Choosing the Right Credit Card Processor: What Every Business Owner Needs to Know

Selecting a credit card processor can be daunting for any business, especially when faced with a myriad of options, from large companies to smaller independent providers. Understanding your needs, the pros and cons of different providers, and key contract clauses can help you make the right choice. This guide will walk you through how to evaluate credit card processors, with insights gained from industry experts.

1. Understand Your Business Needs

Before diving into the details of credit card processors, it's essential to assess your specific needs:

• Transaction volume: How many transactions do you process each month?
• Sales channels: Do you operate in-store, remote / mobile or online?
• Customer payment preferences: Do your customers prefer credit cards, debit cards, or mobile payments?

By understanding these factors, you can narrow down the type of processor that fits your business model.

2. Types of Credit Card Processors

Credit card processors generally fall into two categories: Merchant Account Providers and Payment Aggregators.

• Merchant Account Providers: These companies offer dedicated merchant accounts, meaning your business has its own individual account with the processor. These accounts requrie the business to go through an underwriting process to verify the business is legitimate and in good financial standing.Independent providers often fall into this category and provide customized solutions for small and mid-sized businesses.
• Payment Aggregators: Companies like Square, PayPal, and Stripe operate as aggregators, where multiple merchants share one large merchant account. These companies are the master account holder and have 100% control of every businsses's processing account. These services are typically easier to set up but may come with limitations and higher costs in the long run. Aggregrators do not requrie underwriting to be approved for an account.

3. Advantages of Working with an Independent Processor

Choosing an independent processor, such as those offered by smaller, independently-owned companies, can offer significant advantages:

• Personalized Customer Support: Independent processors often provide more tailored and accessible customer service compared to larger corporations. James Shepard emphasizes that dedicated account representatives and personalized assistance are often missing with mega processors. When you have an issue, you need fast, reliable help — something independent processors pride themselves on.
• Flexibility and Transparency: Independent processors are more likely to offer transparent pricing and customized solutions that match your business's specific needs. They can work with you to eliminate fees through dual pricing programs and offer more adaptable contract terms.

4. Disadvantages of Using Payment Aggregators

Payment aggregators such as Square, PayPal, and Stripe may seem appealing due to their simplicity and ease of setup. However, they come with several potential downsides:

• Higher Fees: Aggregators often charge higher transaction fees compared to traditional merchant account providers. This can add up quickly, especially for businesses with a high transaction volume.
• Account Stability: Aggregators can freeze or terminate your account without notice, potentially leaving your business unable to process payments. This can happen with little recourse, especially for high-risk businesses.
• Limited Customer Support: Unlike independent processors, aggregators typically offer minimal customer service. If you run into an issue, you may find yourself stuck in a slow and frustrating support process.

5. Watch Out for Contract Clauses with Mega Processors

Many large credit card processing companies include clauses in their contracts that allow them to change the terms without notifying the merchant. For example, you may find a clause stating, "By agreeing to this contract, the merchant understands that [processing company] has the right to revise this contract as deemed necessary without notifing the merchant."

This means that your rates and fees could change at any time, and you're expected to comply. James Shepard advises reading contracts carefully and asking the provider about their process for notifying merchants of changes.

6. Conclusion: Making the Right Choice

When choosing a credit card processor, it's essential to balance cost, customer support, and your business's unique needs. While payment aggregators may seem convenient, independent processors often offer better long-term value, particularly for businesses that need dedicated support and transparent pricing.

Pro Tip: Always read the fine print, ask questions about contract clauses, and choose a processor that aligns with your business goals.

By taking the time to evaluate your options and understanding the key differences, you'll be better equipped to choose the best processor for your business.

Advanced Payments Network is an independently owned payments company. Be sure to check out our website at apnetwork.in