As cash usage declines and customers move toward contactless payment methods, many organizations partner with credit card processors to accept payments. However, finding the right credit card processor can be challenging. Buzzwords, aggressive sales tactics and a dizzying array of equipment can cloud the selection process. Unfortunately, some credit card processors aren’t as above board as others and try to scam businesses into paying more than necessary.
We’ll outline six typical credit card processing scams to look for and share tips and best practices for finding a legitimate credit card processing partner to help your business grow.
Evaluating credit card processors can be confusing. As you research credit card processors, watch for the following common scams, hidden fees and other undesirable features that can make your business pay more than necessary.
Credit card processing costs and fees aren’t always transparent. Some payment processors use low quotes to attract business owners and then tack on costs based on transaction types. For this reason, consider steering clear of credit card processors that offer tiered pricing models.
Tiered pricing means the processor separates your fees into three separate categories based on the type of payment method used:
Typically, mid-qualified and nonqualified transactions incur much higher fees that add up over time. Debit card transactions are usually covered under the low-cost qualified tier. However, the processor may list cardless transactions like Apple Pay as nonqualified transactions.
The No. 1 way to avoid hidden transaction fees is to choose a credit card processor that charges a flat rate. If you want to try a tiered-pricing processor, it’s crucial to read the fine print before signing a contract.
Do your best to avoid an equipment lease agreement with credit card processors, even if you don’t have the capital to purchase your equipment.
Leasing equipment means no upfront costs. However, over a few years, you’ll end up paying thousands of dollars. In contrast, purchasing your credit card terminal would cost around $300. Would you prefer paying $300 or $4,000 for your credit card terminal?
If you find that the credit card processor you’re considering is pushing you to lease equipment, your best bet is to keep shopping around.
So what should you do if you don’t have the capital to purchase a terminal? If you have between $100 and $300, do some research and find a credit card machine that suits your business’s needs before talking to a processor about leasing options.
A short-term terminal rental may be worth considering. An even better option is reprogramming the devices you already own.
After gathering the details about your per-transaction rates, ask about surcharges. It’s not uncommon for credit card processors to add fees that aren’t included when they disclose rates.
Surcharges can significantly raise your monthly costs, eventually adding up to hundreds or thousands more than expected. As you review your agreement, pay attention to the “surcharges” section to find unexpected additional fees.
Aside from reading your contract’s fine print, here are some additional ways to avoid surcharges:
Ask about customer support hours before entering into an agreement with a credit card processor. Some sales representatives may be persistent until you sign the contract – and then it becomes challenging to reach someone for support.
Research your potential credit card processor thoroughly to avoid this scam. Get opinions from other business customers, read positive and negative customer reviews, and consult the Better Business Bureau. Additionally, review the processor’s business website for online resources like FAQs, a blog and a knowledge base.
Never let a prospective credit card processor rush you into signing an agreement. If the sales representative you’re working with pressures you with dates or limited-time offers, it’s a huge red flag.
When choosing a credit card processor, you’re searching for a business partner, so always take your time. Many reputable credit card processors will present exclusive offers, but they won’t use offer deadlines to force you into a premature decision.
Steer clear of this scam by taking your time to research more than one credit card processor. Even if a processor initially sounds like the best option, look at at least two others. Base your final decision on research, not pressure from a salesperson.
Card processors may try to sell you specific point-of-sale (POS) system software. Software that can handle all your business operations is appealing. However, adding POS software to your package can drive prices through the roof.
Credit card processors know businesses can leave if they find a better option. However, it’s harder to leave if a business uses a provider’s POS software. Starting over from scratch is a huge hassle when everything is already running.
If a credit card processor offers POS software, ask if it’s compatible with other payment processors. If the answer is no, it’s a huge red flag. While adding POS software to your agreement may seem enticing and convenient, it may cause massive headaches – and cost big bucks – in the long run.
When it comes to small business credit card processing, it’s crucial to understand your needs and evaluate your options. Here are some tips for finding a legitimate credit card processor.
Effective research starts with a solid foundation of industry basics. Before you demo, test or compare any processing companies, build your decision-making foundation by learning how credit card processing works.
Next, consider your business’s stage and goals; sales frequency, volume and predictability; and how much capital you can invest in credit card processing.
Demos can save you time and money and teach you about your potential partner. A demo from a knowledgeable sales rep will answer your initial questions about the company’s hardware and software. Additionally, you’ll learn how the company approaches customer service and if it wants to build a relationship with your business or just wants to sell you a product.
Free trials give business owners and their employees a chance to put the processor to the test in real-world service environments. Testing one or more processors during free trial periods will help you evaluate and compare details before signing a service agreement.
Trial periods give you more experience, confidence and fluency in each company’s terms, flaws and advantages. You’ll be better prepared to review features and ask informed questions.
While researching providers, look to credible third-party sources for more information. The Better Business Bureau (BBB) is a good place to start to assess a company’s reputation and stability.
Pay close attention to customer reviews and recommendations from respected industry players. Their first-hand experiences can save you time, money and opportunity costs.
Contracts and agreements with B2B processors are negotiable. Educate yourself on what to look for in your credit card processing service agreement.
Evaluate the contract’s length, out-of-pocket costs and recurring fees before you start negotiating. And remember that you’re negotiating with a potential future business partner. The end result should be a win-win.
To ensure successful negotiations, keep an open mind. Focus on the big picture and essential contract points, and work with the processing company to ensure you end up with the best contract for your business.
We evaluated the best credit card processors to help small businesses choose the right partner for their needs. Consider the following excellent credit card processors.
Not accepting credit cards isn’t a viable option for most businesses. Your business likely needs a credit card processor to operate. But that doesn’t mean it also needs a tiered pricing model, licensed POS software, or hidden fees and surcharges.
Remember that credit card processing is a tool to help you serve customers and increase revenue. Research potential credit card processors thoroughly, ask for software and POS demos, and request a free trial.
The more you educate yourself before signing a contract, the more likely you’ll partner with a company that fits your needs and doesn’t try to scam or trick you out of your hard-earned money.
Dachondra Cason contributed to this article.