The goal of this piece is to make business owners armed and dangerous when selecting a merchant processor. Although there are various program features to consider when choosing a processor, most business owners place their sole focus on negotiating rates with the processor. What are the top things you should care about when choosing a processor?
1. Relationship. Do you have a person or are you a just a “merchant number” when you call into your processor?
Despite the appearance of consistency, mistakes can and often will happen at some point in your relationship with your payment processor. Technology is constantly shifting at an accelerated pace and smart business owners rely on the advice of a dedicated payments professional for consultation. If something bad does happen whether your terminal breaks or an employee has figured out how to credit their own debit card from your terminal, how quickly will your processor help you?
Bottom line: You have a CPA you trust, an insurance agent, a banker, an attorney, etc. Why wouldn’t you demand the same level of professionalism for your payment processing?
2. Technology. What solutions does your processor advise you to implement to reduce time spent on business processes? Don’t fall victim to the processor who promises savings and not solutions.
Terminals are outdated and inefficient. There is a plethora of payment solutions available that can streamline your business. Do you use Quickbooks for invoicing? Do you have a CRM or POS? Do you have the ability to ACH a checking account? Your processor should be talking to you about these things and helping your business streamline as much as possible.
3. Due Diligence. Learn from other people’s situations and research your options.
Too often, we find that merchants go with their bank because they trust their bank or the bank bullies merchants into thinking they have to keep all services together. The only competitive edge the banks have over most processors is next day funding, but they lack in many other areas. Plus, most processors fund within 36 to 48 hours! Also, we find that merchants choose to go with the person who calls or walks in promising a low rate or fee. If it sounds too good to be true, it usually is. Before signing anything with any processor, remember that Google is your friend. Search the processors name with the words “reviews” after. Also, put together a questionnaire on what is important to your business when selecting a processor just like you would have a list of questions when interviewing an employee.
4. No Termination Fee. There’s no need to lock yourself into a term with a credit card processor!
This is one of the easiest items to negotiate when selecting a processor and if the company you are selecting disagrees with this, don’t select them. Free equipment or upfront investments by your processor usually result in a contract with a termination fee, and many of these contracts enforce an automatic renewal of the terms.
5. Interchange Plus Pricing. Credit card processing is like a retail business:
There’s a wholesale cost and a retail price. However, every processor no matter the size has the same wholesale cost (called interchange) whereas in most industries, price breaks based on buying in bulk are available (ie Chili’s might get a better deal on beef than an independent one location restaurant). The “mark-up” or “plus” part of the pricing is the negotiable part and the only way to keep a processor honest is to demand this pricing structure.
In summary, treat your processor like an employee of your organization. You want someone you trust, you can rely on to show up when you need them, someone that is constantly improving their skills and assets, someone that is looking out for your business, and someone you can develop a relationship with. The best employees don’t come with the cheapest price tags and neither do the best processors (although, the best processors will maintain their profit margin and not ask for raises or increases despite higher costs of living). By being careful in your selection, you will protect your business in the long haul.