Choosing a Credit Card Processor, and how much it should cost
I’m a partner at an independent restaurant in Seattle. Over the last six months we have been receiving a lot of calls from credit card processors wanting our business. It has been a few years since we signed up with our current processor. Over the years we haven’t had any complaints but I wasn’t sure if the fees were still competitive.
I spent some time to write up our basic requirements and evaluated approximately five different companies. Two companies were chosen by doing some basic research on the internet and the other two were from cold calls we received in the past month.
I was surprised the total cost varied dramatically between the different companies. Some general questions I asked each company were:
1. Is a contract required, if so what is the length?
Many companies don’t require a long term contract. I wouldn’t recommend signing a contract over one year.
2. What setup fees are required?
There are also many companies that don’t require a setup fee or charge less than $50. If a company charges setup fees and aren’t willing to wave most of them then I’d continue looking.
3. What are the monthly fees if we don’t make any sales?
Almost every company is going to have monthly administrative fees. Some standard charges are a minimum processing fee, a statement fee, and possibly insurance or equipment related fees. The minimum processing fee should be around $25. The statement fee is approximately $10. These are probably the only two fees that are necessary. The minimum processing fee won’t even apply if you process more than a thousand dollars of transactions.
Any additional fees beyond the two basics isn’t standard and ask what you are paying for and why. Paying a monthly fee for support or insurance may not be necessary. Before signing up for these services find out what is included at no cost first.
4. What are our options to purchase or lease a standalone terminal?
It’s important to know that you can purchase a standalone terminal for approximately $500. Sometimes they can be found for less than $300. If you decide to purchase or lease your terminal the long term cost shouldn’t be considerably more than this. Also ask if there is any charges if you purchase your own equipment that will need to be programmed. Most companies won’t charge for this but some will. It’s important to know if they will charge before you sign up for a company and purchase your own terminal.
One of the companies I meet with required leasing a terminal at over $100 a month with a four year contract. I politely said I wasn’t interested and ended the meeting. The leasing company was Northern Leasing and those rates are what I would consider criminal. Please don’t sign a contract to pay $5000 for a $500 machine.
Stay away from Northern Leasing Systems, http://www.northernleasing.com/. They offer a non-cancelable lease with no trial period and no way to cancel for any reason. Plus you will be paying $5000 for a $500 machine. Who would want to do business with this type of company?
5. What are the transaction fees and percent based fees for credit or debit cards?
In our business our transactions are usually less than $10. For transactions of this size credit cards tend to be cheaper then debit cards. This is because the transaction fee for a debit card is usually more than the processing fee for a credit card.
When I did my research the market rates were approximately:
Qualified Cards – 1.5% or less
Non-Qualified Cards – 3% or less
Non-Qualified cards are usually some type of reward card. Everyone enjoys getting 1% back on all their purchases. It’s the seller that is paying extra to cover this cost.
I ended up staying with our existing company. The existing rates were higher than the current market rates. However a quick call to our sales rep and the retention department was all that was necessary to lower our rates. Since we have had good service from them, RBS Worldpay, for a few years it wasn’t worth the risk to change to a company that was unknown to us.
Please feel free to leave your reviews in the comments.
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