Choosing a payments processor can be an overwhelming task. Each provider has a unique set of fees and contracts, and it’s important to understand those nuances so you find the processor that’s a good match for your business needs.
It’s wise to take the time to do some comparison shopping before choosing one solution. After all, the right processor can make a pretty significant difference to your overall revenue.
Below, the top 10 questions to ask a potential payment processor before making the switch.
1. Are there different rates or fees associated with different types of cards?
Some services charge different fees to process different types of card transactions –– i.e personal, business, debit and rewards cards –– as well as for different transaction amounts. Make sure you know exactly what you’ll be paying to process each type of transaction.
2. Do you charge “billbacks,” or are all charges related to a transaction billed in the same month?
It’s not unusual for a payment processor to entice you by quoting low rates. The catch: that low rate only applies to certain types of cards and not others (see question one). You may only find out after the fact that many of your transactions during the month didn’t actually qualify for that low rate.
For example, in January, you think you’re getting a 1.7% rate on your credit card transactions, but you processed several rewards cards. Even though you processed the transactions in January, come February, your processor charges you back, or bills you back, a higher rate. Now, you have two different statements with two different rates for the same transaction, which makes it much harder to figure out the actual rate you’re paying.
3. What rates or fees do you charge when I swipe credit cards, enter them manually (key-enter) or accept them online?
Generally speaking, to compensate for the risk of fraud, processors charge different rates depending on how you process a payment. Because there is less fraud associated with a card you physically take possession of and swipe in a terminal (after all, you check IDs right?), there is usually a lower rate. If someone calls you to buy something and gives you their number over the phone, the chance of foul play goes up a bit, as does the processing fee. When someone purchases from you online, the incidence of fraud is the highest, so processors cover their risk by charging you a higher rate. Make sure you know what those rates are, and then figure out how much of each type of processing you’ll do to get a rough blended rate.
4. Do you charge a separate fee for your gateway?
It’s pretty common for processors to charge a separate fee for their payment gateway, usually on a per-transaction basis. So, in addition to the standard transaction fee –– say 2.9% + $0.30 –– you’ll pay a gateway fee on top of that for each transaction.
5. When I refund a transaction, do I get any of the original fees refunded to me?
When you process a return, most credit card processors keep all of the fees, and will most likely even charge an additional fee to process the refund. That means you can lose money every time a customer returns something. Be sure you are clear on how this process works. Many companies sidestep this by issuing store credit for a returned item, rather than a refund.
6. What are the contract terms and are there early termination fees?
Most credit card processors impose a contract term for a specific amount of time, like one or two years. Many times, early termination fees or cancellation fees are part of the agreement. That’ll make it difficult for you to switch processors if you’re unhappy with how your account is handled.
7. What fees do you charge each month?
This question is deceptively simple, since some processors might provide you with a seemingly low upfront monthly fee. But be sure to dig deeper: some additional fees might be hidden in the fine print. These can include fees for batch processing, fund transfers from a merchant account to your bank account, as well as statement fees. Processors might “waive” some of these fees to get your business, but could add them back in after a promotional period.
8. Is there a monthly minimum processing requirement or fee?
Some processors charge a monthly minimum fee, which you’ll pay if your monthly transaction volume is below a certain amount. This can be a big financial pain for businesses just getting up and running.
9. Is there a limit on how much I can process?
Many processors limit the amount you can process, based on your initial approval with them. Obviously, this can be frustrating if your business grows quickly or has a busy season — not to mention the impact it’ll have on your customer’s perception of your business.
10. What type of support is offered?
When your payments hit a snag, will the processor be there to support you until you’re back up and running? Further, an automated phone system isn’t the same as speaking to a live person, so make sure to ask if they have live customer support. Low rate processing fees don’t mean much if you can’t reach someone to help when you need it most.
Sorting through credit card processor options is indeed no small task, but knowing the right questions to ask is half the battle. The next step is to actually test out the provider. Likely, the winner will be one that both makes sense for your own bottom line and provides convenient transactions for everyone involved.
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