How to Choose the Best Merchant Services Company
The first question asked by a merchant is usually - what are your credit card processing rates? As a former e-commerce business owner, I can understand their concern. And while fees are a very important aspect of the decision-making process, there are other points that should be taken into consideration. Making sure that the payment processor is the correct fit for your company will usually take a little investigation and asking of questions to start but will pay off in the future.
Since the fees are primarily the main concern of business, let's start there. In the merchant services industry, there are 2 popular methods of charging customers - tiered or interchange-plus pricing. Historically, tiered pricing was the most commonly used program to set merchants up with. Though tiered pricing is still in use, it has been replaced by a more cost-effective method - interchange plus. Merchants can expect to pay about 2% to 2.5% per transaction plus about $0.10-$0.15 per swipe when using a reasonable interchange-plus pricing model.
Another fee that is common for most merchant accounts are the monthly statement fees. Merchant services companies generally charge between $8-$10 per month to manage the merchant account. With recent changes to security guidelines by the card associations, many merchants now pay a PCI Compliance fee. These fees can be charged monthly, quarterly or annually - but generally cost about $100/year. Fees might not be clearly listed on a statement so it is important to pay attention to all monthly fees and determine what each line item includes.
E-commerce merchants shopping for payment processing services should also be aware of the fees charged for the payment processor’s gateway services. Monthly gateway fees generally run $10-$25/month. Every merchant services company charges these fees differently in a different way. It's worth confirming that monthly fees are not costing more than about $25 for the gateway and merchant account combined.
There are other factors besides pricing that should be of importance when choosing a merchant services company. Having a credit card processor that can provide you the services to help you grow as a company can be very beneficial in the future. Merchants should consider checking to make sure that their processor can provide services or equipment, such as;
- Point of Sale systems
- Payment Gateway Services with a Virtual Terminal
- ACH and eCheck services
- Next Day Funding
The flexibility of the merchant account is also an important factor in determining the right payment processor. All merchants should make sure that their merchant services provider can offer the 4 major credit cards;
- American Express
- JCB (if desired to accept)
There are a number of factors besides budget that can determine the best credit card processing company for your business’ needs. Sometimes saving on the fees might not provide the best solution for a merchant. It is important to make sure that the payment processor can provide you the services and functionality needed to grow your business long term.