Most merchants don’t understand the relationship between their processor and their point of sale system, nor how their processor charges them.
Here are 5 things that many merchants don’t know about credit card processing.
‘Til Death Do Us Part? Think Again.
Congratulations, you’ve done your research and found a credit card processor with a great rate and great customer service. It offers all of the services and features you need. You love your rep. You’re sure you want to process cards this way for at least the next three years. Are you? Because that’s the length of the contract that your rep asks you to sign.
You may find yourself asking a few questions: What if prevailing credit card rates change in the next three years? What if the nature of my business changes (this is especially relevant if you’re starting a new business)? What if I’m dissatisfied with the level of service I get once I start processing?
If you don’t read any further in this post, here’s the point to leave with: you don’t need to sign a long-term contract for credit card processing! Long-term contracts primarily protect the processor’s and ISO’s (Independent Sales Organization) interests – not yours as the merchant. Look for a processor with a contract that you can cancel at any time, giving you maximum flexibility if things change
There’s a Reason They’re Called Teaser Rates
The amount that you pay as a merchant for a credit card transaction (the “discount rate”) is composed of fees charged by the card brands and networks (the “interchange rate” – this rate varies by the type of card, type of merchant, and type of transaction), a markup from your ISO or merchant services provider, and various other dues and fees. Visa and MasterCard publish pages and pages of tables periodically that break down their interchange rates in a transparent way. Most processors do not do the same for their markup.
So, if a processor offers you an attractive rate for processing cards, definitely read the fine print and ask questions like: Does the rate apply to “rewards” credit cards, and is the rate guaranteed forever? Try to detangle the processing rate web as much as possible.
Don’t feel like reading the fine print? We don’t blame you. An alternative and more merchant-friendly rate structure is called “cost plus,” where your discount rate is always the interchange rate charged by the card network plus some fixed percent. So, no matter what type of card or transaction it is, you know that you’re always paying a fixed amount on top of the network charge, so there’s no fine print reading necessary.
Whether or not you choose a cost-plus fee structure, be sure to pick a processor that will work with you to provide customized rates that are appropriate for your business.
Choice in POS and Choice in Processor – You Can Have Both
You don’t want to end up in a situation where you love your POS system but hate its processor choices. Similarly, you don’t want to fall in love with a processor that only is supported by lackluster point of sale options.
Instead, you should look for a processor that is supported by a broad range of POS systems, in case you ever decide to change your point of sale. At the same time, when shopping for a point of sale solution, make sure it has a variety of supported processor options, in case you ever decide to change your processor.
Choice and flexibility are generally good things. That definitely applies here!
Your Salesperson Isn’t Going to Take Your Support Calls
Your ISO salesperson may seem great, but it’s important to think ahead to your experience after you’ve signed on. Imagine that your batches all of a sudden won’t close, so your hard-earned revenue stops hitting your bank account. What are you going to do?
When you’re talking to your rep about what his or her processor offers, make sure the conversation goes beyond rates and contracts to include the support experience. Do they have 24x7x365 customer care that’s going to be available to assist you for a problematic sale on Christmas Eve? Or are you going to be sitting on hold for 30 minutes watching customers leave your store one by one before you can talk to an actual person? It may be best to bundle your processing with your POS software – that way you only have to call one company for support anytime.
Merchant support is an often overlooked component to credit card processing services; make sure you get the availability and responsiveness your business deserves.
A Final Word on Features
Credit card technology is evolving rapidly, and you don’t want to be left behind. Whether it’s support for Apple Pay, EMV Chip Cards, or tokenization, make sure that your processor enables all the credit card features you want from your point of sale system. Additionally, be sure to stay away from contracts because you don’t want to be stuck behind as payments technology evolves.