There are hundreds of individual companies that can help you process credit cards. Some of them will offer you "free" terminals, while others will offer great rates. In the merchant services world, there is an intense amount of competition, so as a consumer you can easily get called by several companies every day, and many of them will even buy out your current contract and pay early termination fees (unless they are huge) as a way of getting your business. Merchant services providers make their money over the life of your contract, and turn pennies into dollars by collecting money with each transaction. If you are a smart enough business owner, you can take advantage of this competition by finding the best processors and getting the best deals.
Although most small business owners would not consider themselves "merchants" in the traditional sense, they are given this designation by banks and third party processors. As such, they are provided with a variety of "merchant account services" when they are looking to accept credit cards, take checks, and collect payments through their businesses. What most businesses don't realize is that a company can get merchant services from a different provider than their bank. In fact, banks generally outsource to other processors, and there is a complex chain of organizations involved in the fulfillment of each and every credit card transaction. Therefore, it is possible to keep the same account with your bank, and get discounted credit card processing services from another party, who may have better options when it comes to machines and accessories.
Top Merchant Account Processors Include:
Some Consumer (smartphone swiper) solutions include:
Understanding the methodology behind reviews cand be difficult given the nature of credit card processing. The most likely people to review their merchant services are those who have a problem with the company, service, or equipment. The technical nature of payment processing also means that those who have difficulties with batching and settling transactions may choose to blame the service rather than their own inability to successfully operate a credit card machine. Furthermore, there are multiple instances where customers abuse the merchant relationship and violate the rules set forth by Visa, MasterCard, American Express, and Discover. For example, some merchants try to "prop up" a failing business by making a fake purchase from a personal credit card, effectively giving their business a cash advance. This is against card processing rules, so financial institutions may immediately revoke the merchant's ability to accept credit cards and put a freeze on all transactions. The merchant will then complain to the BBB, Ripoff Report, Yelp, or any other online service and blame the processor, who is in fact blameless. Businesses may also inadvertently violate processing rules, or go over limits imposed by underwriters and agreed to in the contract. At this point, they will be unable to take transactions until the next month, or until the freeze is lifted. Once again, the complaint is directed at the processor, since the business is suddenly unable to take credit cards. As a rule, processing companies with more customers are more likely to experience these complaints. Because there is not a reliable way to show "complaints as a percentage of customer volume," a casual reading of review and complaint sites can lead to incorrect conclusions about a processor.
This is not to say that ISOs and processing companies are blameless. In fact, there are many that are downright deceptive and bordering on fraudulent. Processors can charge excessive early termination fees (ETFs), add hidden fees ostensibly related to PCI compliance, terminal leasing, payment gateway use, and access to tools that should be free. Many processors advertise an extremely low rate without first disclosing that the rate is in fact "added on" to an interchange rate and a "downgrade" which is in fact an extra fee determined by the type of card that is used. Processors that promise "free" equipment usually get their money back by adding excessive charges on monthly statements, charging inflated fees, and marking up interchange costs. Additionally, the "free" terminal may still carry an arrangement where there is fee (sometimes amounting to thousands of dollars) if the contract is terminated and the terminal is not returned in brand-new condition, which is of course impossible. Additionally, most "in store" salespeople for processors are actually independent contractors who get paid to sell you the machine, and have no connection once the lease is sold to another company. Therefore, they can promise you just about anything to make you sign, and the processor is not liable for any claims or actions of the salesperson since they are not really an employee. In fact, there are some door-to-door salespeople who may be agents of multiple processors, and who will sell you whichever one offers the best commission. As such, an ISO can be a complete ripoff bordering on a scam, and sell you an onerous contract that is nearly impossible to get out of.
Most processors also offer online credit card processing and ecommerce merchant services, but there are usually differences in rate schedules owing to the way cards are presented. Online card processing is riskier because the card is not present, receipts do not get signed, and the card is not physically swiped through a card reader. The chances for fraud and chargebacks increase significantly with online merchant transactions. As a result, the rates for online approvals may be a percentage point (or more) higher. Nonetheless, e-commerce acceptance is still very profitable for millions of merchants. After a certain threshold, you may be looking to move away from PayPal as a processor for online sales, and seek out a more customized merchant account for better rates, as long as you are able to absorb the customer service issues that come with getting your own online merchant account.
What are some of the credit card processing trends for 2013? We are planning to explore more issues related to card processing, including the EMV requirements that come into effect on April 1, 2013 and will herald a deluge of new cards being issued in the US. These cards will have NFC chips, contactless capabilities, and contact pads that allow them to be inserted into PIN pads and other accessories designed to make card processing safer. There is even a question as to whether you will need to enter a PIN number when you use your credit card, as people need to do in Europe. We are also covering topics like professionialism in the industry.