4 Questions to Ask Yourself When Selecting a Credit Card Processor

As a business owner, it’s important to provide your customers with multiple payment options so you don’t have to worry about turning anyone away simply because you don’t offer the payment method they prefer. With the rise of today’s forward-thinking payment methods like digital wallets, even small to mid-size businesses have begun to transition away from cash-only to merchant account services and mobile payment processors.

If you’re in the process of doing so, you want to choose a provider that can meet all of your business needs, for a price you can afford, and in a timely manner. To make sure you’re making the right decisions throughout the process, you have to ask yourself 4 key questions when selecting a merchant account services provider, and we have the answers to those questions.

1. What do you sell or what services do you provide?

Businesses vary, and so do the needs of each business. Start by thinking about what it is you provide, and how your customer will be interacting with your business to determine what sort of solution that will best serve those needs. If your customers come to you, you are going to have very different needs than those businesses that are physically mobile and go to the customer. Likewise, if the majority of transactions take place without the need for face to face interaction with the customer, this is going to be a factor that determines what type of credit card processor you are going to want to use.

Mobile credit card processors, for example, are best for businesses who want to accept their customers’ credit cards at any time, and wherever the business may be. But even so, merchants seeking mobile solutions must still keep their unique situations in mind.

Merchants like food truck owners or street vendors will naturally have different circumstances than brick-and-mortar business that may want to evolve beyond the register, such as a medical business seeking to allow patients to pay on the spot instead of mailing a bill.

Ultimately, a business owner knows what they are looking to provide for their customer, so reassessing your merchant-customer relationship and getting your ducks in a row is a solid starting point.

2. How are you accepting payments?

You know what your business needs are when it comes to choosing a processor, so now you have to ask that type of account that fit those needs.

If you have a physical storefront location, a retail merchant account is the common type of processor you will want to choose, so the customers’ credit and debit cards can be swiped through payment terminals installed at your store.

These days, a growing number of business transactions are handled online or at least have an online component. For this, you will need to set up an internet merchant account. Businesses can then process credit and debit card payments on their website.

If you want your business to use your smartphones and tablets as payment terminals, you’ll need to set up mobile credit processors to allow your business to accept payments wherever you have a mobile network service. These have risen in popularity in recent years because they can be used by practically any type of business or individual.

Though payments of this type seem to have decreased over the years, having the option for mail or telephone order merchant accounts (MOTO) is still used and, as you would expect, an account of this type lets you process payments by phone or direct mail, which is often necessary for businesses.

Two things to note: If you plan to accept payments for your business in multiple ways, be sure to look for a processor that supports multiple merchant account types. Also, if you already have a point-of-sale system or website set up for your business, you will also have to research and see if the processors you are looking at using are compatible with what you already have set up.

3. How much will it cost you?

Arguably the most important question in shopping around for a credit card processor is its cost, including both its setup cost and how much it’ll cost your business in the long run. Here are of the fees to be aware of:

One-Time Fees

When choosing a processor, you may be charged application fees to get your payment system account set up, and these initial costs can also include the installation of any equipment required.

Transaction Fees

When using a credit card processor, you will be charged a transaction or “interchange” fee for every transaction made with a debit or credit card. This usually ranges between 1.5% – 4% of the total purchase amount that goes to the credit card issuers. For smaller businesses where low-volume, low-cost purchases are common, this can often make it difficult to stay competitively priced with larger businesses.

The rate can vary based on several factors including the type of card used and where the transaction takes place (in person, over the internet, or by phone). In-store payments can cost you less since the card is physically present during the transaction and so the risk of credit card fraud is much less than online or by phone.

Another security-related factor to consider is whether you want the equipment installed for more secure EMV technology such as Chip-and-Signature and Chip-and-PIN. The signature function requires a signature to verify transactions, just like credit cards traditionally have in the past, and the PIN function requires a four-digit PIN, just like a debit card.

There are no special or additional fees to use EMV chip cards. However, it does cost money for credit card companies and merchants to switch over to EMV technology, and the major credit card networks are mandating that merchants upgrade for the security benefit, so it may not be worth delaying the upgrade costs.

Monthly Charges

You should prepare for a few potential fees that you will see month to month. Some processors will charge a small fee for mailing you a monthly statement. It’s usually around $10 or so per month, but added onto your other expenses, it’s important to be mindful of this as well. Renting a credit card processing terminal can generally be around $20 to $100 a month, so that’s another potential cost to research when selecting a processor.

The cost can vary, but some processors may charge you a fee for early cancellation of your contract, which can range from several hundred dollars to potentially thousands. Additionally, most processors will have monthly minimums for fees they collect, and if your business doesn’t exceed this minimum amount, you will be charged the difference.

Additional Charges

A few other costs to be mindful of are equipment leases, which you would be responsible for even if you were unfortunately forced to close your business, or were looking to sell. Also, if you’re looking to modernize your business with the equipment needed for mobile wallet readers and other modern transaction amenities, there would be costs tied to setting your business up for that as well.

Be sure to ask all the relevant questions pertaining to what charges you’ll have to plan for when finding a processor since every business will have their own considerations that make the most sense for them.

4. When do you need it?

There are two time-related considerations that you must keep in mind from the outset of your processor search. Consider both the time to get your payment system set up physically and the time to get the credit processor account in order. You want to open the door as soon as you can to allow your customers to pay in ways that are convenient to them, so having the setup process mapped out ahead of time will only help your business more.

When signing a contract with a processor, try to negotiate the terms and get a month-to-month  contract so you have the leniency to terminate the contract if there are issues or if you need to switch to a more affordable processor in case rates increase, as they often can. The smaller your business, the more valuable this kind of contract could be for you. Also, stay diligent about making sure terms don’t change between months, so you’re always making the right choice for your business.

Research and Decide

With these considerations in mind, it should be easier to seek out a processor that suits your business’s specific needs. And once you’ve found the perfect processor, it’ll be that much easier to perfect your customer experience and position your business for future success.

Nathan Grant is a Credit Industry Analyst with Credit Card Insider. Nathan strives to educate individuals and communities about financial decisions big or small and equip them with the knowledge to identifying your financial priorities and face them head on