Credit Card Processing for Small Business | Shift Credit Card Processing



credit Card Processing for Small Business

Finding the right credit card processor is no easy feat and can easily become overwhelming. This can lead you to make a rash decision to choose the most popular one without considering that finding the right processor is individual and unique to your business. Choosing the wrong one can end up costing you a lot of money!

In this guide, we will go over some basics of credit card processing. We will discuss common pricing models and walk through the qualities that make the best credit card processors. We’ve got a handy checklist that you can use to help evaluate a credit card processor - so you can a truer sense of what you will be signing up for. You’ll also be able to view a comparison of some of the top credit card processors so you can get a feel for what is best for you.

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Let's Get You Started!

Understanding how Credit Card Processing can work for you!

The Complete Guide to Credit Card Processing is an in-depth explanation of how credit card processing works. This guide will help you evaluate and decide on the best merchant account without the false starts and missteps that others have fallen prey to in the past. Download your copy of the world's most-comprehensive guide on credit card processing.

5.1 How can a small business accept credit cards?

A small business can accept credit cards by first finding a processing company, which is a company that provides the service of processing your credit transactions. You can’t just get any old card reader off the internet, plug it in and hope that it works.

Once you’ve decided to accept credit cards, the next step is to find a credit card processor (or merchant account) for your small business. Some business owners will just go to their banks to process credit cards, but often that is the most expensive option! 

You’ll need to consider many different components to be able to accept credit cards. These include credit card fees (interchange & cost per swipe), contracts, other fees, equipment, software, and the processing company’s reputation for their customer service. There is no one-size-fits-all processor - which is why we’ve put together this guide on how to choose the best credit card processor for you.

Before you consider any merchant account, here are the top 5 things to consider:

  1. 1
    Never sign a long term contract
  2. 2
    Never lease equipment
  3. 3
    Transparent pricing structure & no hidden fees
  4. 4
    Excellent customer service
  5. 5
    Card Terminal should be compatible with many different POS Software

Before we dive into the details, let’s get a basic overview of how credit card processing fees are calculated and then build from there.

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5.2 ​How small business credit card processing fees are calculated

In your search for a merchant account provider (the company that will process your transactions), you’ll come across these two terms : interchange & processor mark-up.

  • Interchange is a combination of 2 fees:
  1. 1
    Fees from the issuing bank, like Chase, Capital One, Bank of America, Wells Fargo, etc.
  2. 2
    Fees from the card brands: Visa & Mastercard. Discover & American Express are their own bank and card brand.

Interchange fees are non-negotiable. Everyone will pay the interchange, but it the amount will vary by the brand of card and type of transaction.

  • Processor markup are the fees your merchant account provider charges in order to process your credit cards.  

It can include a certain percentage in mark-up, plus a small amount of cents that is charged every time the card is swiped. This fee is highly variable between processors.

How processors charge the business owner for interchange and their mark-up will vary. Regardless of their pricing model, there will always be interchange to pay.

  • Monthly fees: a monthly fee you pay regardless of how many sales you process
  • Transaction percentage fees:  a small percentage of your sale that you will pay to use the credit card.
  • Other fees include: minimum processing fee, batch fees, contract termination fees, etc. Check out this guide where we dive deep into the hidden & made-up fees of credit card processing.

Your equipment will also be an additional upfront cost (never lease a credit card reader). Equipment includes the credit card reader, printer, cash drawer, etc. and POS software which will enable you to actually make a transaction. Some companies may offer a free terminal and free point of sale software. If you decide to switch processors, make sure you know whether they expect you to return the reader to the processor or if they will make you pay for it.

Which pricing model should a small business choose to process credit cards?

There are several pricing models available to a business owner. There are those like Square and PayPal Here which offer one flat cost per transaction which encompass all their fees plus interchange. The flat fee pricing model accounts for all different types of cards and their specific interchange.

Other companies, like Dharma or Fatt Merchant, will charge a monthly subscription rate and then only charge you interchange plus a much smaller transaction fee.  This pricing model is called “interchange-plus.” These are generally a cheaper option if you process more than 10K a month.

There are also tiered-pricing models, but those are often more expensive. They are based on whether a transaction is “qualified” or not.

5.3 ​What is the cheapest way to accept credit cards?

There are also companies that offer a zero fee pricing model, like Shift Processing. This type will always be the lowest cost for the business owner. It means absolutely no fees for the business owner. 

This doesn’t mean that there are no fees at all, but what the zero-fee pricing structure does is pass the cost of purchasing with a credit card onto the consumer. How? There are 2 ways of doing this: a cash discount program and/or a surcharge program.

Both cash discount programs and surcharge programs are ways for merchants recoup the cost of accepting credit card payments. 

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By offering a discount to the consumer if they pay with cash, the choice then becomes the consumer’s on how they want to pay. The could pay with cash & save or still decide to pay with a credit card. Spoiler alert: most still pay with credit cards. 

A surcharge program is where a fee is added on top of the total when they decide to use a credit card to pay.  Click here for more detail on how both cash discount & surcharge work.

Regardless of the pricing model you choose, it’s important to calculate how much each swipe will actually cost you - the cost may seem to be a good deal at first glance, but the more you dig and add up fees, it may end up costing you more in the long run.

5.4 ​What makes the best credit card processing for small business?

The best credit card processing for small business will not be a clear cut answer. The best one for you will depend on your industry, your average ticket, your monthly volume of sales, and your other needs. 

A credit card processing company is first and foremost a business. Think about what makes a great business when making your decision - you are their customer. How do they make you feel like a # 1 customer?

The best credit card processing will have the lowest fees & transparent pricing with no contracts or hidden fees. They are even up front about the fees you might not think about or know to ask about. The equipment will be easy to set up. They will have a user friendly and reliable POS system, and will integrate with accounting software easily. They will have reliable, talk-with-a-real-person 24/7 customer support based in the US. 

The best will offer a dedicated account representative that will be your go-to person instead of playing the phone-tree run around. They will also offer in-store processing that can also easily expand into online orders & mobile processing. The best will have affordable equipment - never a lease - and equipment that can integrate to other POS systems should you need to change processors. The last thing you want to do is have to repurchase equipment and software.

How to choose the best credit card processing for your business?

Do your research! We’ve provided a checklist for you so you can have a starting point while you shop for a credit card processing company. You can print it off and use it to interview potential credit card processing companies.  Click here to jump to the checklist. 

The information you need to know to start is: what is my average ticket cost? What is my average monthly volume of sales? 

Although fees are a big part of the processing puzzle, there are other considerations to make  as well. Besides being competitive with processing fees, you should also consider the following when evaluating a credit card processor:

The best credit card proces​sor will have:

  • Lowest fees - or they can be negotiated
  • Up front about ALL fees - including the ones you don’t think to ask about
  • No pressure sales - be wary of high pressure sales, no one should make you feel pressured into using their service without due consideration
  • No contracts - stay far far away from any contracts, they do NOT have your best interest at heart. They also don’t have to work hard to keep you happy.
  • No early termination fee
  • Equipment is affordable can be purchased, bonus if it can used with other POS systemsUS Based Customer service
  • US Based Customer service
  • Dedicated account representative - someone who you always talk to regarding your business so solutions can be quick and efficient. You also build trust and rapport. Huge processors will be hard pressed to have this type of customer service.
  • 24/7 Support - and NOT just an online forum
  • In-store processing that can also expand into eCommerce & mobile: the last thing you want to do is have to redo all this research if you decide to expand your market. Make it easy on yourself and choose the one you KNOW can grow with you.
  • Great review history - do research on company reviews, and NOT just on the company website. They’ll only want you to see favorable reviews so you go with them. Do a quick google search of reviews and read through several. Decide if the common complaints are worth dealing with.

5.5 ​Evaluate a Merchant Account Checklist

Evaluate a Merchant Account Checklist

  • What type of pricing model do you use?
  • Do you have a monthly fee?
  • What is your processing rate?
  • What do you charge for interchange?
  • What do you charge for processor mark-up?
  • What do you charge for card not present (keyed in) or online transactions?
  • What makes a card qualified & unqualified? What are the specific charges for each type of card?
  • Will these rates ever increase?
  • Is there a monthly minimum I have to meet? What is the fee if I don’t meet that?
  • What other fees should I be expecting?
  • Batch fee
  • PCI Compliance fee
  • Statement fee
  • Annual fee
  • Monthly minimum fee
  • Early termination fee
  • Card network fee
  • AVS fee
  • Voice authorization fee
  • Retrieval request fee
  • Web login fees
  • Account maintenance fees
  • Under what conditions would you hold back funds from my account?
  • Contracts (Be very wary about signing a long term contract!)
  • What are the terms of the contract?
  • Is there an auto-renew clause?
  • What about early termination?
  • What will that cost me?
  • Equipment
  • What kind of equipment do you offer?
  • What does that cost? (Never lease equipment!)
  • Does that integrate with various Point of Sale software?
  • How easy is it to set up?
  • Who do I call if it doesn’t work?
  • If I decide to switch processors - what happens to the equipment?
  • Customer Service
  • Is your customer service US Based?
  • Will I have a designated account representative?
  • Can I talk to a live person 24/7?
  • Point of Sale Software
  • What Point of Sale software will I be using?
  • Can you add custom tips or sales tax?
  • Can it track my cash and check drawer too?
  • Can I manage inventory?
  • Who do I call if it doesn’t work or if I have problems?
  • How much does that cost per month?
  • Cash discounting?
  • Can I invoice payments?
  • Can it integrate easily with my accounting software?
  • Review history - look up reviews online from various sources to see what the general feel is for the company.

OK, now that you know what to look for in a credit card processing company, it’s time to see how the industry leaders compare. We’ve already done the research for you. 

In our next chapter, we compare the data from the top credit card processing companies so you can see the numbers for yourself!  

Chapter 1

How to Avoid Credit Card Processing Fees

Chapter 2

Online Credit Card Processing: No Storefront, No Problem, right?

Chapter 3

Accepting Mobile Credit Card Processing Payments on the Go

Chapter 4

High Risk Merchant Account: Can I accept domestic payments with no reserves?

Chapter 5

​Choosing the Credit Card Processing for Small Business That’s Right for You

Chapter 6

Credit Card Processing Companies: We Compare the Industry Leaders

Chapter 7

The Best Credit Card Processing: Find a Partner that will Lower Your Rates