How to Choose the Right Restaurant Credit Card Processing Service for Your Business

How to Choose the Right Restaurant Credit Card Processing Service for Your Business

As 2022 begins, some sectors of the economy are experiencing some challenges. However, in June 2021, research firm IBIS World reported continued growth for the country’s credit card processing and money transferring industry.

IBIS World projected that the credit card industry will reach a market size of $90.3 billion in 2022. Further, the sector is expected to grow 7.1% during the year. 

In fact, the market size of the credit card industry has increased more rapidly than the overall US economy in the past five years. This is highly relevant to restaurant owners who reap much of their revenues from customers who use credit cards.

This article discusses everything you need to know about restaurant credit card processing and how to choose the best payment processing provider for your business. 

Let’s dive in.

Why you need a restaurant merchant account 

Restaurants that process customers’ credit cards incur multiple expenses. Credit card processing fees include costs for a card reader, point of sale (or POS) terminal, and other equipment. 

Transaction fees are often joined by a laundry list of other processing and service fees. So, restaurant owners might be tempted to not open a merchant account, a requirement to accept credit card payments. Although this would certainly reduce the restaurant’s operating expenses, there are two big downsides to this decision. 

  • First, a 2020 study found that just 19% of consumers choose to pay with cash. This figure would likely be even lower today as many people avoid cash because of perceived COVID risks. 
  • Second, the rapid growth in digital payments means that a restaurant business that accepts only cash has no chance of getting diners’ credit card business. Let’s delve a bit deeper into this particular aspect.

Rapid growth in digital payments 

Many diners prefer credit cards or debit cards with built-in rewards or other benefits. To maximize their points, these customers seek out restaurants that accept their Visa, Mastercard, American Express, or Discover cards. Today, most of these cards feature the “Chip and PIN” (or EMV) functionality. 

Contactless payments, along with Apple Pay and other mobile wallet choices, are also popular options. Some fast-food restaurants have recently added smartphone payment apps to their POS systems so that customers who prefer mobile payments can pay for their orders quickly and efficiently. 

Other customers use the online ordering (or eCommerce) option. This eliminates delays when customers arrive to pick up their food. Thus, cash-only fine dining or other full-service restaurants will lose out to their competitors (that offer varied payment options).

How a restaurant credit card processing provider can help

Let’s say a restaurant merchant decides that processing credit card transactions would best meet their business needs. Selecting the right restaurant credit card processing services provider will make a huge difference.

Diners will be able to easily pay for their meals using their preferred payment method. Plus, the restaurant business will benefit from fast payment processing, with the proceeds soon reaching its bank account.

What to look for in a restaurant payment processing service 

Consider six key factors when evaluating a restaurant payment processing service. Decide which variables are most important, and then shortlist the candidates meeting those criteria. Select the payment processor that represents the best overall fit for your small business.

1. Flexible POS system 

When choosing a restaurant POS system, the restaurant owner should decide how each cardholder will pay for their meal. With tableside payment terminals (or tablets), customers can handle their own payments. This frees up servers for other customer-focused tasks.

Many fast-food restaurants operate with a counter-based POS system. Each customer completes both the ordering and checkout functions at the front counter. In other words, customers must pay for their food before receiving it. This eliminates the chance of a diner skipping out on the bill afterward.

2. Payment processing system security

Every credit card processing services provider should maintain a secure payment gateway. This digital communications corridor provides the path through which customer transactions are processed. An updated payment gateway is equipped to process any payment solution.

Concurrently, restaurateurs must meet the Payment Card Industry Data Security Standard (or PCI DSS). This exacting set of requirements helps to ensure that customers’ sensitive card information is protected throughout the transaction. In other words, the restaurant business must ensure its own PCI compliance.

3. Budget-friendly pricing model

Each payment processing company operates with its own pricing model. In addition to monthly fees, restaurants may be subject to a long list of additional service fees. Examples include a statement fee, annual fee, batch fee, PCI compliance fee, and chargeback fee, among others.

Credit card processing rates and fees

It’s an understatement to say that credit card processing fees are all over the map. It’s also a well-known fact that restaurants frequently operate on tight margins. Therefore, it’s important to find a credit card processor that understands the industry and offers a budget-friendly pricing structure.

Four common rate structures

Each payment processor uses one of four well-known rate structures. Each model has different implications for small business owners, including restaurant operators.

  • Tiered pricing. This pricing model is based on three transaction levels. Qualified sales, such as those with debit cards and non-rewards credit cards, receive lower rates. Non-qualified transactions, such as those involving higher rewards cards and corporate cards, are assessed at higher rates. Small businesses will generally pay higher rates with a tiered pricing structure.
  • Flat rate pricing. Also called blended pricing, this rate model charges a flat rate for all transactions. So, credit card, debit card, and rewards card sales will all be assessed at the same processing rate.
  • Interchange-plus pricing. With this model, the payment processor separates the rate into two parts. The “interchange fees” are the credit card networks’ fees. The processor also adds its markup to the equation. This structure provides transparency for the restaurant owner, as they can see where their money goes.
  • Membership-based pricing. In a membership-based pricing model, the payment processor does not siphon off a portion of the restaurant owner’s sales. The business owner pays only the card networks’ interchange fees. In addition, the processor (such as Payment Depot) charges a monthly or annual membership fee.

Additional processing fee variables

Several additional factors influence a restaurant’s credit card processing fees. First, the processor will consider the restaurant’s business type and financial history. The company’s credit score and chargeback history are also factored into the mix.

Finally, swiped cards incur lower fees than keyed-in cards. In a similar vein, card-present transactions are charged lower rates than card-not-present sales. In both cases, there is less risk associated with the presentation of a physical credit card.

4. Transparent (and fair) service agreement

Many payment processing companies are known for their lack of transparency in customer service agreements. These agreements often contain vaguely explained fees or even hidden fees.

Some payment processing services agreements may lock small business customers into long-term contracts. Customers who opt out early are typically hit with hefty cancellation fees (or termination fees). Most payment industry experts advise against long-term payment processing services agreements. 

Small businesses can have many structural and operational hiccups. These situations often result in cash flow irregularities and the need to suddenly reduce expenses. An agreement imposing very stiff fees is the last thing a cash-strapped restaurant owner needs.

Fortunately, small business owners have another option. Payment Depot is a well-regarded merchant services provider that offers month-to-month membership-based pricing. 

Restaurants receive competitive processing rates with no add-on fees. In addition, these budget-conscious eateries won’t face cancellation fees if they must unexpectedly end their contracts.

5. Integration with current POS equipment

Maybe you have already invested in payment processing hardware. If so, determine if the new payment services provider can run its program on your current equipment. If not, see if the company will reprogram your payment terminals and/or card readers at no charge.

Some payment processors include credit card processing equipment as part of a promotional offer. If so, get the exact terms in writing so you aren’t surprised with a bill later.

6. Convenient customer service 

Restaurants frequently stay open far beyond normal daytime business hours. Let’s say the restaurant’s POS system malfunctions at 9 pm on a Sunday night. The cashier cannot ring up customers’ tickets, and the line is growing longer by the minute. In such situations, an accessible customer service and tech support team are worth their weight in gold.

Some of the best restaurant payment processing companies

Choosing the right payment processor can make a marked difference in a restaurant’s profitability. Restaurant owners should search for companies that provide diverse payment choices, multiple equipment options, and competitive rates. Customer agreement flexibility, operational transparency, and responsive customer service are also important.

1. Payment Depot

Payment Depot is a reputable payment processor suited to higher-volume restaurant businesses. This monthly membership-based model provides restaurants and bars with special discount rates. Clients pay no hidden fees or cancellation fees. Each client receives a free payment gateway and a virtual terminal.

However, Payment Depot’s services are limited only to US-based restaurant operations.

2. CDGcommerce

This payment processor offers lots of restaurant-focused technology plus a free virtual terminal and payment gateway. CDGcommerce maintains different pricing structures for low-, medium-, and high-volume eateries. Clients enjoy monthly billing with no early termination fees. 

However, this US-only modular system can get pricey. The CDGcommerce software does not integrate with many widely used restaurant POS programs.

3. Dharma Merchant Services 

This payment processor is suitable for high-volume restaurants and caterers. Dharma Merchant Services offers transparent interchange-plus pricing, discounted restaurant rates, and low monthly service fees. Restaurants processing more than $100,000 monthly will see reduced transaction fees.

However, restaurants processing under $10,000 per month will not see any cost savings. Also, clients requiring a payment gateway must pay setup and monthly access fees.

4. National Processing

National Processing uses favorable interchange-plus pricing, and clients enjoy super-low restaurant processing rates. Clients with an EMV-compliant terminal can have it reprogrammed for free. This reputable processor offers month-to-month membership billing.

Although National Processing offers free equipment, the restaurant owner may need to sign a long-term contract. Other software fees may apply. To waive the termination fee, the business may have to meet certain conditions.  

5. Square 

This third-party payment processor is ideal for smaller restaurants and food trucks. Square offers flat rate pricing and no monthly fees. Payment processing is easy via varied smart devices.

On the downside, processing costs are relatively high, and unusually large transactions can cause account holds. Also, net proceeds can take up to three days to be deposited into your bank account.

The best restaurant POS systems offering merchant services

Each foodservice business has specific POS system needs. These four restaurant-driven POS systems feature integrated restaurant merchant accounts.

1. Clover 

Clover’s restaurant-focused POS system has options for both quick service and full-service eateries. The company offers targeted hardware for limited-seating restaurants and large dining establishments.

The Clover POS system does have two downsides. First, it can only be operated through a Fiserv merchant account. In addition, some Clover resellers have engaged in shady business practices. Purchasing the system directly through the company, or an ethical reseller is the best option.

2. Lightspeed Restaurant

The Lightspeed Restaurant POS system’s features include an in-depth menu design and a simple interface. The “eCom For Restaurants” portal, impressive reporting functionality, and affordable monthly cost are other benefits.

Lightspeed Restaurant does have two downsides. Restaurant owners will lack some useful inventory management capabilities. In addition, the system requires a “moderate” learning curve that may prove to be challenging for some users.

3. TouchBistro 

This affordable, simple-to-use restaurant POS system caters to smaller food service operations, including food trucks. TouchBistro’s recent software enhancements make it suitable for larger restaurants. The app is available in both English and Spanish, and users have access to 24/7 customer support.

However, the basic TouchBistro package lacks several important functions, so software add-ons may be necessary. In addition, some users have reported substandard customer service.

4. Upserve 

This restaurant-specific POS system is designed to serve differently sized restaurant businesses. Chains with multiple locations will find enterprise-level features. Users enjoy extensive reporting capabilities, 24/7 support, and a growing number of positive customer reviews.

However, Upserve offers fewer software integrations compared to its competitors. In addition, the company has experienced periodic outage problems, causing disruptions to its customers’ operations.

Choosing the best restaurant credit card processing company

Because the restaurant industry is so diverse, restaurant owners should avoid a “one-size-fits-all” credit card processing solution. Payment Depot has become the choice of many small- and medium-sized restaurant businesses.

This highly reputable company offers membership-based pricing, transparent operations, and unparalleled customer service. Contact our award-winning support team today to understand how we can help you save hundreds of dollars in credit card processing every month. 

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