How To Choose the Best Credit Card Processing Company

The best credit card processing company for your business strikes the right balance of cost, functionality and support. Processing fees and monthly costs are the obvious starting points when comparing providers. However, considerations such as ease of use, support, integrated sales features and free software can help you spot the best value for your specific needs.

Here are a few questions to keep in mind when you shop for card processing services;

What is your average sales volume per month? Higher transaction volumes equal lower processing fees. A good rule of thumb is once you reach $5,000 in monthly transactions, you can benefit from an interchange-plus or tiered processing service. Before then, a flat-rate service such as Clover can be economical.

Do you sell in-person, online, mobile or combined channels? Where you sell determines your processing hardware and system needs. If you sell in-store, you need checkout registers. If you sell on the go, you need mobile card readers and a mobile processing app or mobile POS. If you sell online, you need a secure payment gateway. If you combine sales methods, you need a payment processing service that seamlessly connects all of your sales within an integrated system.

Do you need free equipment and POS systems? Free equipment and POS software add value to a service, even when paired with higher processing fees. When comparing services, consider what any free perks would cost if you went with a lower-fee processor that doesn’t provide them.

Do you already have registers, terminals and POS software? A processing service that integrates with registers, terminals, POS systems or accounting software that you already use can save in upfront costs and minimize business interruptions.

Is your business high-risk? High-risk merchants generally find the lowest fees with traditional merchant accounts with tiered pricing.

Are you selling restricted items? Many popular card processing services limit what you can sell. If your business falls outside their approved list, you’ll need a traditional merchant account provider.

How fast do you need your funds? Virtually all card processing companies deposit funds within one to two business days, but charge an added fee for same-day deposits. If you need quick access to funds, look for a provider that offers this for free.

Do you need 24/7 support? Most providers offer 24/7 service for network outages and other business-critical events, however, a few limit support at lower plan levels.

Do you sell globally? You need a processing service that supports international cards and exchange rates.

Do you use QR codes, payment links and online invoicing? You need a card processing service with an online portal feature that supports these cutting-edge payment methods.

Do you want to accept e-checks and bank transfers? Look for card processing services that support ACH payments. Source

Credit Card Processing Fees and Costs

Whatever pricing structure they use, processing companies base their pricing on four primary fees. These include interchange fees, assessment fees, processor markup fees and monthly account or statement fees. Knowing what goes into credit card processing fees can help you understand your options and spot the best payment processing service for your business.

Interchange Fees

Interchange fees are set by Visa, Mastercard, Discover and other card brands. These are the unavoidable, base-level costs of processing credit cards. Often called wholesale or base fees, interchange fees generally range from 1% to 2% of the transaction amount. Payment processing companies collect interchange fees during the transaction process. They then transfer these funds to issuing banks as payment for the credit service. Interchange rates vary greatly and depend on the merchant’s industry, the transaction type and the brand and type of card used. 

Here are a few examples of factors that impact interchange rates merchants pay to process credit cards.

• Transaction type: Card-not-present transactions, such as online sales, have higher interchange rates than in-store sales, where cards are physically swiped.
• Debit vs. credit card: Debit cards have lower interchange rates than credit cards because they are considered a lower credit risk.
• Card brand: Discover and American Express have higher interchange rates than Visa and Mastercard.
• Card type: Rewards, corporate and governmental purchasing cards have higher interchange rates than non-rewards cards since these programs cost the issuing banks more to administer.

Assessment Fees

Assessment fees, often called per-transaction fees, are also set by the card brands. These are flat per-transaction fees attached to interchange fees and typically range from 1 to 5 cents, based on the type of card and transaction.

As with interchange fees, assessment fees are collected by card processing companies during the transaction process. However, these fees are paid to the card associations, such as Visa, Mastercard, Discover and American Express, not to the issuing banks.

Processor Markup Fees

Markup fees are what credit card processing companies charge for their processing services. Markup fees vary based on the card company’s processing fee structure, such as a straightforward markup percentage called interchange-plus, complex tiered rates or simple flat-rate fees.

Each fee structure has benefits and drawbacks, which we explore in more detail below. Bottom line, markup costs vary greatly from processor to processor, so it’s essential to shop around for the best deal.

Monthly Fees

In addition to markup fees, many credit card processing companies charge monthly fees for specific services, such as statements, online gateways, PCI compliance and card terminals and other processing hardware. Some roll all of these services under a monthly account or subscription fee.

A few charge no monthly fees for credit card processing services. However, these providers typically have higher flat-rate processing fees that can cost more compared to providers that combine monthly fees with lower processing rates.

Other Costs To Consider

Some credit card processing companies have add-on and conditional fees that can affect your overall processing costs. To avoid surprises on your monthly statement, always check the fine print for add-on fees when comparing credit card processing companies.

• Chargeback fees: Unfortunately, chargebacks are an inevitable part of accepting credit cards and the cost of processing a chargeback varies greatly among processing services.
• Batch processing fees: Some tiered and traditional merchant services providers charge per-batch fees.
• Setup or termination fees: Card processing services with negotiated or tiered rate plans often require contracts with setup costs and hefty early termination fees.
• Monthly minimum fees: Some negotiated and tiered rate plan providers charge a monthly fee if contracted transaction volume minimums aren’t met.
• Same-day funding fees: Most card processing services deposit funds within one to two business days with no added fees but charge a fee for instant or same-day access to processed funds.

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How Does Payment Processing Work?

The process involves several steps and multiple parties. Here’s an explanation of how payment processing works:

1. Transaction initiation

The customer initiates the payment by providing their payment information (e.g., a credit card, debit card, or another payment method) at the point of sale in a physical store, or through an online platform like an e-commerce website or mobile app.

2. Payment gateway

Once the customer submits their payment information, it’s securely transmitted to the payment gateway, which acts as a bridge between the customer, the business, and the payment processor. The payment gateway is responsible for encrypting the transaction data and ensuring the data is transmitted securely to the payment processor or the acquiring bank.

3. Transaction authorization

The payment processor receives the transaction data from the payment gateway and validates the information. It then forwards the transaction details to the acquiring bank, which sends the information to the card network for validation and authorization.

4. Issuing-bank verification

The card network forwards the transaction details to the issuing bank. The issuing bank verifies the customer’s account status, checks the available balance or credit limit, and assesses any potential risks. Based on these factors, the issuing bank either approves or declines the transaction.

5. Authorization response

The issuing bank sends back the authorization response—approval or decline—through the card network to the acquiring bank, which then forwards the response to the payment processor. The payment processor then sends the response to the payment gateway, which communicates the result to the business’s POS system or online platform.

6. Transaction completion

If the transaction is approved, the business completes the sale by providing the customer with the goods or services. If the transaction is declined, the business may request an alternative payment method from the customer.

7. Transaction settlement

At the end of each day, the business sends a batch of approved transactions to the payment processor or the acquiring bank for settlement. The acquiring bank requests the funds from the issuing bank through the card network. The issuing bank transfers the funds to the acquiring bank, which then deposits the money into the business’s account, usually within a few business days.

8. Reconciliation and reporting

The business reconciles the settled transactions with its sales records and any transaction fees charged by the payment processor, acquiring bank, or other parties involved. Both the business and the customer receive transaction records, such as invoices, receipts, or account statements.

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3 Ways To Optimize Your In-Store Credit Card Processing

If you’re accepting cards in store, or in-person, you’ll want to ensure the process is quick and easy. Long queues are a big turn off for shoppers and, in a world of social distancing, unnecessary interaction should be kept to a minimum. 

Here’s how to optimize your card processing in person:

1. Contactless

Tap-to-pay is standard these days, and, since everyone wants to keep their distance, you can take contactless one step further and let customers pay via self-service kiosks.

2. Digital wallets

Digital wallets are easy to use and secure. Apple Pay and Google Pay™️ have the added benefit of helping to blur the lines between online and point of sale transactions so your customer can move seamlessly between the two. Amazon Pay lets customers pay using information already stored in their Amazon account. In all cases, they remove the need for customers to go digging around in their purse.

3. Mobile point of sale (mPOS)

There’s a lot to be said for bringing the payment to the customer and not sending them off to join the back of a queue. Mobile point of sale (mPOS) terminals provide greater flexibility by letting you take payment from anywhere. Now, there’s a new generation of smartphone-style terminals that let you manage several POS functionalities from one device. Source

What Is An Invoice And How To Write One

Most consumers have experience with invoices and don’t give much thought to their creation or components. However, now that you are on the other side of the process as a business owner, you may need an introduction to this vital part of running a successful company. 

Once you know exactly what it is and how to create an invoice, you will find that your operations run more efficiently and your customers are happier.

What is an invoice?

Simply put, an invoice is a business document provided by you, the seller, to the buyer. Its purpose is to request payment for the products or services you have provided. 

In addition to specifying details about goods or services, the invoice also defines the time frame, total due, invoice due date, and any important terms. 

Beyond furnishing this information to the buyer, the invoice also stands as a permanent record of the transaction that can be referred to for accounting, tracking and taxation purposes.

Elements of an invoice.

• Invoices can range from being a bare-bones chronicle of charges to an extensively customized bill complete with logos and branding details unique to your company. 
• Regardless of how simple or fancy you make it, however, the document should contain several important basic components.

Company details.

• Start by showcasing your company details. These should include your name, address, and contact information. 
• Next, indicate similar specifics for the person or business you are billing, including contact or company name, and address.

Invoice details and payment terms.

• Then, be sure to clearly set forth the invoice details. This section is where you will give the invoice number, the invoice issue date, due date, and any payment terms to which the customer must adhere. 
• Be sure to write out an itemized list of the goods provided or services rendered that also specifies the quantity of each one, the unit price, the total amount that is owed for each item, and a brief description if necessary.

Costs and payment methods.

• Finally, don’t forget to talk about payment specifics. Specify the total amount due, including any taxes to be paid. 
• The finishing touch should be to let the customer know what methods they can use to pay, including by mail, via ACH transfer, via your website, recurring invoices, or over the phone. 

Tips for how to write an invoice.

Invoices are more than just bills. When done in a polished, customized way, they can function as ambassadors for your company, enhancing your relationship with buyers, and boosting the reach and scope of your brand. 

Dedicating time to implementing some simple invoice preparation tips will help to expand your business’s reach;

Design.

First, begin by coming up with a design that is in keeping with your mission and brand voice. Be sure that colors and logos are consistent across all channels to create a uniform experience, minimize confusion, and enhance awareness of your unique brand.

Tone.

Second, focus on the transparency and professionalism of your invoice. This can be accomplished by clearly displaying information about your company as well as the buyer you are billing.

Essential elements.

Third, it’s time to get into the meat of the invoice. This is where you carefully define exactly what amount is due and when you expect the payment. 

Essential elements that should appear prominently in this part of the document are the unique invoice number assigned to this transaction, the invoice date when the bill was sent to the client, the date by which you expect the payment, and the agreed-upon payment terms. 

This final detail refers to information about how long the client has to pay the bill. The most common options include net 30 (amount is due within 30 days of the invoice issue date), due upon receipt (client is expected to pay the invoice amount immediately), and net 60 (payment is due within 60 days of the issue date).

Description of products or services.

Fourth, be fully transparent about all charges. Carefully set forth in line items format all of the goods and services for which you expect payment. 

Thoroughly describe each piece of merchandise or service that you provided, the quantity, cost per unit, and the total amount charged for each. 

If applicable, be sure to also specify the amount of tax that is to be charged. In order to make it easy and clear for your customer, include sections for subtotal, tax amount, and total due.

Payment options.

Fifth, now that you have indicated the amounts owed, it’s time to let the customer know about their various payment options. 

These can include by mail, credit or debit card, ACH or wire transfer, online payment through a digital wallet, and by automatic payments. Offering several options increases your chances of receiving the funds you are owed quickly and in full.

Delivering your invoice.

In today’s fast-paced digital world, most invoices are sent electronically via email or text. Electronic invoicing is not only convenient for your customers allowing them to pay using whichever digital payment method they prefer, but it also generally helps you to get paid faster. Sending paper invoices via mail is still necessary for some businesses. 

In these cases, it’s helpful to your customers to give them the options for making their payment online, sending a check, or making a payment via phone.  

Invoices can be as simple or complex as you like as long as they contain all of the essential details elucidated above. 

Even in their most scaled-down form, they serve as effective customer-facing devices that can boost your credibility, make your branding memorable, and inspire your customer to resolve their bill quickly and fully.  Source

The Importance Of Business Credit

Establish a solid credit history for your business to improve your financing options.

It takes money to run a business. But financing isn’t always easy to get: According to a 2023 Federal Reserve Bank report, of the firms surveyed about seeking credit, 58% of white-owned firms, 38% of Hispanic-owned firms, 33% of Asian-owned firms, and 20% of Black-owned firms responded that they were fully approved for the credit they sought.1  There are many reasons firms may be denied credit. Learning about the application process and building a solid business credit history can improve your odds of receiving financing. 

Here are five key elements to address as you build your business credit:

1.) A formal business entity

It’s important to establish a separate business entity that can establish its own credit history. Having a separate legal entity for your business helps to create a credit profile with business credit reporting agencies. Incorporate your business by registering it to establish a separate legal entity such as an LLC, S-corporation, or LLP.

It’s usually a good idea to apply for an employer identification number (EIN) from the IRS to establish additional separation between your business and personal finances, even if one isn’t required. You should consult a tax or legal professional to help ensure you choose the right form of incorporation for your business.

2.) A business banking relationship

Loans are by far the most common form of financing, sought by 53% of businesses. Like establishing a corporation, opening a business bank account helps establish your business as an independent entity.

While lenders may not specifically require you to have a business bank account, it could ease the process of applying for — and paying down — a business loan, line of credit or business credit card.

Having an existing financial relationship with a bank could make the process more efficient.

3.) Trade credit

Opening trade lines with your vendors can help build your business credit. 

Here are three steps you can take to get started;

• Talk to your vendors about opening a line of credit.
• Check with vendors to be sure they report their credit arrangements to the major credit bureaus.
• Submit trade references to Dun & Bradstreet, which tracks business credit, to help ensure that your trade relationships are captured properly.

4.) On-time payments

Just as with personal credit, an established history of on-time payments creates a track record for your business that can make lenders more willing to extend business credit. 93% of companies experience late payments from customers.

• Late or missed payments can harm your business credit score.
• Make all of your business payments on time or early, if possible.
• If you know you’ll need more time to make a payment, speak with the affected vendor or lender right away to work out a payment plan.

5.) Monitoring your business credit score

To ensure your efforts to improve your business credit are working, monitor your score regularly. 20% of small business loans are denied due to poor business credit. By building and maintaining solid business credit, you can stabilize your cash flow and increase the chances your business will get the funding it needs to grow and thrive.

Track your score across the major business credit bureaus:

• Dun & Bradstreet
• Experian
• Equifax

Correct any errors immediately by contacting the credit bureau and filing a formal dispute. Source

5 Steps To Consider Before Applying For Credit

Whether your business is just starting up or preparing for expansion, credit can help support your short- and long-term financial goals. You’ll find that there are a number of benefits to establishing and building small business credit. However, before you apply, it’s important to determine whether your business is ready for credit.

Follow these steps to ensure your business is fully prepared to obtain financing:

Review your credit history

When assessing creditworthiness, both your personal and business finances matter. On the business side, a bank will determine if your business is generating a positive cash flow. On the personal side, a bank will want to know if you are earning enough income to support not only your current debt, but also the debt that you’re requesting.

Before you approach a lender, request a copy of your personal credit report from the three consumer credit reporting agencies (Experian, Equifax, and TransUnion) and your small business credit report from Dunn & Bradstreet. Review your reports carefully for accuracy. If you spot an error, file an online dispute with the applicable agency as soon as possible (within 30 days of receiving your report).

Gather financial documents

Before filling out your application, locate this information and double-check it for accuracy:

• Business revenue reports
• Personal income reports
• Tax returns for the past three years
• Asset and bank account information
• Proof of ownership
• The full legal name of your business

Providing comprehensive and accurate information can help your application move through the process as quickly as possible.

Determine how much capital you need

Be prepared to tell the lender how you plan to use the money. For example, you may explain that you will use the capital to pay for additional office space and furniture or for a website redesign.

Also be sure you are asking for a realistic amount to fulfill those particular goals. The cost of materials has gone up quickly in recent years, so a remodeling project this year may be considerably costlier than the quote you got two years ago. If you’re not sure how much capital to request, consider seeking bids from several companies before filling out your loan application. This information may help avoid funding shortfalls that can sidetrack your business plans and will give a prospective lender a clear, accurate picture of your borrowing needs.

Understand all your lending options

It’s important to identify all the lending options available to you and determine which one is the best choice for your business. You will also want to consider the process and the timing. For example, loan decisions below $100,000 may be based on your credit profile and basic information, while larger amounts may require a detailed review of your finances. Some things to keep in mind:

• Credit cards may be used for everyday business purchases, including office supplies, meals, and travel.
• Lines of credit can help with working capital needs (such as paying for inventory) and maintaining cash flow.
• Term loans are designed for making specific purchases, such as equipment, vehicles, real estate, or renovations.
• If you’re unsure which credit product is right for your business, make an appointment to discuss your credit needs in detail with a banker before you apply.

Consider terms and interest rates

You also have to decide how long you will need to repay your credit. There are short-, medium-, and long-term loans, and they all have positives and negatives. For example, if you expect to be able to pay back the money quickly, a short-term loan may be the best choice. Interest rates can also have a big impact on your decision. For example, loans with fixed interest rates may make it easier for you to budget, as you’ll likely have fixed monthly payments.

Bottom line: Just as planning and preparation can help you set business goals that will help you succeed, planning and preparation can help you apply for and secure the funds needed to reach them. Your banker, accountant, or financial advisor can explain the various trade-offs of loans and credit products — and how their rates and terms can impact you now and in the future. Source