• 2016

    Credit Card Processing Reviews

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    Credit Card Processing Review

    Choose the Best Credit Card Processor

    The top performers in our review are Payment Depot, the Gold Award winner; Helcim, the Silver Award winner; and Payline Data, the Bronze Award winner. Here’s more on choosing a credit card processor that meets your small business's needs, along with detail on how we arrived at our ranking of services.

    Credit card processing is the intricate sequence of data routing that occurs when you accept a customer's credit card in exchange for goods or services. During each transaction, your customer's credit card information passes through a secure connection to the processor, the credit card network, the bank that issued your customer's credit card and your business bank account. At the end of the process, the customer's credit card is debited for the amount of the transaction and the funds are deposited into your business bank account.

    Despite its complexity, credit card processing is a necessity for nearly every business since the majority of your customers expect you to accept credit cards as readily as you accept cash. While credit cards are extremely convenient for your customers to use, they can be a potential source of frustration and expense for you, which is why it's so important to choose the processor that can provide your small business with seamless service at the best possible price.

    This article presents our conclusions based on the extensive research we conducted to help you understand this very complex industry and the factors that you need to be aware of to choose the best processing service for your small business. It's important to understand that you need to contact multiple companies to get quotes tailored to your business as the costs and fees may vary from the information we received. In this article, we present information on:

    • Data security requirements: You need to know about the Payment Card Industry's (PCI) data security standards, EMV chip cards and the fraud liability shift.
    • Pricing models: Tiered, interchange-plus and flat-rate pricing models are the most popular options for credit card processing. Learn how they work so you can choose the best plan for your small business.
    • Hidden fees: You can find out which fees most processors charge and which ones you should watch out for when reading a processor's contract.
    • Negotiating tips to lower costs: You may be able to work with your current processor to get lower rates if you ask for a pricing review or switch to a different pricing model.
    • Questions you should ask processors: By asking the right questions about processing costs and fees, you can get key information to decide which processor you want to work with.
    • Contract traps: Before you sign up with any processing service, you need to read the contract so you can opt out of supplementary services and avoid getting trapped in a long-term commitment with an expensive cancellation penalty.
    • The unnecessary expense of leasing equipment: It's actually less expensive to purchase your processing equipment than to lease it, so you may want to buy your equipment even if a processor offers you one for free.
    • Our recommendations for specific processing preferences: You can read about the companies that preformed the best overall in our testing as well as those that provide the best processing costs for different pricing models.

    Why Credit Card Processors Are Difficult to Evaluate

    Unfortunately, credit card processing seems engineered to be confusing and expensive since it involves multiple parties, including banks, credit card issuers and credit card processors who each want a share of every transaction you process. Additionally, many processors customize their pricing to your business and base the rates they quote you on your monthly processing volume, average ticket size and type of transactions you process. Your company's creditworthiness and industry may also be considered. Although our comparisons, articles and reviews can arm you with the information you need to know about this industry and can help you narrow your choices, you still need to contact the companies you're most interested in and request quotes before you make your final decision.

    Most companies offer various pricing models, such as interchange-plus pricing or tiered pricing, that can also make it difficult to compare pricing across services. Even though pricing customization is common and some of the pricing that you receive may differ from the pricing that we received in our testing, it's extremely useful for you to consider the pricing estimates that we received as a baseline you can keep in mind as you shop for the service that's best for your business. It's also worth noting that although every processor charges fees in addition to processing costs, some fees may be negotiable.

    If your business is online, if the majority of your receivables are check or cash, or if you want a very simple solution for your credit card processing needs, be sure to check out our Mobile Credit Card Processing review. If you're looking for a complete point-of-sale system to use with your credit card processing, our POS Systems review can help you find what you're looking for. You can also read articles about various aspects of credit card processing.

    Credit Card Processors Can Provide POS Systems
    All credit card processors can provide you with the hardware needed to accept credit card payments, such as a basic card reader or terminal. They can also provide advanced credit card processing equipment, called point-of-sale (POS) systems. These normally include a cash register or cash drawer, a monitor, a barcode scanner, a receipt printer and a card reader. They can include or integrate with software that helps you run your business, such as analytics, inventory management or marketing. POS systems may also provide industry-specific functionality, for example, order and table management for restaurants. Many processors allow you to process using an existing or third party POS system; although, you may have to pay an extra fee to have the equipment reprogrammed.

    What to Expect From Your Credit Card Processor

    No matter which credit card processing service you select, you should expect it to provide you with the basic services that you need in order to accept payments. The processor should enable you to accept all major cards, including Discover and American Express, so that you don't lose sales because you can't accept your customers' preferred form of payment. You should expect that the company is fully compliant with the data security standards (DSS) established by the Payment Card Industry (PCI) and that it helps you attain PCI compliance. It should also enable you to accept EMV chip and PIN cards so that in the event of a security breach, you are not held liable because you use outdated equipment. The processor should provide readily accessible customer support that you can reach by phone 24 hours a day, seven days a week, so that no matter what hours your business keeps, you can immediately get the assistance that you need to continue to accept payments or to resolve an issue.

    The Evolving Credit Card Processing Industry
    The credit card processing industry is making improvements toward increased transparency and security. Many companies have adopted transparency in pricing, which is evident in the increased number of companies that post their pricing on their websites and offer the interchange-plus pricing model. It's enhancing security and reducing fraud by adopting EMV technology, which the industry is enforcing by shifting liability for data security breaches to non-EMV-compliant merchants, effective October 2015. It's also in the process of implementing near-field communication (NFC) technology that enables the use of mobile wallets, such as Android Pay, Apple Pay and Samsung Pay.

    Direct Processors, ISOs & MSPs
    For the sake of simplicity, we refer to all of the companies in our credit card processing review as processors. But in fact, only a few companies actually handle the processing and have direct relationships with the banks and credit card companies. We reviewed four of the largest direct processors: Chase Paymentech, Elavon, TransFirst and TSYS. Most of the other companies we reviewed are independent sales organizations (ISO) or member service providers (MSP), which are companies that market and resell the merchant accounts with the actual processors. The terms ISO and MSP are commonly used interchangeably.

    The benefit of choosing a direct processor is that they're well equipped to deal with a large amount of transactions, such as for larger businesses that have high processing volumes and may be eligible for better pricing. Direct processors also handle everything in-house, so there are no middlemen to deal with. However, we found that some direct processors are less transparent about their pricing and contract terms. Of the direct processors we reviewed, TransFirst stood out as the best in terms of pricing and setup terms.

    ISO/MSPs are often smaller companies sponsored by banks that have processing relationships with the card brands. Small businesses may prefer to work with this type of company because most of them cater to small business merchants and have the ability to deliver better, more personalized customer service. These companies can also develop their own technologies and can target niches that the larger processors might not directly address. ISO/MSPs can be more transparent with their pricing and terms, and the best post their pricing on their websites. Dharma Merchant Services, National Bankcard and Payline Data are ISO/MSPs that rated strongly because of their competitive fees, setup terms and customer service.

    Data Security
    Data security is a huge issue in the credit card processing industry. Although the large breaches that you read about in the news, such as those recently sustained by Home Depot and Target, may lead you to believe that your small business is too small for criminals to be interested in, that isn't the case. In fact, small businesses are most often the preferred targets of security attacks.

    According to the PCI Security Standards Council, 80 percent of cyber security attacks are aimed at small businesses. Even grimmer is the success that criminals have with their small business targets. Security experts from First Data, one of the world's largest payment technology companies, estimate that 90 percent of data breaches affect small businesses. Criminals target small businesses because many small business owners fail to prioritize data security. As a result, the data often isn't as secure as large companies that have the resources and personnel to put stronger security protocols in place.

    Data Breaches Are Expensive
    If your small business experiences a data breach and is found liable, the associated costs can be crippling. First Data estimates that on average, a breach costs a small business $36,000 and in some cases may even exceed $50,000. Within six months of experiencing a data breach, 70 percent of those small businesses go out of business. Expenses include:

    ►Liability for fraudulent charges, which means you pay for
        any charges made to the customer's card after it is

    ►Hiring independent forensic investigators to pinpoint the scope
        of the breach

    ►Notifying affected customers by mail multiple times and
        providing them with a year of credit monitoring services

    ►Paying PCI-compliance fines to the card brands and the
        acquiring (merchant) bank if you weren't in compliance when
        the breach occurred

    ►Paying for the cost of providing your customers with
        replacement cards

    Other costs may include legal fees, upgrading or replacing your point-of-sale system, and hiring a Qualified Security Assessor to assist you in establishing your PCI compliance.

    In addition to the expenses that you incur due to a data breach, you may also lose business due to negative press and the loss of your customers' trust in your business. Also, if your customers are unable or unwilling to pay you in cash, you may lose business due to your inability to accept credit cards while the investigation is underway. If the card brands revoke your processing privileges due to the breach, you may be permanently unable to accept credit cards.

    Protect Your Data
    You can take two important steps to increase your security, protect your data and reduce fraud. These are to comply with PCI data security standards and to upgrade your equipment so that you can accept EMV chip cards.

    PCI Security Standards
    The Payment Card Industry Security Standards Council has established guidelines called PCI Data Security Standard (PCI DSS) to help businesses of all sizes protect payment data. Most processors require you to be PCI compliant and charge both a compliance fee for their efforts in helping you achieve PCI compliance and a noncompliance fee to discourage you from putting off annual compliance requirements. PCI DSS measures have proven to be successful in discouraging attacks, as 96 percent of merchants that sustained data breaches in 2011 were not PCI DSS compliant.

    As of October 1, 2015, all major credit card brands issue EMV chip cards (also called smart cards or integrated circuit cards) to their customers in order to phase out the older magnetic stripe credit cards. The reason behind this shift is that the magnetic stripe is an outdated technology that's much less secure because it's easier to counterfeit than the microchips in EMV cards. Although you can continue to have your customers sign their receipts for transactions made with EMV chip cards, asking them to sign with their PIN numbers provides increased fraud protection for them and for you.

    Fraud Liability Shift
    Prior to this change, customer losses resulting from cards that were compromised, stolen or counterfeit were dealt with by either the payment processor or the issuing bank. After October 1, 2015, the fraud liability shifted, and the costs for these kinds of fraud now falls to the least EMV-compliant party, which in many cases is the merchant due to outdated equipment. As mentioned above, data breaches can be extremely expensive for a small business, which is why it's important to upgrade to EMV-compliant equipment.

    You Need EMV-Compliant Equipment
    Because of this liability shift, it's important for you to have EMV-compliant equipment so that you can better protect your customers from fraud and your business from fraud liability. If your business currently accepts credit cards, you may need to upgrade your credit card terminal or POS system to one that is compatible with EMV. All of the credit card processors we reviewed can provide you with new EMV-compliant equipment. Many processors offer free equipment or a free terminal-placement program, but in most cases, this arrangement requires you to sign a lengthy contract, so it's better to purchase the terminal outright.

    We realize that the expense may cause you to delay upgrading your equipment; for this reason, we included a line on the matrix for the minimum cost for an EMV-compliant upgrade. This line lists the purchase price that each processor charges for its least-expensive EMV-ready equipment. Of the processors we reviewed, the cost for EMV-capable terminals ranged from $69 to $355, with National Bankcard offering the lowest-priced option.

    Mobile Wallets
    Another recent technology to consider when purchasing or upgrading your equipment is its ability to accept payments made using mobile wallets. Mobile wallets, such as Android Pay, Apple Pay and Samsung Pay, enable your customers to make payments with credit cards stored on their mobile phones. If your credit card terminal or POS system has NFC technology, your customers can hold their phones near the contactless reader, which then captures the payment and completes the transaction. Although most consumers haven't yet adopted this technology, industry experts expect it to gain in popularity. If you're purchasing equipment, it may be worthwhile to consider upgrading to a machine that enables you to accept mobile wallet payments so that you can accept payments from your customers using whichever payment method they prefer.

    Credit Card Processing: What We Evaluated; What We Found

    We looked for credit card processors that provide service on a month-to-month basis with no lengthy contract requirement and no prolonged or punitive cancellation terms. This is a preferable arrangement because it gives you the ability to switch processors without penalty if you're not satisfied with the service you're receiving or if you find better rates elsewhere. We looked for processors that charge the most affordable costs and that don't add hidden fees because it's important to know what you can expect to pay without worrying about surprise costs. We also looked for services that enable you to accept all major cards, including EMV cards and mobile wallets, so that you can accept payments from your customers using whichever payment method they prefer.

    We researched the processors and contacted a variety of company representatives multiple times by phone and email as potential customers, at various times on various days, in order to evaluate the offerings of each service. Key differentiators include the transparency of pricing, fees and terms the processor made available to the public without a quote, and the availability of pricing options.

    Pricing Transparency & Consistency
    We weighted transparency highly in our review because seeing key information on a company's website helps you know what you can expect from the company – that there won't be surprise costs or fees on your bill. It helps you feel confident that its rates are consistent and that you're receiving the same pricing as the company's other customers. Additionally, easy access to information saves you time as you gather information from multiple processors and compare their rates.

    In our testing, we found that the best processing companies post complete information about their terms, pricing and fees online. However, this is extremely rare, though more companies are beginning to post starting rates or flat-rate program pricing on their websites and frequently include a sampling of their terms in their FAQs. Processors that provide interchange-plus as their only option tend to be more forthcoming with information. Some processors may advertise low starting rates that look very appealing, but the companies don't mention the much higher mid-qualified and non-qualified rates they charge and what type of cards get those rates.

    Information about fees is even rarer than pricing information. Approximately a third of the processors in our review have no pricing or service term information posted, and nearly half of them have no fees posted.

    As part of our testing, we also evaluated how forthcoming the representatives that we spoke with during our testing were with key information. We looked at how complete the information they provided was. You should be aware that most company representatives probably won't volunteer all of the information that you need to make the best decision. Remember, the reps want your business and they want to sign you up for their company's services as quickly as possible. For this reason, you're going to need to ask very detailed questions and make sure that you get a contract to read through. Unless you specifically ask, most reps aren't going to tell you about things like the $99 PCI-compliance fee that the company charges annually or unfavorable contract terms, such as liquidated damages, that could cost you hundreds or thousands of dollars.

    At the conclusion of our testing, we considered the consistency of the information that we received throughout our evaluation. Companies that consistently provided comprehensive key information online, by email, over the phone and in their contracts received the highest scores.

    Pricing Options
    Half of the processors we reviewed recommended the interchange-plus pricing model as the most beneficial pricing structure, which is consistent with expert recommendations. Most of the processing representatives that we spoke with initially provided tiered pricing and also provided interchange-plus pricing upon request, although a few were reluctant to do so. Some reps stipulated that this pricing would only be available to established merchants, so you would have to process for several months with a tiered-pricing model before becoming eligible for interchange-plus. Other reps discouraged our testers from the interchange-plus pricing model and warned that it was only beneficial for merchants processing an extremely high dollar amount of transactions. However, this opinion contradicts expert advice and the information that we received from other processors. These pricing models are explained in detail later in this article.

    Ease of Application
    We evaluated how easy it is to apply for an account with a credit card processor based on the ability to complete the application online, the documentation required and how much of the contract the customer service rep provided us. We considered the time it takes to get set up with a processor as well as how long it takes to clear the account and have funds deposited into your bank after you start processing. Additionally, we reviewed cancellation terms and looked at associated costs, such as early termination fees and liquidated damages. The companies that received the highest scores were those that made it easy to apply by providing online forms, complete contract information and flexible cancellation terms that don't require you to pay early termination fees.

    Quick Account Setup
    Most processors make it easy to apply, and nearly every customer service representative that we spoke to offered to help our testers fill out the application over the phone. Most applications are approximately four pages long and request information about the business and the business owners. You should be aware that the application is actually part of the contract, so you want to make sure that you don't sign it or fill out the sections asking for your social security number and bank account information until you're ready to enter into a processing agreement with that company. It takes most credit card processing companies two business days or less to approve your application and set up your account. The fastest can approve and set up your account in one day, and the slowest can take up to five days.

    Quickly Clearing the Account
    Another timing component of processing that you may wish to enquire about before signing up with a company is the amount of time that it takes for the money from your transactions to clear the account, which is when the funds are deposited into your business bank account. At the end of each day that you process credit or debit card transactions, you "batch out," which means that you transmit that day's transactions to the processor to complete the sales. You can do this manually, but you can also have your terminal programmed to do it for you automatically each day at a set time. It's important that you perform this task daily so that your customers' accounts can be debited in a timely fashion and your account can be credited.

    After batching out, it takes most processors two days or less to deposit the money from your transactions into your account. The fastest companies can do it the next day; however, the availability of this feature may depend on whether you can batch out before a certain time each day, which may not be feasible due to your business hours or if you're in a later time zone than the processor. The slowest companies in our review may take up to three days to deposit your funds.


    Pricing is probably the number one factor that you're considering as you research credit card processing companies. Although there is a broad range of processing costs, you have many competitive options to choose from. All of the companies in our review provided interchange-plus pricing models, although many prefer to offer tiered pricing, and some may have requirements that you must meet in order to qualify to participate in interchange-plus pricing. For example, you may be required to process with a company for three months before you're eligible to switch pricing models.

    There's also quite a bit of variance in fees, although most processors charge a monthly fee and a PCI-compliance fee, which may be charged either monthly or annually. Most processors charge a daily batch fee, which is usually the same price as the per-transaction fee. Chase Paymentech is the only company we reviewed that charges a setup or application fee. When you review your quote and contract, some of the nonstandard fees that you want to watch for include a quarterly technology fee, a semi-annual postage and handling fee, an annual membership fee, an interchange-compliance adjustment fee, and a 1099K IRS reporting fee. Although comparable services may include some of these expenses in their monthly fees, you may want to look elsewhere if a processor charges too many nonstandard fees. However, if you otherwise really like a processor, it may be worth your time to talk with the rep and see if he or she is willing to waive some of these fees.

    Credit Card Processing Pricing Models
    There are three main pricing models that you can consider when you're evaluating credit card processing services, and some processors give you more than one option. Some processors allow you to switch pricing models so that you can evaluate which one provides the best savings for your business.

    Tiered Pricing
    This is the most common pricing model, but it's widely criticized by industry experts because it's not as transparent as interchange-plus pricing. It attempts to simplify the interchange table by combining interchange rates, card-brand fees and markups together and then sorting the transactions into tiers. Tiered pricing may also be referred to as "bundled pricing" or "bucket pricing."

    Most processors categorize these tiers as qualified, mid-qualified and non-qualified transactions, although some may have as little as two or as many as six tiers. The factors that determine the transaction categorization include the type of card (whether it's debit or credit and if it's a rewards, corporate, government-issued or international card) and how the transaction is processed (whether the card is swiped, accepted using an EMV reader or manually keyed in). Typically, only in-person transactions made using non-rewards cards are considered qualified transactions. However, some processors offer a lower rate if the customer pays with a debit card and enters a PIN. For example, for this type of transaction, CreditCardProcessing.com charges 0.00% + $0.24.

    Critics note that there's variance between processors as to which interchange rates fall into each tier, which makes it difficult to compare pricing when you're evaluating services. In our testing, we found this to be true as processors categorize rewards cards differently, with some categorizing them as mid-qualified and others as non-qualified. This variance in tier categorization, sometimes referred to as "inconsistent buckets," makes it difficult to determine how much you can expect to pay above set costs for your processing.

    Interchange-Plus Pricing
    Most industry experts prefer this pricing model because it promotes pricing transparency. In contrast to tiered-rate pricing, which charges different rates for different card types, the markup stays the same no matter what card type your customers pay with. Plus, many of the companies that offer interchange-plus pricing post their rates on their websites, which makes it easier to compare rates between companies.

    With interchange-plus pricing, your cost is comprised of three parts: the interchange rate, the card-brand fee and the processor's markup. The interchange-plus pricing model may also be called "interchange-pass-through pricing" or "cost-plus pricing" because the processor passes the interchange rates and card-brand fees to you at cost and adds a markup. One of the benefits of the interchange-plus pricing model is that it's easier to see how much you're paying in processor markups, which makes it easier to spot savings when comparing services.

    The interchange rate and card-brand fee are non-negotiable, published rates established by card issuers like Visa and MasterCard. Every processor pays these costs, and you can view interchange rate tables on the card issuers' websites. The processor tacks on its markup as both a percentage and a per-transaction fee, and this is the only negotiable part of the processing cost.

    The processor may consider several factors when determining the markup it charges you, including your monthly processing volume, your average ticket size, your business's industry and your processing history. The average markup in our review is 0.30%; Helcim offers the lowest at 0.18%, and several processors charge the highest rate of 0.50%. The average per-transaction fee in our review is $0.10; the lowest is $0.08, and the highest is $0.25. The rates listed in this article, in the matrix and in our reviews are the rates that we were quoted in our testing and may vary from the rates listed on processor websites as well as the rates that you are quoted.

    Flat-Rate Pricing
    This is the simplest pricing model. Most processors that use this model charge a fixed per-transaction percentage rate and fee. Alternatively, some processors charge a flat monthly rate and a per-transaction fee. This pricing model is most beneficial for small businesses that process a small percentage of their receivables or that primarily accept cash or check, especially if the ticket amount is small. Some credit card processors in our review refer merchants processing less than $2,500 per month to a processor with flat-rate pricing, such as Square. Because this is an especially popular pricing model for mobile credit card processing, we include it in the matrix for our mobile credit card processing site. We omitted flat-rate pricing from the matrix on this site because it isn't commonly offered by credit card processors catering to small businesses that use processing as their main means of accepting payment.

    Credit Card Processing Fees 
    In addition to processing costs, you can expect to pay a variety of fees to whichever credit card processor you end up choosing. Some of these are one-time fees that occur when you set up your account and others are ongoing. It's important to read through the application and the terms of service to learn about the fees that accompany your credit card processing account.

    Fees May Be Flexible
    During the course of our testing, we found that it's possible to get some fees waived during upfront negotiations. You need to have these fees waived before you actually sign the contract; you won't be able to renegotiate once you've committed to the processor's service. Make sure that you obtain a waiver or that the fees you're able to get waived are noted as such on the contract you sign. Most credit card processors are eager for your business and are willing to give you a good deal. Some of the companies we called offered to waive monthly minimums, PCI-compliance fees and early termination fees. Most companies don't charge a setup fee or an annual fee, but if the company charges one or both of these fees, ask your rep if he or she can waive it for you.

    Ask About Fees Included in the Contract
    It's important to understand what you're paying for and if you're getting the best possible deal on the processing service. For this reason, you need to find out exactly which fees the processor is charging you, how much each fee costs you and whether the processor can waive them for you. Although you can ask your rep what fees you can expect to pay, your best source of information is the contract.

    As you're reading the contract, it's useful to make a list of all the fees named in the text as well as any amounts it mentions. You can then call your rep and ask him or her about each fee – what it is, how much it costs, how often it's charged and if he or she can waive it for you. Although some of the companies you call may offer to waive certain fees, many won't, but they may be willing to waive or lower fees for you if you ask.

    Get Changes in Writing
    If the rep is willing to waive or lower your fees, it's important to make sure that you get a revised contract or a waiver that notes the changes that the processor made for you before you sign any application or contract. It's not enough for the rep to verbally promise that he or she has waived a fee; you need to get the changes in writing.

    Monthly Fee
    The most common fee you encounter is the monthly service fee, sometimes referred to as a customer service or statement fee. This fee pays for a variety of services, including monthly statements, account maintenance and customer service. Some processors, such as Payment Depot, give you the option of paying annually instead of monthly, which is beneficial because the annual cost often ends up being less expensive than a year of monthly fees. You should be aware that some processors charge an annual fee in addition to monthly fee. Merchant One and The Transaction Group are two processors that charge both annual and monthly fees.

    Monthly Minimum
    Most of the processors we reviewed charge a monthly minimum, which is the minimum dollar amount of transaction fees that the processor expects you to generate each month. The typical monthly minimum is $25, but some processors have a minimum as low as $5 or don't set one at all. Gotmerchant.com has a $50 monthly minimum, which is the highest in our review, followed by Elavon, which is up to $35. It's important to note that in most cases, the minimum amount processed refers to the processing costs and not the total transaction costs. This means that in most cases, you won't meet a monthly minimum of $25 by selling $25 worth of merchandise; you need to meet the minimum from the processing costs you pay, which is the interchange-plus markup or the tiered rates that your processor charges you for each transaction.

    If you fail to meet the monthly minimum, the processor charges you the difference between the dollar amount of processing costs that you generated and the fee. For example, if you have a slow month, your processing costs total $20 and you have a monthly minimum of $25, the processor would charge you $5.

    PCI-Compliance Fees
    The major yearly fee that you can expect from your credit card processor is a PCI-compliance fee. PCI is a shortened form of PCI DSS, which stands for Payment Card Industry Data Security Standard. PCI compliance means that the credit card data from your transactions is processed, stored and transmitted securely. PCI compliance is required of all businesses, regardless of how many credit card transactions they have.

    Most small businesses are level four merchants, which is the level designated for businesses that process less than 20,000 eCommerce transactions or fewer than a million other transactions per year. For level four compliance, you need to complete a self-assessment questionnaire, get your terminal scanned for vulnerabilities, and submit the scan results and questionnaire along with any other required documents to your processor. Practicing PCI best practices is important because it helps your business prevent fraud.

    Processors charge PCI-compliance fees to ensure that you meet these requirements, and many of the credit card processors we reviewed provide services to help you achieve compliance, including helping you fill out the survey or scanning your terminal for you. PCI-compliance fees range from $30 to $180, although most companies charge $99. Some processors include PCI-compliance as part of your monthly fee, and a few, such as Payment Depot, Dharma Merchant Services and Chase Paymentech, don't charge the fee at all. When you're looking for a credit card processor, it's important to know if you have to pay this fee. If your processor charges this fee, be sure to ask your account rep what services it provides to help your business meet PCI compliance.

    Online Processing Fees
    If you plan to expand your business online and sell products or services through your website, you need a payment gateway to process online credit card sales. A gateway is an internet connection that transmits credit card information securely and helps prevent fraud. Authorize.net is one of the most common payment gateways.

    There are additional fees to be aware of if you decide to use online credit card processing. Some credit card processors charge a one-time gateway setup fee to get your gateway started. You also have to pay the processor a monthly gateway fee to continue using the gateway. Of the processors we reviewed, monthly gateway fees ranged from a low of $5 to a high of $20. A few processors also charge between five to 10 cents per transaction in addition to the monthly fee and regular processing costs.

    If you choose to begin processing online as well as in person, it's important to know that you may be required to open a separate account for your online processing. This means that you may have to pay the regular monthly fees on both accounts. The processing costs may also vary depending on which pricing model you use. If your processor uses interchange-plus, the markup and per transaction cost are the same, but the interchange rates set by the credit cards companies for online transactions are higher, so you can expect to pay more than you pay for face-to-face transactions. If you choose a tiered-pricing plan, the rates for online processing may be higher or you may be assessed an additional card not present (CNP) surcharge.

    Tips to Lower Credit Card Processing Costs
    If you're currently processing and want better rates, it may be worth your time to contact your account manager and ask if he or she can help you reduce your costs. Also, by reviewing your statement on a regular basis, you may be able to identify costs or fees that you're overpaying.

    Review Your Statement Every Month
    Contracts don't include pricing guarantees, so it's important to closely monitor your statements so that you know what's going on with your account. Regularly review your rates and fees so that you can get a feel for what you can expect to pay on average for processing each month.

    You also want to watch for notifications about rate increases, new fees and reminders about PCI-compliance requirements, such as the annual questionnaire that you need to take in order to avoid costly noncompliance fees. If you notice a change in your pricing, if there are fees that you don't understand or if you receive a notification about your compliance, call your rep to discuss your account.

    Request a Pricing Review
    If you're an established merchant and you want to lower your fees, you may be able to request a pricing review to see if you qualify for lower pricing. For example, Chase Paymentech merchants qualify for pricing reviews after a year with the processor. Requesting an account analysis can be particularly worthwhile if your business has grown since you signed up with the processor and your transaction volume exceeds your initial estimates.

    Request Interchange-Plus Pricing
    If you're currently processing on a tiered-pricing plan, it may be worth your time to ask your processor if it can switch your account to interchange-plus pricing. Many processors allow you to switch to a different pricing model so that you see for yourself which pricing model works best for your business. If you choose to do this, be sure to enquire if the new plan triggers any different fees or requirements; for example, ask about the new plan's monthly minimum and how much you need to process in order to meet that requirement.

    Ask If Fees Can Be Waived
    As mentioned above, some fees are negotiable and your rep may be able to waive them for you. For example, if you're having trouble meeting the monthly minimum, your rep may be willing to waive or lower it for you. Your rep may also be able to waive the PCI-compliance fee after you complete the annual questionnaire.

    Shop Around & Renegotiate Your Rates
    If you've been with your processor for a year or longer, consider shopping around to see if your rates are still competitive. As with insurance, it's beneficial to take the time to look for better deals every year or two. This is particularly important to do if your rates have increased over time or if you've been with your processor for several years and you don't know what pricing is available elsewhere.

    If you find better pricing from another processor, don't be afraid to contact your rep to see if he or she is willing to renegotiate your rates. If your service is provided on a month-to-month basis and you own your equipment, you have more negotiation power since you can switch to a new service without penalty. If you are under contract, the rep may be less willing to renegotiate, but it's still worth a try. If you're overpaying for your processing and the rep won't renegotiate your rates, you want to read your contract to find out the cancellation procedure that you need to follow in order to switch processors when your contract finally expires. Be aware that most contracts automatically renew, that you have a very short window in which you may cancel without penalty and that you may need to begin the cancellation process well in advance of the contract's expiration date.

    Shopping for a Credit Card Processor
    Although reading credit card processing reviews can provide you with a good idea of which processors you may want to request more information from, you still want to take the time to shop around and gather quotes that are specific to your business so that you can find the best deal. Be sure to allot enough time to request and review contracts. During your research process, take note of the quality of the customer service that you receive from the companies you're considering, as this can affect your overall satisfaction with the processor.

    Processors Need Lead Time
    Most credit card processing reps recommend that you sign up a week and a half to two weeks before you need to start processing; this gives the company time to set up your account, ship equipment to you, and walk you through setting up and testing your equipment to ensure everything is working properly. Although credit card processors can set up accounts quickly, many in as few as two days, it's best to follow the processor's guidelines and get your account ready at least a week before you need it since a period of being unable to accept cards could be problematic for your small business.

    Start Looking a Month in Advance
    You want to look for a credit card processor well before you need to start processing so that you give yourself enough time to thoroughly research the companies you're interested in. By allowing extra time for this process, you won't feel rushed into making a hasty decision simply because you need to be able to accept credit card payments in two days.

    Having ample time to research the companies you're interested in shields you to some degree from high-pressure sales tactics since you won't be processing immediately and have time to shop around. You should be aware that many credit card processing reps work on commission and are very anxious to sign you up for their service. You want to thoroughly enquire about the ins and outs of how the service works and how much you can expect to pay on a daily, monthly and yearly basis in terms of transaction pricing, regular fees and incidental costs. You also want to ask about service terms that might affect your satisfaction with the processor.

    Evaluate Customer Service
    As you're evaluating the processor's pricing and service terms, you're also evaluating the individual who, in most cases, will be your account manager for the life of your account. For this reason, it's important that you like this person. You want the person that you're working with to be responsive and easy to get on the phone, honest and forthcoming with information, and knowledgeable about credit card processing and the services that the company provides. You should feel that the rep is respectful, and you should feel comfortable asking questions about the service. If any of the following situations occur while you are exploring a business, it may be wise to consider the kind of service you can expect after the rep is no longer courting your business:

    ►Difficulty getting the rep on the phone

    ►The rep hedges or tries to confuse you

    ►The rep doesn't seem very knowledgeable when you ask questions

    ►The rep is impatient

    ►The rep doesn't seem very helpful.

    Our testers contacted each processor's customer service reps at various times on various days, both online and by phone. We rated the processors according to our testers' experiences across multiple interactions with various reps from each company. We considered whether the reps contacted us after we filled out the company's online form, how promptly the reps returned our calls and responded to our emails, and whether the reps followed up with us after our initial contacts. We also evaluated the quality of the information the reps provided to us, whether they were courteous and professional in their interactions with us, and whether they were knowledgeable about credit card processing and took the time to explain complex information to us, such as pricing models and EMV regulations.

    Talk to More Than One Rep
    Most of the account reps that we talked to in our testing were professional, knowledgeable, patient and helpful, although we did encounter a few that lacked some of these attributes. If you really like the company's offerings but not the rep that you talked to, it may be worth trying to call back and see if you can speak with another rep before you sign up. Even though you haven't yet signed a contract, some companies don't allow you to switch reps; however, many do, and some even permit other reps to follow up on your lead.

    In our testing, we found that there were occasions in which we received different quotes from different reps from the same company. This leads us to conclude that some processors give their reps some flexibility in the rates and fees they provide, which means that it may be worthwhile to speak to more than one rep, even after you've determined which company you want to work with.

    Questions to Expect When Comparison Shopping
    When you call a credit card processing company for a quote, the representative typically asks a few questions about your business in order to provide you with a quote, such as:

    ►What is your business name?

    ►What does your business do?

    ►What is your average ticket size?

    ►What is your monthly processing volume?

    ►What is your email address and phone number?

    The rep may ask you to provide additional information, such as your business location and address so that he or she can start filling out the application. However, the rep shouldn't need more information than this in order to provide you with a quote and a copy of the contract. As stated above, the application is part of the contract; you don't want to provide your social security number or your bank account information until you've made your final decision and are ready to sign a contract and commit to a company's services.

    Questions to Ask When Comparison Shopping
    You want to ask the rep about rates, fees, contracts and equipment. If the rates sound good and you're considering the company, you also want to ask the rep to email you a quote and a contract to review. If the rep only sends the application, be sure to ask for the full terms and conditions as well as the program guide. You can use the following questions to lead your discussions with processing reps:

    ► What are your rates?

          o Is this tiered or interchange-plus pricing?
          o What are the rates for each tier: qualified, mid-qualified,
          o What types of transactions are considered mid-qualified and
          o Do you offer interchange-plus pricing? What are your markup and
             per-transaction rates?

    ►What fees do you charge?

          o Is there a setup fee?
          o How much is the monthly fee?
          o How much is the monthly minimum? How much do I need to
              process each month in order to meet the minimum?
          o How much is the PCI-compliance fee? Is that a monthly or
              annual fee?
          o Are there any annual fees?

    ►How long is your contract?

          o Do you offer month-to-month service?
          o What is your cancellation policy?
          o Is there an early termination fee?

    ►How much does equipment cost?
    ►Would you email me a pricing quote and a contract that I can review?

    Request Pricing Quotes & Contracts
    After you've narrowed your choices to your top three or four processors, it's important that you request written quotes that include a complete list of fees as well as copies of the application or service contract, including Terms and Conditions and Program Guides. You want to obtain these documents before you sign anything so that you can read them through and ensure that the terms you were verbally quoted match the terms in the contract. Some reps balk at providing this information because they don't want to go to the trouble of filling out paperwork if you're not going to sign up with them (they may worry that you plan to take the quote to another processor, or back to your existing processor, to get better pricing). However, this is information that you need in order to ensure that you make the best possible decision for your business, and you want to insist that the rep sends you this information.

    Read the Contract
    It's critical that you thoroughly read the application, contract and service terms. If there is any discrepancy, it's important to take it back to the rep and get it changed before you sign. For example, if the rep told you that the service is month-to-month, but the actual contract states that there is a three-year term, you need to ask the rep to change that clause in the contract or to send you a waiver that amends the term. If, perchance, a rep tells you that a clause doesn't need to be amended because it isn't enforced, keep in mind that if a term is in writing, and if you sign the document, you are agreeing to that term. A verbal assurance doesn't supersede the written, signed contract.

    Make Your Decision
    Once you've decided on the processor you want to use, you can follow up with the rep, sign the contract and purchase your terminal. After you start processing and receive your first statement, you may want to contact your rep if you have questions about how to read your statement or if you have questions about your processing costs or fees. After a few months, if you find that your processing volume is higher than you anticipated, some processors are willing to re-assess your processing costs.

    Applications, Contracts & Cancellation Fees

    Usually when you ask a processor to send you the contract to read before you fill out the application, the rep sends the "merchant application" or "merchant agreement." The term "application" is misleading because it's actually part of the contract. Don’t fill out an application until you're ready to sign up with a company. Don't sign the application until you've thoroughly read it along with the Program Guide (or Merchant Operating Guide) and possibly an additional Terms and Conditions (or Terms of Service) document. Although some applications include the Terms and Conditions and act as a full contract, most don't. It's important to understand that the application is often just one part of the contract; there is usually at least one and possibly two other documents that comprise the contract, and you need to read all of them before you sign the application. Some applications include a link to the Program Guide in the fine print, but in most cases, you're going to have to specifically ask for these additional documents from your rep.

    When you receive the Program Guide, you may feel a little overwhelmed at the thought of reading it because these documents are often more than 50 pages long and delve into the minutiae of processing. However, you really don't want to sign the application until you've read this guide because it contains important details that can cost you money. For example, the Program Guide often includes information on early termination fees and instructions that you need to follow if you choose to cancel your account, which may involve providing a written notice to the processor within a certain timeframe.

    Here are some factors to keep in mind as you read the contracts for the processors that you're evaluating:

    Contract Length
    The industry is shifting away from lengthy three-year contracts in favor of month-to-month agreements, and all of the best processors offer this as an option. A processor should be confident enough in the quality of its service and the competitive value of its pricing that it doesn't have to require its customers to sign lengthy contracts.

    The only exception that justifies a contract is if you choose to accept free equipment, in which case it's reasonable for a company to expect you to remain a customer long enough for it to recoup its equipment costs. If you decide to sign a contract for this reason, the contract length should not be excessive and should not automatically renew for additional lengthy terms. For example, a non-excessive term would be no longer than a year with a month-to-month renewal, such as the contracts that Flagship Merchant Services and CreditCardProcessing.com require in exchange for free equipment. An excessive contract would span three years or longer and renew for additional two-year terms.

    Even if the processor tells you that the service plan is month-to-month and there are no cancellation fees, it's still important that you read the contract and make sure that this information is consistent with the information in the contract. If you find that contract says that the term is for three years or that there is an early termination fee (ETF), you want to be sure that you ask for a waiver or amendment that stipulates that the service is provided on a month-to-month basis and waives all ETFs.

    If the processor that you want to work with has a contract that it expects you to sign, it's worth trying to negotiate for better terms. Be sure to ask the rep if he or she can give you a waiver or amendment that puts you on a month-to-month plan and waives all ETFs.

    Automatic Renewals
    If, for some reason, you decide to choose a company with a traditional three-year contract, be aware that these contracts typically automatically renew for additional two-year terms. It's worth your time to ask for a waiver that puts you on a month-to-month plan after the initial term ends.

    Early Termination Fees
    There's usually a very short window before a term expires in which you can cancel your account without incurring an early termination fee. Most ETFs are a few hundred dollars; however, some are several hundred dollars. Be sure to scour any contract you sign for liquidated damages, which is either a percentage or the full amount of the projected revenue the processor expected to make on your account; it's a very punitive fee that can be exorbitantly expensive. The ETF may be disguised as an "early deconversion fee" (EDF), so you want to look for this term in the contract text as well.

    Personal Guarantees
    Most application forms include personal guarantee clauses that grant the processor the right to perform credit checks. This guarantee also gives the processor the right to collect money from you personally in the event that, for any reason, your business is unable to meet its obligations. In addition to holding you personally responsible for all expenses, some of these clauses hold your successors and heirs responsible for your debt if you die.

    Additional Service Clauses
    These indicate that the processor may sign you up for various additional services that have additional fees, and you have a very short period, typically 30 days, to cancel the additional services. Again, you may be automatically enrolled in additional services, and you have to figure out what they are and how to cancel them or you will be charged for them. Approximately a quarter of the companies we reviewed include this clause in their contracts.

    Processing Equipment
    Nearly every credit card processing company has some sort of free equipment offer. Some processors give you a terminal if you sign a contract, while others have a free placement program in which you borrow the equipment. Accepting free equipment sounds like a great way to save money, but as a perceptive businessperson, you know that "free" often isn't really free and you need to do the math to determine whether the free option is actually the best option for your small business.

    Purchasing Equipment
    Buying a terminal outright is nearly always your best bet. Although it may be an expensive upfront cost, over time it's less expensive and less restrictive than other equipment options. You can keep your purchasing costs low by shopping around for the best price, choosing a basic terminal instead of a fancy POS (point-of-sale) system and inquiring if used equipment is available for purchase.

    As you shop around for equipment, you want to find out if the equipment is proprietary or "locked." This is an important consideration because you don't want your purchased equipment to be unusable if you switch processors. If you already own unlocked equipment or if you decide to shop for new or used equipment online, be sure to check with your processor to see how much it charges to reprogram the equipment, including shipping and handling costs, and how long the process takes.

    Free Equipment
    Although free sounds fantastic, even the best processors may require you to sign a contract in return for the equipment. The best contract terms for free equipment are one-year long and then go forward on a month-to-month basis. Most free equipment contracts last for three years, and many automatically renew for two-year terms. Some companies we reviewed require you to sign up for a different pricing plan if you choose to accept free equipment. Another thing to be aware of if you chose to accept free equipment is that some processors may charge you the full price of the terminal in addition to an early-termination fee if you chose to end your relationship with the processor before your contract expires. Before accepting free equipment, consider whether being tied to a contract or accepting higher processing costs is worth the purchase price of the equipment.

    Free Placement Programs
    These may initially sound like a good deal, and many processors offer this option, but like the free-equipment offers, you may be required to sign a contract. However, when your contract expires or you decide to switch processors, you are required to return the equipment. You should be aware that many free placement programs come with additional monthly fees and may include additional monthly minimum requirements that you have to meet in order to avoid fees or penalties. Be sure to request the contract and a list of all the fees associated with the program to read over before you agree to accept such an arrangement.

    Leasing Equipment
    Many processors encourage you to accept a lease on equipment because it's a very lucrative arrangement for them. Some reps give very persuasive reasons for leasing equipment, such as "it's like a cell phone plan" or "many customers choose to lease for tax reasons." However, you want to carefully consider every other option before you lease equipment as this is generally one of the worst decisions that a small business can make when setting up credit card processing. Consider the following leasing myths and truths.

    Leasing Myth #1: It's like getting a cell phone, which means that if equipment breaks, the processor will replace it.
    Truth: While technically true, most equipment comes with a manufacturer's warranty, and you may be able to purchase an extended warranty or insurance. If your purchased equipment breaks while under warranty or while insured, the manufacturer replaces the equipment anyway, according to the terms of the warranty or insurance.

    Leasing Myth #2: It's easier to update to the newest model if you lease your equipment.
    Truth: This myth is based on the assumption that if you purchase equipment, you probably keep it longer than the four-year term of your lease. The processor expects that when your lease expires, instead of purchasing your existing equipment, you will take out a new lease on new equipment. However, the money that you save by purchasing the equipment outright puts you in a better position to buy new equipment when it becomes available.

    Leasing Myth #3: Leasing is better for tax write offs since you'll have an expense that you can write off yearly instead of just a one-time purchase.
    Truth: The long-term expense of leasing is still more expensive than purchasing equipment outright, even if you factor in the tax write offs that you expect to receive. If you are considering leasing for these tax reasons, you want to do the math to verify that the costs and savings are in fact what they're purported to be.

    Remember that leasing is short-term cheap and long-term expensive. Often, you'll find that for the amount of money that you pay over the life of the lease, you could purchase the equipment several times over. Additionally, you should be aware that most equipment leasing contracts are noncancellable, which means that you can't even return the equipment and pay a fee to get out of it. Even if your business fails, you return the equipment and you get out of your processing contract, you may still be held personally responsible for the remaining time on your equipment lease.

    Credit Card Processing: Our Verdict & Recommendations

    By carefully evaluating your options, you can choose the processor that provides your small business with the lowest processing costs, no hidden fees and good customer service. The best companies in our review offer transparent pricing and post their costs, fees and terms on their websites. Their customer service representatives provide straightforward information about what costs you can expect to pay for your account and follow up with you via email with pricing quotes and contracts. The best processors don't require lengthy contracts but instead provide service on a month-to-month basis and don't charge cancellation fees if you decide to take your account elsewhere. They're up-to-date with current payment technology and enable you to accept all major credit and debit cards, including EMV chip cards and mobile wallets.

    Payment Depot is one of the best credit card processing companies in our review because of its innovative pricing structure, in which you pay transaction costs at wholesale (interchange and card-brand fees), $0.25 per transaction and a membership fee that can be paid monthly or annually. Helcim has the lowest interchange-plus pricing in our review. It doesn't set a monthly minimum and includes the PCI-compliance fee in its very reasonable monthly fee. Payline Data and Dharma Merchant Services are other good options to consider if you prefer interchange-plus pricing; however, you need to process more than $10,000 per month in order to process with Dharma Merchant Services.

    If you prefer tiered pricing, or if you want a processor that allows you to try both pricing models, National Bankcard, Flagship Merchant Services, CreditCardProcessing.com and Cayan are good options to consider and offer some of the lowest rates in our review. These companies also offer very reasonable prices on basic EMV-capable terminals, with National Bankcard offering the lowest equipment price in our review.

    If you prefer to process with one of the large direct processors, Chase Paymentech, Elavon, TransFirst and TSYS are solid options that provide service to small businesses. Of these companies, TransFirst has the most competitive interchange-plus pricing and the lowest monthly fee and monthly minimum. Chase Paymentech doesn't charge a PCI-compliance fee and has the lowest chargeback fee. Elavon has the lowest interchange-plus pricing but has the highest monthly fee and monthly minimum. TSYS has competitive tiered pricing, but the most expensive interchange-plus pricing.

    If your business is what most processors consider a high-risk industry, for example, if your business is a legal marijuana dispensary, The Transaction Group can be a good option. This company also provides service for international businesses.

    Disclaimer: The pricing listed in this article, in the matrix and in our reviews is reflective of the date this review was last updated. Pricing reflects our testing scenario; the pricing you receive may differ due to processing volume and average ticket size, among other factors. Top Ten Reviews seeks, whenever possible, to evaluate all products and services using testing scenarios that simulate as closely as possible the experiences of a typical small business owner. The processors had no input or influence over our testing methodology, nor was the methodology provided to any of them in more detail than is available through reading our reviews. Results of our evaluations were not provided to the companies in advance of publication.