Credit Card Processing Options for Business Owners
As it turns out, there are more than 115 different companies on the market that are willing to process your credit card transactions by clearing the transactions and then squaring things away with the card issuer and the card bank. However, after Reviews.com took a close look at each of them, it narrowed the playing field down to the five best for you to choose from.
These five companies--Payment Depot, Shopify Lite, Square, Paypal, and Dharma Merchant Services--were selected from the masses based on the following criteria:
1. Transparent pricing models
2. Ease of online AND offline transaction processing
3. Quality Customer Service
Why it Was so Difficult
The biggest problem with this industry is the lack of pricing transparency. In reality, most average business owners simply don't have the time to understand the pricing models of all of the different processors out there, and those who have the time will find it utterly difficult to find clear information for most of the companies on the market.
Basically, there are two main pricing methods at play: flat-rate and interchange pricing.
With flat-rate pricing, the payment is paid on a percentage + a few cents basis to the card processor itself. Usually, this would look like 2.9% + 30 cents per transaction, or something similar. Square, Shopify, and Paypal all operate on this payment method.
For the interchange method, processing fees for credit card transactions are based on a variety of different factors. Usually, each card company (i.e. Visa, MasterCard, Discover, etc.) charge their own fees, and then there is a fee for the type of card that is used by the consumer. On top of that, there is a fee based on the transaction type, as this is how card companies serve to pay cash-back to their users.
All of these fees are distributed to each party via the card processing company, who also takes a small percentage of each transaction. This method may seem more convoluted than flat rate processing, but it may actually be cheaper depending on the business that you run.
What You Need to Know
First, if you haven't already changed to a card terminal that accepts EMV chips, now is the time to do so. As of October 2015, merchants now assume the responsibility for any fraudulent charges made by swipe cards when an EMV-accepting terminal is not present. Otherwise, the card issuer is responsible.
Secondly, you should know that digital wallets are quickly gaining traction. According to market research, Apple Pay is the most highly used digital wallet by a long stretch, so it might be worth chipping up the extra cash to pay for a card terminal that can accept all transaction types, including digital wallets.
Finally, no matter what card processing company you go with, make sure that the fee pricing structure is utterly transparent, as the small losses that you can incur as a result turn into rather large amounts in the long run if you're being charged constantly by opaque, hidden fees.
Check out Reviews.com full research and guide on choosing the best credit card processor: http://www.reviews.com/credit-card-processors/.