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What is a Credit Card Processing Company?
What is a Credit Card Processing Company?
November 14, 2022 / www.toppaymentprocessing.com staff
What is a Credit Card Processing Company?
November 14, 2022 / www.toppaymentprocessing.com staff

What is a Credit Card Processing Company?

Credit card processing companies (also known as merchant services companies, merchant accounts providers, credit card processors, payment processors, or online payment services) are companies that allow you to accept credit card payments. Your credit card processor acts as an intermediary between your business and your customer’s credit card/debit card provider, making this the quickest and best way to take credit card payments.

Here’s how the best merchant service providers help you realize your goal of accepting credit card payments:

  • The customer swipes their credit/debit card or enters their card information to make a purchase from your business.
  • Your point-of-sale software sends the data to your credit card processor.
  • The credit card processor contacts your customer’s credit/debit card provider to confirm the customer has enough credit for the transaction.
  • The credit/debit card provider checks with the customer’s bank to confirm the transaction.
  • The credit card processor confirms the transaction and issues you a receipt to give to the customer.

The best merchant service company can make this happen in the blink of an eye. Modern technology, eh?!

What are Merchant Services Companies?

Not all credit card processors offer merchant services, but all merchant services companies offer credit card processing. The top merchant services companies offer a range of services to merchants (businesses), including: credit card processing, business financing, gift card programs, loyalty programs, and website design. The terms ‘merchant services provider’ and ‘credit card processor’ are used interchangeably, but it’s important to remember that credit card processing is only one of many services offered by the best online merchant services providers.

If you’re the sort of business owner who enjoys the convenience of a one-stop shop, then the best payment processor for you may be one also that offers a variety of merchant services. But if your main goal is to accept credit card payments, then you can freely choose from the best credit card companies without having to worry about whether they offer additional services.

Top 3 Credit Card Processors

Merchant Credit Card Fees

Typical online payment systems for small business involve many different types of rates and fees. As a result, it can be difficult to run an accurate credit card merchant fees comparison.

The most important fee to know about is the interchange fee – the fee you pay for each transaction. Depending on your merchant accounts provider, you could be subject to any number of other fees and charges. According to Square, one of the best online payment services, the average cost of processing payments for an American business earning $10,000 to $250,000 in annual payments volume is between 2.87% to 4.35% per transaction.

Some of the best merchant services for small business charge the interchange/transaction fee and little else, while others charge dozens of fees. There is no right or wrong. However, one thing is for sure: the best online merchant services have transparent fees and charges. When you compare merchant services, always read the fine print to be sure you know what you’re being charged. Obviously, the fee structure needs to suit your sales volume; the best payment solutions for small business aren’t necessarily the same as for a large business.

Here are the main types of fees and rates to know about:

Interchange fees

Interchange is a wholesale fee that accounts for most of the cost of accepting credit card payments. Technically speaking, each card provider (e.g. Mastercard, Visa) sets its own interchange fees. However, many credit card merchant companies charge the same interchange fee regardless of card provider, making it a lot easier for you to know what you’re paying. An interchange fee comprises two parts: a percentage of the transaction amount plus a flat fee, e.g. 2.5% + $0.10 per transaction. Additional fees apply for foreign currency transactions.

Monthly fee

Some, but not all, merchant services companies charge a flat monthly fee for using their services.

Assessment fees

Some credit card merchant services charge a percentage of your estimated monthly sales volume, e.g., 0.1% of sales up to 1,000 sales, then 0.11% of the next 1,000 sales, etc.

Terminal fees

To begin accepting credit card payments, you need a physical terminal like a countertop register or mobile EMV. Most merchant services companies double up as credit card machine companies, offering to sell or lease equipment to your business. If you’re intent on buying the best credit card machine for your small business, then separate costs will apply. However, many of the top merchant services providers offer smaller equipment (such as mobile card readers) for free.

Monthly minimum fee

If you don’t reach the minimum amount of annual transactions agreed to in your contract, your merchant accounts provider may charge you an additional fee.

Additional fees

Even among the top 10 merchant services, companies, you may find additional fees such as these:

  • PCI non-compliance: For failing to comply with credit card industry data-protection standards
  • Termination fee: For leaving a contract early
  • Statement fee: For receiving invoices and statements by mail
  • 1099-K fee: For reporting transactions to the IRS
  • ACH fees: For receiving large volumes of transactions in batches
  • Chargebacks: A chargeback is when a credit card provider refunds your customer for a disputed or fraudulent transaction.

Accepting Ecommerce Payments: Finding the Best Online Payment System

Online payments are an important source of income for many businesses. Therefore, the best credit card payment system for small businesses is one that easily integrates online payments. Ecommerce payments are enabled by what is known as a payment gateway or virtual terminal. The best online payment services securely encrypt the customer’s data and send it to the payment processor. At the back end, the process works the same as with physical credit or debit card transactions, all the way up to the issuing of a receipt to the customer.

Here are things to consider when looking for the best payment gateway:

  • Security. Not only must your payment gateway be secure, but customers must also feel that it is secure. The best online payment system lets you show off security credentials at the checkout (such as a ‘Guaranteed Safe Checkout’ sign with logos of accepted payment types). Additionally, all the top payment gateway providers have APIs that let your customers pay you securely without ever leaving your website.
  • Choice of payment methods. People have a diverse range of preferences when it comes to payment methods. The best online payment services let you offer your customers the full range of methods, including Visa, Mastercard, American Express, PayPal, and Apple Pay.
  • Cost. Running an online store should be cheaper than having a physical store, and that includes being able to pay the cheapest online payment gateway fees. As always, read the fine print and make sure the fee structure suits you – the best payment gateway for small business isn’t necessarily the same as for larger companies.
  • Compatibility. When you set up an e-commerce store, you need a payment gateway that is easy to integrate into your website and is compatible with your brand. At a minimum, the best online payment gateway must integrate with top ecommerce website builders like Wix, BigCommerce, and WooCommerce.

Getting Approved for Accept Credit Card Payments

Getting approved to begin accepting credit card payments is straightforward. As long as you can show you’re a legitimate, lawful business, you shouldn’t have too much trouble opening an account with the best card merchant services providers. Charges generally depend on how much you earn each month or year. If you fail to make the amount agreed upon with the processing company, then you may be subject to additional fees.

The one group that can have trouble getting approved by the best merchant account services companies are ‘high-risk’ merchants: businesses that typically have lots of chargebacks or that do business in multiple currencies.

High-risk businesses include:

  • Online gambling or casinos
  • Advance bookings in travel and tourism
  • Magazine or other subscription-based businesses
  • Online dating services
  • Debt collection
  • Vitamins and supplements
  • E-commerce

If you fall into this category, then what you need is a credit card processor or merchant services provider that caters to high-risk businesses.

How to Do a Merchant Services Comparison

Every business has different sales volumes and different needs, so it’s fair to say no two merchant services companies are ever the same. If you run a small business, then you should only be searching for the best merchant services for small businesses. What is the best merchant account for small business? One that charges low setup fees and doesn’t tie you into contracts with unrealistic monthly sales commitments.

Here are some things to compare when searching for best small business merchant services providers:

  • Experience serving your industry
  • Ability to service all your transaction needs, e.g. bricks-and-mortar, remote, online
  • Straightforward fees, with no risk of hidden charges
  • Minimum monthly transactions that you can uphold
  • Preferably no contracts or setup fees (unless these things don’t bother you)

By www.toppaymentprocessing.com staff
www.toppaymentprocessing.com staff is comprised of freelance writers who write for the site