Although credit cards have been around since the 1950s, in recent years, they’ve started to dethrone cash from its position as king of payment methods. With a whopping 84% of American adults owning at least one credit card (the average is 3 credit card accounts per person), card payments reached $9.43 trillion in 2021. In fact, that’s the fastest growth rate for card payments…ever.
As a small business owner, it’s important to accept different payment methods like cash, credit card, and contactless or NFC mobile payments to ensure an easy shopping experience for your customers. But to do most of that, you need to have a credit card processor.
Since we’ve spoken a lot about credit card processing before, today we’ll take a look at how to find the best credit card processor for your SMB. Since the big players in the landscape generally all offer a robust set of services, data shows that most SMBs are satisfied with their payment processors and aren’t likely to switch. However, for lower transaction fees, over half of SMBs would be willing to switch to another provider—which means finding the best credit card processing rates is an important criteria to factor in. If you have no idea where to start with evaluating potential payment processing solutions, fret no more. Here are the top factors you need to look for when finding a credit card processor, as well as our ranking of the top players in the industry.
TL;DR
- To understand what the best credit card processing rates for small businesses are, it is important to know what options you have, what’s included in the rate, and what’s negotiable. In order to ensure you have the best credit card processing rates possible for your merchant account, avoid providers who charge percentage markups and ensure that you always understand what fees to expect from your provider.
- Other factors you should take into account are integration with existing systems, security and fraud protection, customer support, and ease of use.
- When looking for a credit card processor, assess your business needs upfront: decide on your non-negotiables and must-haves, then work from there and look for providers that offer features that match your needs and goals.
Fees and Pricing Structure
You’ve most likely agonized over your credit card processing rates and wondered whether or not you have the best ones possible. With the majority of processors relying on negotiations and tacking on hidden costs like exorbitant setup fees, dishonest monthly subscription fees, or unfavorable long-term contracts, it can be hard to know what the best rates really are. To understand what the best credit card processing rates for small businesses are, it is important to know what options you have, what’s included in the rate, and what’s negotiable.
Knowing your processing rate
Want to know if your rate is “good” or not? You first need to determine what exactly is included in the rate you are looking at. The most common fees you’ll see are percentage markup rates and effective rates.
Percentage markup rates
Percentage markup rates are the rates a payment processing provider charges in addition to interchange. These rates can vary from 0% to 3%; therefore when looking at a percentage markup rate, you want to be as close to 0% as possible. Stax, for example, charges 0% markups on top of interchange, giving you the lowest percentage per transaction rate. However, the percentage markup rate does not give you a full picture of your processing costs.
Effective rates
The effective rate is what you want to look at to truly understand how much you are paying for your credit card processing. The effective rate is calculated by adding up every cost related to processing credit cards, divided by total sales.
These processing costs include interchange, percentage markups, ancillary fees, transaction costs, etc. Thus, the effective rate is the best indicator of whether or not you are paying too much for your payment processing.
Understanding interchange rates
The one part of your effective rate that you can not negotiate or change by switching providers is interchange. Interchange rates are set by the credit card companies themselves and are the same for every single business owner. You can think of interchange rates as your base rate. Everything on top of the interchange will increase your effective rate and vary depending on the provider.
For example, Stax charges a flat monthly membership in exchange for a 0% markup rate, a transaction cost of just a few cents, and no ancillary fees. Since the only processing costs other than interchange are flat (the monthly membership and a few cents per transaction), effective rates with Stax are close to interchange and tend to decrease as transactional volume decreases.
Traditional providers who charge percentage markups and ancillary fees will have higher effective rates and those rates will stay the same or increase as transactional volume increases, ultimately costing your business more money.
Getting the best credit card processing rates
To ensure you have the best credit card processing rates for your merchant account, avoid providers who charge tiered percentage markups and ensure that you always understand what fees to expect from your provider. Asking questions and paying attention to your credit card processing statement will help you never be surprised by an increase in your effective rate.
With Stax’ all-in-one, reliable platform there are no hidden fees: our goal is to ensure that you’re spending less when you need to process payments and putting more money back into your business’s bottom line, to help guarantee maximum satisfaction from our customers.
Security and Fraud Protection
Fraud is rampant in the SMB sector for both brick-and-mortar or eCommerce companies. Whether it’s phishing, fraudulent chargebacks, or account breaches, your credit card processor needs to be properly secured to minimize the risk of security breaches for in-person transactions and online payments. That’s why you need to work with a payment provider that implements secure payment systems and a trustworthy payment gateway.
With Stax, we’re proud to ensure PCI compliance, which means we meet the Payment Card Industry Data Security Standards, created by card associations like Visa, Mastercard, and American Express to ensure sensitive payment data is securely processed, transmitted, and stored. In other words, you can rest easy knowing that we’ve prioritized the security of the cardholder and bank account data of you and your customers.
Integration with Existing Systems
While there will always be a learning curve when you work with a new payment processor, you want it to complement your way of working, not completely upend your small business. A good provider will have the functionality to allow you to easily connect their payment processing solution to popular applications or add-ons to speed up your workflow.
If they don’t offer ready-for-use integrations, ask if they at least allow access to their API so you can create web hooks to send the data to other online business tools or vice versa—but this does require having the technical expertise in your company, so this shouldn’t be the first option!
Customer Support and Service Quality
A top-notch payment processor will go above and beyond to provide a great working relationship with their customers, and excellent customer support is at the heart of that. That means short communication lines so it’s easy to get in touch with a real person, quick turnaround times, and an understanding customer success team.
When looking for a credit card processor, ask them what channels they can be contacted on and if they’re available 24/7. Then, look into reviews regarding their turnaround time on support requests. Remember, if it takes a few business days to resolve an issue with invoicing or processing your credit card transactions, not only could you lose out on valuable revenue, you could damage your customers’ trust in your business.
Accessibility and Ease of Use
This hopefully goes without saying, but the best credit card processing company is one that offers an intuitive solution. With proper customer onboarding, you should feel empowered and confident to use the different tools your solutions provider offers, like the POS system, credit card reader, virtual terminal, and any other unique features. To determine this, ask what sort of support resources are offered, what onboarding looks like, and if you can chat with an expert by phone, email, or live chat if you need additional information to get set up for success.
The Best Credit Card Processors for Small Businesses
Stax
Throughout this article, we’ve already touched on a lot of the features our all-in-one payment processor offers, but here’s a quick summary: Stax offers secure in-person and online payment processing designed to not only run, but grow your business. With transparent membership-style pricing; Level 1 PCI Compliance; and the ability to take all major forms of payments and online transactions, Stax has been consistently ranked as the (one of the) best credit card processing solutions for small businesses. Plus, we support card-not-present (CNP) transactions, offer no cancellation fees, and provide additional services like next-day funding and ACH processing if you want to get paid faster.
If you’re not sure if Stax is a great fit, our team will analyze your existing statements to give you free advice on if you should make the jump or not!
Payment Depot by Stax
Did you know we also offer an alternative to Stax Pay that takes on a interchange plus approach to credit card processing fees, which means that Payment Depot by Stax passes these rates on to its members, which lets startups and SMBs benefit from low interchange plus pricing.
Beyond that, you get the same Stax benefits like no long-term contracts or hidden fees, and PCI compliance. This is a good option for low-volume businesses. If you’re a high-risk merchant, this may also not be the right fit.
Choosing the Right Payment Processor for Your Business
While we’ve already looked at some tips on picking the right processor if looking at specific factors, there are a few other things you should keep in mind on a broader level while on the quest for the best payments solution for your small business.
Most importantly, you need to assess your business needs upfront: do you value a provider that offers its own hardware? One that provides invoicing features? Decide on your non-negotiables and must-haves, then work from there and look for providers that offer features that match your needs and goals. Of course, take pricing and credit card processing rates into consideration! Finally, think long-term. If your business scales, will your potential provider be able to support your growth? Armed with these questions, you should be able to make the right decision for the future growth of your business.
Stax’ all-in-one payment processing platform helps small businesses save on credit card processing. Discover how to run your entire business on Stax by contacting us today.
Quick FAQs about Credit Card Processor
Q: What is a credit card processor and why is it important for a small business?
A credit card processor is a tool that allows businesses to accept different payment methods like cash, credit cards, and contactless or NFC mobile payments. It is important for small businesses to ensure an easy shopping experience for their customers.
Q: What are the key factors to consider when finding the best credit card processor for my SMB?
Key factors include the credit card processing rates, integration with existing systems, security and fraud protection, customer support, and ease of use.
Q: What are the best credit card processing rates for small businesses?
The best rates are those that are transparent, with no hidden fees or percentage markups. It’s also important to understand the fees to expect from your provider and what’s included in the rate.
Q: What is the difference between percentage markup rates and effective rates?
Percentage markup rates are the additional charges a payment processing provider adds to interchange. The effective rate includes every cost related to processing credit cards, giving a true picture of your processing costs.
Q: What is interchange and how does it affect my credit card processing rate?
Interchange rates are set by the credit card companies themselves and act as the base rate for processing. These rates cannot be negotiated or changed by switching providers.
Q: How can I ensure I have the best credit card processing rates for my merchant account?
To get the best rates, avoid providers who charge tiered percentage markups and ensure that you always understand what fees to expect from your provider.
Q: What security measures should a credit card processor have to protect against fraud?
Credit card processors should ensure PCI compliance, which means meeting the Payment Card Industry Data Security Standards to securely process, transmit, and store sensitive payment data.
Q: What should I look for in customer support from a credit card processor?
A good processor will provide short communication lines for easy contact, quick turnaround times, and a responsive customer success team. They should be available 24/7 and have positive reviews regarding their support response.
Q: What are the top credit card processors for small businesses?
Some of the top processors include Stax, which offers secure in-person and online payment membership-style processing, and Payment Depot by Stax, which takes a interchange plus approach to credit card processing fees.
Q: How can Stax help my small business with credit card processing?
Stax offers secure payment processing, transparent pricing, PCI Compliance, and the ability to take all major forms of payments and online transactions. It also supports card-not-present transactions, offers no cancellation fees, and provides additional services like next-day funding and ACH processing.
Q: How do I choose the right payment processor for my business?
To choose the right processor, assess your business needs upfront, decide on your non-negotiables and must-haves, consider pricing and processing rates, and think about the long-term ability of the provider to support your business growth.
Q: What is the role of integration with existing systems in credit card processing?
Integration with existing systems allows a smooth transition and compatibility with your business operations. A good provider will have the functionality to connect their payment processing solution to popular applications or add-ons to speed up your workflow.
Q: What are the hidden costs that can come with credit card processing rates?
Hidden costs can include setup fees, monthly subscription fees, or unfavorable long-term contracts. It’s important to thoroughly understand the rate structure to avoid these.
Q: Why is ease of use important in a credit card processing solution?
Ease of use ensures that you can confidently use the different tools your solutions provider offers, like the POS system, credit card reader, virtual terminal, and any other unique features. This contributes to operational efficiency and customer satisfaction.
Q: How does Stax compare to other credit card processors in the market?
Stax is recognized for its secure payment processing, flat-rate transparent pricing, and PCI Compliance. It also supports all major forms of payments and online transactions, making it a preferred choice for many businesses.
