What should business owners look for in credit card processing companies?

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At some point, most companies offer their services and products on credit, which means they need to find a credit card processor. With the services of credit card merchant processors, they can accept physical cards, digital wallets, and even other contactless payment method alternatives.

What is credit card processing?

Credit card processing is the use of software from specialized companies to provide goods and services to customers in exchange for payment via cards, wearables, and phones.

How does credit card processing work?

Although card payments are typically processed in seconds, a complex procedure occurs in the background, including approval and verification.

A credit card processing system comprises the card terminals, the payment processor, the merchant account, and the card-issuing bank. The card terminal reads customer transaction data in the store and shares it with the processor, who then sends it to the card-issuing bank for verification. The bank then sends back approval to the processor, who signals the terminal to accept the payment. The card processor sets up the merchant account, which stores funds from your credit sales.

A bankcard network transmits billions of transactions’ data between retailers, processors, and banks, with processors using a variety of security algorithms.

Understanding how card processing works is vital because charges are levied at various points throughout the system. Ultimately, you want to choose the company that provides the best services at favorable rates.

Payment processing fee

For their services, card payment processors charge a monthly or daily fee. The pricing structure, the particular processor, and their markup determine the overall amount.

Most card payment processors deposit the money from the transactions within a day; however, some opt to keep the money for longer to ensure no fraud or other risks are involved. You can compare the effective rate from various payment processors to keep your expenses low.

What is a good effective rate for credit card processing?

The effective rate is calculated as the total processing fee divided by the total sales volume. It is the sum of the processor’s markup, the transaction fee, and additional costs stated as a percentage.

Your effective rate should be between 3 and 4 percent. An effective rate higher than 4% could be due to the following reasons:

  • Your business has been designated as “high-risk.”
  • Hidden costs
  • Small total sales volume
  • International transaction charges
  • A high markup

Businesses with poor cash flow, low credit, severe chargebacks, or poor processing patterns are often classified as “high-risk” and incur hefty credit processing fees and additional terms and conditions.

In some circumstances, there are steps you can take to avoid the “high-risk” classification. On the other hand, if your entire industry has been classified as “high risk,” there may be nothing you can do about it.

That said, checking different processor fees and terms and conditions might help find a favorable credit card merchant processor. Here’s how to select a credit card processor.

Here’s a look at the factors to consider when picking a credit card processor:

Transparent fee structure

Every business cares about money, but it’s the smaller businesses that suffer the most from added expenses and levies. Although each card payment processor has different upfront prices, credit card processing fees are generally complicated.

Determining if a card payment processor levies a fixed per-transaction charge or a monthly fee is a smart place to begin. Processors without a fixed rate may charge various rates for various card kinds, resulting in additional expenses. On the other hand, depending on the goods you are selling, and how clients pay for them, fixed per-transaction charges can start eating into your revenues. After all, the overall per-transaction fees depend on the average volume of each transaction.

Whatever rate option you select, pay close attention to your monthly statements and tally up your card processing expenses to determine whether switching to a provider that charges a set monthly payment plus a somewhat lower per-transaction fee could be worthwhile.

Give the provider’s fee structure a thorough analysis. In addition to transaction fees, other processing charges, such as compliance fees, statement fees, interchange fees, gateway access fees, and cancellation fees, may be charged. Ask questions because not all providers impose these fees, and some who do are not always upfront about them.

Anti Fraud tools

Regardless of your business’ size, you shouldn’t relax on customer information security and fraud prevention. Fortunately, the majority of card payment processors offer security services built right into their platforms.

In-store transaction fraud solutions rely on EMV chip technology, which stores card information in integrated smart chips, rendering forgery rather more difficult than when using magnetic stripe technology.

As extra security measures, make sure the payment processor can implement tokenization and encryption because cardholder data theft and malware at the point of sale cannot be stopped by EMV alone. While at it, make sure Payment Card Industry Data Security Standard compliance is up to par.

Flexibility

Flexibility is crucial. You want to be able to implement several payment options to meet the needs of your organization. Check that the credit card processor offers options for accepting payments through physical, contactless, and digital wallets.

You’ll probably link your card processing system directly to your POS system for simplicity of usage and reporting purposes. Some card processors provide a POS system that connects seamlessly to their platform and hardware, while the rest offer a selection of partners. Choosing POS software comes down to your company’s requirements and the intricacy of the inventory. Finding a processor that offers additional services like billing, bookkeeping, and reporting is essential.

Additionally, check to see if the processor merchant has a strong partner network outside the point of sale since this will make linking to services like Shopify, Xero, and BigCommerce simple.

Customer Support

Customer support is essential. Choose a credit processing company that’s there 24/7 when you need help. They should provide an account representative you can talk to at any time.

What does Payline offer?

Payline is an experienced credit card merchant processor with transparent fees and flexible PCI-compliant solutions to help you accept various forms of payment. We provide solutions such as:

  • Shopping cart integrations
  • Virtual terminals and dashboards enable you to accept payment in various ways, view reports, enter transactions, record customer information, send invoices, etc.
  • Open-faced API to customize our software to your liking

Whether you’ve made up your mind on a credit card payment processor or need a further chat, we’ll be glad to hear from you at (800) 887-3877 and provide answers to any questions. You can also check our FAQ page and blog to learn more about our services.

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