Five Tips For Not Getting Ripped Off By A Credit Card Processor

This is a Guest Post from Stella Fayman who knows her stuff on an area I’ve recently had frustrations with – credit card processors. I think you’ll find her tips very valuable.

Image from MBDA Minority Biz Blog

If you have your own business, you most likely have gone through the annoying and frustrating process of choosing a credit card processor (also called a merchant account provider) in order to accept credit cards.

Since there is not a lot of information out there on how to choose a processor, a lot of business owners get ripped off with tricky rates, confusing salespeople, and contracts that are impossible to understand.

Here are some tips to help guide you in your search:

1)   No cancellation fees allowed

Make sure to read the fine print from your credit card processing contract. You may be surprised to find a cancellation fee from at least $250 to several thousand dollars.  This fee is a way of guaranteeing your loyalty to the processor, regardless of your satisfaction with their service.

The good news is that getting rid of this fee should not be a problem: most salespeople have the authority to waive it. To avoid this problem, talk to the salesperson and make sure the fee is waived in writing either in the contract or as an amendment.

For a beginning business, making sure to have the no cancellation fee clause is a great hedge in case anything goes wrong.

2)    Only interchange plus pricing

The bulk of the processing fee goes to Visa and Mastercard—this fee is called “interchange” and is set in stone. Interchange-plus pricing is the fairest form of pricing structure for your business, meaning that you pay the interchange fee plus a constant markup which goes to theprocessor as a service charge. Having this structure ensures there are no tricky fees or hidden costs, unlike tiered pricing structures.

3)    Comparison shop

Research shows that the best deal can be found by comparison shopping for credit card processors–at least five. However, make sure to compare on an apples-to-apples basis, and be sure each processor knows that you are actively shopping. You can easily make your bids more competitive by leveraging the power of comparison.

4) What about PayPal?

If you’re in ecommerce, PayPal seems to be the no brainer chose for a processor.  It’s an ok choice in the beginning when credit card revenues are low and your service is growing.

However, as revenue gets in the thousands it’s time to reevaluate since PayPal may be taking more of a cut for their service than a traditional merchant account provider.

5) Don’t Rent of Lease Equipment

For the most part credit card processing equipment is quite cheap now.  Those little black terminals that you see in small retail stores usually cost $100 – $300 and a full-fledged POS system is a little more than a desktop computer, less than $2000.

If you own your own equipment there is less chance for processors to sneak in extra profit by padding your lease payments and it also makes it easier to switch if something goes wrong in the relationship.

Bio: Stella Fayman blogs about credit card processing at the Fee Fighters.  Just like getting multiple quotes for airfare using Expedia, TransFS lets business owners compare top quality processors on an apples-to-apples basis and makes sure they get the best deal by not having any cancellation or hidden fees, and only interchange plus pricing. Feel free to email Stella with specific questions at stella@feefighters.com

This is by no means a paid advertisement! I think this is just very handy for business owners to know about.

If you have 30 seconds to spare I’d appreciate your vote on my one click poll in my previous article on what solutions you’d like to see from WomanzWorld to help you and your business

  • http://www.virtualvisionsinternational.com Teresa Andre

    I was wondering if you have heard of a company called eps 90 their website is http://www.eps90.net is this company reputable for merchant services or are their rates to high for a Entrepreneurs to make a successful living selling? They are on Career Builder and they have a option to sell this merchant service to prospective customers on a 1099 basis. It seemed to me they have higher prices than the other companies but they do not make companies run a credit check before receiving the services.

    Teresa
    myvirtualvisions@yahoo.com

  • http://www.transfs.com Stella

    Hi Teresa,

    This doesn’t look like a payment processor but more of a money lending service.

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  • http://www.merchant-service-reports.com/ D. Whitely

    You are spot on about interchange plus rpicing. Merchant need to empower themselves with information. After reading Womanz World daily, visit merchant Service Reports and News. We do not endorse or promote any providers.

  • http://megamllc.com Guy Renkovksi

    Check out Mega M. processing. We are an ISO and can set up with processing and any equipment that you may need at a very fair interchange plus price. Give us a call at 347-444-4444, and ask for Guy Renko, I will be happy to help you sign up.

  • Christopher

    Your spot on but this doesnt really address some of the key reasons you could be paying to much. My processor was able to save me a considerable amount by simply changing the way I submit my transactions. They have a article called “7 Costly Ways Your Credit Card Processor Is Ripping You Off”

  • Christopher

    Your spot on but this doesnt really address some of the key reasons you could be paying to much. My processor was able to save me a considerable amount by simply changing the way I submit my transactions. They have a article called “7 Costly Ways Your Credit Card Processor Is Ripping You Off” on their website http://metromerchantservices.com/

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  • dylan.mazeika

    Great post Natalie! Really helpful article, I know this is an old article but I’m currently going through the process of setting up a merchant account for my small business. I have read a lot about the “interchange-plus” that Stella wrote about. I was wondering if you had any information, or if you knew what went into trying to get the interchange-plus pricing instead of the tiered rate. I got a few quotes from <a href=http://www.businesscreditcardprocessingonline.com/index.html>card processing services</a> but I just want to make sure I go with the right company.

  • dylan.mazeika

    Great post Natalie! Really helpful article, I know this is an old article but I’m currently going through the process of setting up a merchant account for my small business. I have read a lot about the “interchange-plus” that Stella wrote about. I was wondering if you had any information, or if you knew what went into trying to get the interchange-plus pricing instead of the tiered rate. I got a few quotes from <a href=http://www.businesscreditcardprocessingonline.com/index.html>card processing services</a> but I just want to make sure I go with the right company.

  • dylan.mazeika

    Great post Natalie! Really helpful article, I know this is an old article but I’m currently going through the process of setting up a merchant account for my small business. I have read a lot about the “interchange-plus” that Stella wrote about. I was wondering if you had any information, or if you knew what went into trying to get the interchange-plus pricing instead of the tiered rate. I got a few quotes from http://www.businesscreditcardprocessingonline.com/index.html but I just want to make sure I go with the right company.

  • dylan.mazeika

    Great post Natalie! Really helpful article, I know this is an old article but I’m currently going through the process of setting up a merchant account for my small business. I have read a lot about the “interchange-plus” that Stella wrote about. I was wondering if you had any information, or if you knew what went into trying to get the interchange-plus pricing instead of the tiered rate. I got a few quotes from http://www.businesscreditcardprocessingonline.com/index.html but I just want to make sure I go with the right company.

  • http://www.the-merchant-account-advisor.com Col Albert

    One place you can comparison shop, as the author advised, is The Merchant Account Advisor’s website. They have a selection of card processing services to compare as to their fees, etc. And yes, making sure there is no early termination fee is very important, especially for new businesses that may never get off the ground. You don’t want to be stuck with paying monthly fees for months or years after your business closes.

  • http://www.payscout.com/ merchantscout

    Hi very well you compose this article it really help people to know people what is Virtual Card Services & Methods of Accepting Payments.