In turn, you receive the “wholesale” credit card fees straight from the bank/card network. In other words, a membership-based processor makes profits from membership dues – and doesn’t jack up your bank/card network costs. This could be a good option for a large-volume business that could otherwise get dinged for high processing costs.

Merchant Service Rates and Fees

Within the highly competitive merchant services industry, each provider offers its own rate and fee packages. For starters, know that your MasterCard, Visa, Discover, and American Express cards may each have a specific per-transaction rate that’s determined by external factors. In addition, your provider may also slap you with the following fees:

• Per-transaction fee
• Batch fee 
• Statement fee 
• Annual fee 
• Customer service fee 
• PCI compliance fee 
• IRS fee 
• Contract termination fee   

Naturally, you want to know how to get better rates merchant services, as that will enable you to improve your bottom line. However, don’t let your desire to save money convince you to choose a plan with rosy-sounding promises and fees much lower than the industry standard. In many cases, these companies offer super-low introductory fees, and then sharply increase your card processing costs later. Avoid these businesses at all costs.

Merchant Services Transaction Processing Time

When you’re shopping for better merchant services, you want to know how long it will take to receive your net transaction proceeds. Many bank-affiliated merchant service providers operate on a next-day basis, which is welcome news for your business checking account. 

However, other providers may take two to three days to transfer funds, and some can take up to a week. If you’re relying on this income to cover other expenses, this may be a deal breaker.

Customer Service 

Ideally, your merchant services provider should offer 24/7 customer service from a United States location. They should offer a toll-free phone number so you don’t have to fork over your hard-earned cash to sit on hold while you wait for a representative. Email and live chat options should also be available.

Each customer service associate should possess a high-level understanding of the company’s products and card transaction procedures. Adequate tech support should be easily accessible. If the provider checks all these boxes, you may have found a better merchant services provider.

Credit Card Processing Equipment and Payment Systems

Processing your credit and debit card transactions should be simple with current point-of-sale (POS) terminals and other equipment. 

Ensure that your hardware complies with Payment Card Industry (or PCI) Data Security Standards. These protocols dictate security procedures that keep customers’ payment information off limits to nefarious operators.

In a perfect world, your card processing equipment will work seamlessly with your online shopping software and other payment systems. If not, you may be forced to make expensive modifications to make the two entities compatible, or scrap your payment system in favor of a new one.

Decide whether purchasing or leasing your card processing equipment makes more sense. (Spoiler alert: leasing is generally a bad idea and is more expensive in the long run.) 

Finally, look for a better merchant services provider that can continue to accommodate your growing business’ needs. You’d like to avoid changing providers, and causing service disruptions, just when your business is really hitting its stride.

Getting a Better Merchant Services Deal

Before you sign on the dotted line, you’d like to have confidence that your new merchant services provider will meet your business’ needs without breaking your budget. For starters, the company should have a solid history and a good reputation, along with other satisfied business customers in your area. 

Let’s assume the provider has a respectable local customer base. That makes it easy to ask for references from area businesses of the same type and/or size. Take time to call (not email) those business owners, and ask about their experiences.

Contact your local Better Business Bureau, and ensure that the company doesn’t have any troublesome complaints. Next, view national business publications’ annual “Best Merchant Services Providers” reviews. After reading the current online edition, put several companies on your short list so you can select a better merchant services provider.

Finally, consider getting several merchant services quotes from an independent “brokerage-type” company. Rather than selling card processing services and equipment, these companies provide customers with targeted quotes from providers that may be a good match.

Final words on Merchant Services Providers

Still need help finding a better merchant services vendor? Payment Depot can help. Send us your current credit card processing statement or proposal, and will analyze for free to determine if you’re getting best rate. We always offer unbiased advice to help merchants save.