Shop Around for the Best Credit Card Processing Deal

More of your pumping customers want to pay with plastic. Follow these tips to navigate the murky waters of financial services and collect payments safely, efficiently and for the least amount of money.

Shop Around for the Best Credit Card Processing Deal

Erik Gunn

When Sean Dolan switched careers a few years ago and bought Sanitary Pumpers in Eagle River, Alaska, he made one change right away: He began taking credit cards.

“I knew which direction business was going,” Dolan says. “Everybody’s using credit cards now. That’s the majority of our transactions.”

And that’s why you might want to consider taking credit cards for your business if you don’t already: Increasingly, consumers use them or credit card-style debit cards to pay even routine bills.

With plastic you also get your cash that much faster. Properly equipped, you can make it easy for the customer to pay you on the spot and have the funds in your account within a day, instead of waiting for a check to clear.

Of course, all that convenience comes with a price. And accepting credit cards is a big step if all you’ve ever known is the cash-or-check transaction. But it is probably less complicated than you might think.


Step one is to get a merchant account — the financial service that processes credit card payments and transfers the funds to you. You’ll pay the account provider a fee on each transaction, and you’ll probably pay other charges as well, starting with a sign-up fee.

Local banks were often the starting point for a merchant account, but they might not be your best option, says Phillip Parker, who operates, an informational website that compares merchant account providers.

(Parker’s business offers its ratings and reviews free to website users. When visitors sign up with a particular provider, the site gets a referral fee. But Parker says he does not let that skew the rating process or the reviews, and he has delisted some providers for bad practices.)

For one thing, he says, even if you get your merchant account through your local bank, it’s probably no longer the actual provider.

“Most banks, including huge banks, actually refer that service out to another company,” Parker says. “You are typically not dealing with your bank when you are using their merchant services.”

That also can mean that no matter how well your personal banker knows your business, you won’t be able to count on that with the third-party merchant account personnel. “You’re not actually working with someone super knowledgeable.”

Going through your bank is also likely to cost you more than going directly to an account service provider, he says.


The ballpark fee you’ll pay every time a customer pays you with a credit card is 3 percent. But those rates, along with other fees, can vary by provider.

“The minimum you should really expect to pay would be about 2 percent,” says Parker, who considers 2.5 percent fair. If the fee is over 3 percent, “You’re probably getting kind of ripped off.”

Transaction fee structures can be complicated and not always clear. There’s an industrywide base fee and then other layers the merchant account providers add. The amount of those additional fee segments can depend on things like whether the particular card being processed includes reward points for the cardholder. Merchant account providers aren’t always transparent in how their fees are made up, Parker says.

How you process the card can also affect your fee. If the buyer is using a debit card — even one branded as a credit card — and you can process it by having the buyer use a debit-card PIN, merchant fees are lower.

Another factor is how the card information is entered. If it’s on a website or by telephone, the transaction fee might be higher than if the physical card is swiped through a reader. “The banks see it as there’s less chance for fraud if you’re actually swiping their credit card,” Parker explains.

There may be monthly or annual fees, too. “In my opinion,” Parker says, “you shouldn’t have to pay any more than $15 to $20 a month in monthly fees, on top of processing fees.”

One fee Parker says you should always avoid is an expensive rental or purchase price for a credit card reader. You don’t have to get the reader through your merchant account provider just because it’s offered. Compare the price with readers available on the open market, usually in the neighborhood of $150, he says, and avoid leasing equipment altogether. And watch out for contracts you can’t cancel without paying a huge penalty.

Some merchants impose a surcharge on credit card sales to recapture the transaction fees, but most simply build the cost into their overall pricing.

“I figure if I can get my money from the customer rather than sending a bill out every month for six months, it’s worth it,” says Bill Hardee, owner of Hardee’s Septic Tank Service in North Carolina.


You’ve probably seen more and more businesses swiping cards with a gizmo attached to a smartphone or tablet. Square, a financial services and mobile payment processing company based in San Francisco, is probably the best-known business for mobile credit card readers, but there are a handful of other options.

The online payment processing company PayPal also processes credit card payments for owners of a PayPal account. PayPal offers a mobile reader of its own, although merchants can run credit card purchases through the service without the reader.

When Dolan set up credit card payments, he went with Square and has been satisfied with the results. Most transactions are done over the phone, but he uses the tablet-connected reader sometimes. He also uses a PayPal account for customers who want an invoice sent to them so that they can pay online.

Hardee’s Septic Tank Service has been taking credit cards for more than five years, mainly via PayPal online. About 15 to 20 percent of Hardee’s customers pay with plastic.

“When we complete the work, they can get on our website and go through PayPal to pay the amount,” Hardee explains, even if they’re actually using their credit cards for the transaction.

Because his drivers still use flip phones instead of smartphones — and because of the expense and the delicate nature of regular credit card readers — he’s opted not to send machines out on the road.

“Square and PayPal are really the best for new services just starting out who don’t have much of a credit card volume yet,” Parker says. Their transaction fees tend to be on the higher side, though, he finds. And once your revenue from plastic rises above about $5,000 a month, “That’s when you want to start looking at a more traditional credit card processing company.”


No form of payment is completely risk-free. Checks can bounce, cash can be counterfeit, and credit card payments — despite all sorts of security provisions — can turn out to be fraudulent.

Parker considers the risk of fraud greater for transactions conducted entirely over the internet, where buyer and seller never meet. With face-to-face deals, scams are less common.

Still, sellers need to guard against them. And when someone pays fraudulently with a card that isn’t theirs, the seller must return the funds and lose out on the service or merchandise that was provided in the transaction.

Providers also can impose penalties on merchants who are the victims of fraudulent transactions that result in a chargeback to the account, Parker says. And even legitimate refunds may incur a fee, depending on the merchant account provider.


All those risks can be managed by carefully researching your choices for a merchant account provider, examining the fine print, and then considering your customer base.

Ultimately the decision of whether to take credit cards is up to you. But with electronic payments becoming the norm these days, it’s at least a decision worth thinking about. 


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