Although we’re not a paperless society yet, and it’s tempting to avoid paying high processing fees by only taking cash, it is really important that your business accept credit cards to stay competitive.

First of all, there’s the incremental revenue to be earned. Study after study has shown that consumers spend more money if they’re using non-currency, like credit cards. Visitors to the county fair have to buy food and ride coupons not only to cut down on pickpocketing, but also so people don’t realize that they’re paying $5 for a hot dog. Then, there’s the convenience factor. The two or three seconds that a credit card shaves off the transaction time can be the difference between a sale and no sale – between a satisfied customer and one who spent too long in line.

Finally, consider the cost of cash. If you have to hire an armored car service or constantly send employees on risky runs to the bank, it may be cheaper to pay the credit card processing fee.

So what should you be looking for in a credit card processing provider?


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First the POS, then the Processor

Well, the first and most important thing to stress is this: choose your point of sale system first. Find a point of sale system that meets your needs. As we’ve covered in the previous lessons, there are a huge range of benefits to a quality point of sale system, so you don’t want to just suffer the POS System that comes bundled with some sub-standard processing bundle. Find the POS first, then the processor.

Flexibility is Key

The flipside of this dynamic is that you need to choose a POS System that works with multiple credit card processors. The world of credit card processing is complicated and it’s easy to end up with the wrong deal. However this needn’t be the end of the world as long as you’ve chosen a POS System that integrates with multiple processors – and which lets you switch without any issues.

Upfront Fees

Walk away if the provider wants to charge installation or setup fees. These things are simply not industry standard.

Your Processing Rate is X.X% Unless…

The devil is always in the details. There are more than a few processors out there who will offer you an attractive headline rate only to then have a secret list of reasons why the rate doesn’t apply in certain situations.

Be alert for a few common terms, such as monthly minimums that require a certain volume in order to qualify for a discounted rate. Qualified cards is another frequent clause: the cheap rate only applies to a few credit or debit cards issued by a few financial institutions.


Though it may seem counterintuitive, don’t work with a processor who allows you to start processing right away. Reputable processors are backed by banks who perform an underwriting check on your business, which can often take up to two days. This check is done upfront for a reason. The App Store is littered with reviews of people who have been ‘wowed’ by the convenience of starting up quickly only to have their funds held for weeks if not months.

To avoid meeting a similar fate, make sure there’s a big bank involved, like Wells Fargo or Bank of America – and make sure you are properly evaluated before you start processing. It’s a short term pain, for a very real long term gain.

Getting the Best Rate

First, know the ground rules. Each card you swipe, from a Mastercard to a Walmart gift card, has a different wholesale price. The provider usually calls this price the “interchange rate.” Some companies are more transparent than others, so don’t hesitate to ask questions. Processing rates are sort of like insurance premiums: the company assesses your risk (or, in this case, estimates your sales volume and projected average ticket size) and charges a rate based on that assessment.

As a rule therefore, you should be careful when confronted with a one- size fits all, ‘flat rate’. By their very nature these deals are great for some merchants but suboptimal for most – that’s how the processor involved makes money. It’s nice to have a feeling of predictability, so these flat rates can be very seductive but that predictability comes at a very real cost for most serious small businesses.

As a rule of thumb, stick with interchange-plus providers. There’s an emphasis on transparency. Interchange-plus processors tell you their exact wholesale costs (i.e. the price they are paying to the card providers) and their margin, i.e. the ‘plus’, so you can perform a true apples-to-apples comparison when you’re looking at different plans.

Note: If you remember nothing else from this section, remember this: don’t accept setup fees or termination fees and make sure to work with a POS system that works with any credit card processor – that way if anything goes wrong, you’ll have the freedom to switch without penalty.

Paul Nugent

Paul Nugent

Paul Nugent is a small business advocate who uses his background in the startup space, along with his POS system expertise, to allow small business owners to make informed decisions within their specific budgets.