Just starting out with your small business? Finding great credit card processing rates may seem impossible, but there’s hope. By following these simple tips, you’ll be able to secure credit card processing rates that make big businesses jealous.
- Not all credit card processing companies are created equal. To ensure that you’re able to take payments in a cost-effective way, be sure to carefully compare their fee structures, contract terms, and available features. Look for transparency in pricing, no hidden fees, and options that suit your specific business needs.
- Make it a point to choose the right pricing models. Prefer interchange-plus pricing over tiered models for transparency and control over costs; avoid leasing terminals by purchasing affordable ones outright.
- It’s best to avoid long-term contracts. Opt for flexible, month-to-month contracts without hidden fees for credit card processing to avoid being locked into unfavorable terms.
Here are Stax’ Top Credit Card Processing Tips.
In today’s world, knowing how credit card transactions work is super important for any business owner, given that card transactions make up the bulk of all payment transactions. No matter if you’re just starting out or you’ve been in business for a while, making your credit card system work better can really help your business grow—by saving you money, making your systems more efficient, or improving your customer experience.
Avoid Non-Mandatory Contracts
No one likes to be stuck in a contract, from cell phone contracts to credit card processing contracts. It’s common in the credit card processing industry to lock clients into multi-year contracts filled with hidden fees. Contracts are not mandatory, especially contracts with cancellation fees. Most processors will actually waive that fee if you tell them no, so don’t be afraid to speak up. If you can, find a company that doesn’t offer contracts—or offers rolling month-to-month contracts.
If you do opt for a contract, you should read the terms very carefully, looking for hidden fees, rate changes and other specifications that may end up costing you money.
It’s also worth asking ahead of time what the renegotiation process would look like. It’s not unusual for companies of any type to raise rates quite a bit when starting a new contract, and it’s best to be prepared for what to expect.
Be sure you know if there is a date you need to provide an opt-out by if you end up switching processors, as well. Some contracts will automatically renew (potentially at higher rates) if you pass a certain date without providing notice that you’re ending usage of the processor.
Find Affordable Terminals and Avoid Leases
Credit cards and EMV terminals are cheaper than you think. A good terminal can cost around $250 these days, so don’t try and lease one if you have the money to buy one upfront. If your processing company offers to include one in a contract, always make sure to read the fine print to see how much they’re charging you for it. It’s usually better to buy one yourself and get a cheaper rate.
Avoid Tiered Pricing
If you’ve had a business before, then you’re probably used to tiered pricing. It’s expensive and unneeded with its lack of transparency, so stay away from it at all costs.
Instead, go for interchange pricing. Interchange results in lower costs and doesn’t include any surcharges. Paying interchange rates instead of tiered rates is a common practice among big businesses and it’s the best option for you as it gives you the most control over costs of all the pricing types.
Always Know Where Your Money Goes
Before you start looking for a good credit card processing rate, you need to do your research. Learn where your money goes by looking up interchange and assessment fees. Interchange, as we mentioned earlier, is the best way to go when choosing a pricing option. They are a fixed credit card processing expense, and they’re the same for all processors. Here are the Mastercard and Visa interchange fees, for example.
Assessments are also a series of rates and fees charged by Visa and MasterCard, and they are the same across the board.
Just because you’re a small business doesn’t mean processing companies can treat you like one. Credit card processing rates are the same for all businesses, big or small, so don’t let them make you feel insignificant as a small business starting out. The bigger you think, the smaller your rates.
Secure your transactions
Ensuring your customers’ transactions are secure isn’t just in the customers’ best interests. It’s in yours too.
Secure transactions ensure you can maintain a trustworthy reputation with past and future customers, as well as reducing the financial losses that come from the fines and legal fees associated with compromising customer data.
One of the most famous data breaches happened to Target in 2013. They were required to pay an $18M settlement, but losses are estimated to top $200M. A large part of that was simply lost customer revenue. Their earnings dropped 46% afterwards because people were afraid to shop there. It was a potent example for everyone of just how important your company’s reputation for security is with your customers.
Optimize your credit card processing speeds
Slow transactions are, at best, an annoyance to customers, and at worst, result in lost sales, especially online. In order to improve processing speeds, you should make sure your POS equipment is up-to-date and that your internet connection is both stable and fast. Part of this includes performing regular maintenance on your hardware- and software, and ensuring that your settings are configured for reduced friction.
For instance, you should reduce the amount of prompts that an employee or customer might have to click through in order to actually proceed with payment.
Use Address Verification Services (AVS)
AVS is a fraud prevention measure for online and card-not-present transactions. It’ll compare the billing address provided in the transaction to the billing address on file with the card issuer. The service can determine if the addresses are a perfect match, partial match, or not a match at all.
AVS does not prevent all types of fraud, but it’s a good way to detect suspicious transactions. Generally, you’ll implement AVS directly through your credit card processor, and you’ll need to monitor its effectiveness over time to improve the system.
Train Your Staff To Handle Data Securely
For in-person transactions, it’s crucial your staff is able to take payments in an efficient and trustworthy manner. Customers need to feel that their data is secure and that transactions don’t take any longer than necessary. Furthermore, your staff is likely the weakest point in your security due to the factor of human error – among other things. Providing your staff with education on how to handle customer data can help prevent data breaches that even a well-intended employee might cause.
There are a few key areas to provide training on:
- Recognizing what potential risks may look like (such as common phishing tactics).
- The physical measures required to keep customer data protected, such as locking devices or safely stowing and securing any actual paperwork with customer data.
- Require employees to create strong passwords for any systems they access (this includes implementing two-factor authentication wherever possible).
Leverage Your Data
Your credit card processing solution will ultimately gather a lot of unique data on customer behavior and preferences. Analyzing this data in the reports your processor provides can help tailor marketing efforts and improve overall business strategies. The data gathered by a credit card processor is particularly handy in identifying trends and patterns – and therefore forecasting what business will likely look like during a certain time period.
At this point, most businesses do use systems other than the credit card processor as their central operating system (think an ERP or eCommerce site host). Because of that it’s crucial to ensure that any credit card processor you choose can integrate their data with your preferred central system. Otherwise, you’ll be unable to compare data in real time – and all data comparisons will result in a headache of manual effort.
Many of our tips apply to how Stax works, with no contracts, surcharges, and optimized terminals that pair perfectly with our subscription pricing plans.
FAQs about Credit Card Processing For Small Business
Q: What is credit card processing for small business?
Credit card processing for small businesses involves enabling these businesses to accept payments through credit cards. This process requires a merchant account, which is a special type of bank account that allows businesses to receive payments in multiple forms, including credit and debit cards.
Q: What are credit card processing fees for small businesses?
Credit card processing fees for small businesses are various charges that businesses incur to accept credit card payments. These fees are typically a combination of percentage-based and flat fees and can vary based on the credit card processor, the type of card used (credit or debit), and whether the card is present during the transaction.
The main types of fees include interchange fees (paid to the card-issuing bank), assessment fees (paid to the credit card network like Visa or MasterCard), and the payment processor’s markup.
Q: How do I accept a credit card payment for a small business?
To accept credit card payments for a small business, you first need to set up a merchant account with a bank or an independent payment processor. After this, you choose the appropriate hardware and software for processing transactions. This could be a traditional credit card terminal, a point-of-sale (POS) system, or a mobile card reader that works with smartphones or tablets. You also need to ensure you have a payment gateway if you’re accepting online payments.
Q: What’s the cheapest way to take card payments?
The cheapest way to take card payments often depends on the volume and nature of your transactions. That said, comparing different providers and negotiating for better rates can also help you in finding the most affordable solution.
It’s also important to choose a payment processor that offers a merchant-friendly pricing structure. As mentioned earlier, tiered pricing is NOT the best option because it often lacks transparency and can be more expensive in the long run. In tiered pricing, transactions are categorized into different tiers (qualified, mid-qualified, non-qualified) based on various criteria, and each tier has its own fee. This model can be confusing and unpredictable, making it hard for businesses to forecast expenses.
Instead, opt for a transparent and cost-effective pricing method such as interchange-plus or subscription.
Q: How can I start taking credit cards for my business?
First, choose a credit card processing service that aligns with your business needs. Once approved, you will need to acquire the necessary hardware (like credit card terminals or mobile card readers) and software for processing transactions. If you’re planning to accept online payments, setting up a payment gateway is essential. Finally, ensure your system is compliant with industry security standards (PCI DSS) to protect your customers’ card information.