Progressive Payment Solutions

The Ultimate Guide to Choosing the Right Credit Card Processor in Five Steps

Learn how to save time, money, and stress when you accept payments by card.

Credit card processing probably isn’t something you spend much time thinking about.

As a daily occurrence for many businesses, the customer automatically goes through the steps:

Swipe, dip, or tap the card. 

Press “OK” to accept the total.

Done! …All without a second thought.

But the fact is, the average business overspends on credit card processing by nearly two thousand dollars per month.

That’s why processing is something you may want to rethink, since spending a little time choosing a credit card processor will save you time, money, and stress.

PPS wrote this guide to help you increase revenue and save time

To make it as easy as possible, we’ve identified five key areas when it comes to credit card processing that make the biggest difference for your business. We broke each of them down and included practical advice that will help you pay less and get more.

Table of Contents

Why credit card processing matters

Almost every merchant accepts credit cards—whether they’re offering products and services face-to-face, online, or on-the-go. Every time you process a credit card transaction, you’ll pay a fee that’s a percentage of the transaction amount.

Taken together, these fees are one of the biggest “hidden” costs in your business—somethines accounting for 4% or more of all the credit card transactions you have. 

What does that mean to your bottom line? Simple: If you can reduce your fees just a little, then you can enjoy substantial savings–up to $20,000 or more per year.

Let’s get into it.

Understand what you will be charged to reduce your fees

Credit card payment processing is complex. When a customer pays by credit card, the behind-the-scenes transactions involve numerous areas including the issuing bank, the receiving bank, the payment processor, the card network, and many more. Fortunately, you don’t need to understand those processes to accept a payment. 

Instead, it’s important to look at how credit card processors are going to charge you to make all of that happen. We’ll start by discussing the two main pricing structures, then explore additional fees like monthly, annual, and per-occurrence fees.

Pricing structures for credit card processors

There are two main ways that credit card processors charge merchants like you to take card payments from customers: “Tier” pricing and “Interchange” pricing. 

Interchange pricing will always be your better option, which we’ll explain why below. 

We’ll also cover Zero-Fee Processing which has grown 86% in the last five years.

Tiered pricing and how it works

Tiered pricing separates your credit card payments into different “tiers” or “buckets” and then charges for each bucket of transactions at a different rate. For example, tiered pricing might have a different bucket for:

  • Debit cards taking money directly from a bank account.
  • Standard credit cards that are used to pay in person through swiping, embedded chip, or contactless. These tend to be known as “Qualified” payments.
  • Card payments that are typed in by hand, for example receiving an order via telephone. These tend to be known as “Mid-qualified” payments.
  • Card payments from online transactions, international credit cards, corporate cards, or reward cards. These tend to be known as “Non-qualified” payments.

Depending on the source, type, or other aspects of the credit card or customer, a payment processor determines the cost by selecting which tier a transaction is assigned to

This is where we get to the problems with tiered pricing.

Here’s why tiered pricing is often a bad choice:

  • Payment processing for each tier is charged at a different rate, so “Qualified” payments may be charged at 2.3%, while “Non-qualified” payments are charged at 3.5%.
  • It’s very common for transactions to be “downgraded” or moved from one tier to another with a higher cost.
  • Payment processors tend to group card transactions into each tier at their own discretion.
  • Processors can change tiers and processing costs whenever they want.
  • It’s very difficult for merchants to get the data and know which tier each of their payments falls into.
  • Processors will often list their best tier rate to attract merchants, even though most transactions will not fall into that tier.

This tends to result in much higher credit card processing fees for merchants than they would need to pay under the interchange system.

Why Interchange Plus pricing will save your business money

Interchange Plus processing is much more transparent and straightforward than tiered pricing. Here’s how it works:

  • The major card networks (MasterCard, Visa, AMEX, Discover) have a standard “interchange” rate to process payments. 
  • The networks apply the same interchange rate to every card payment or transaction.
  • The payment processor adds on a small, additional fee (The “Plus” in Interchange Plus) for the services they provide.
  • The merchant then pays this combined fee for credit card processing for every transaction. 

That’s it—there are no tiers or buckets, just standard prices

The Interchange Plus process is much more transparent and gives merchants greater visibility and control of their costs.

Of course, there are very slight variances. Interchange fees do vary between card networks, so you may pay a slightly different fee for processing an AMEX card compared to a Visa card. It’s not an identical processing rate for every card you accept. 

You might also pay slightly different rates for cards that you process in person via swipe or chip compared to payments you take via other means, such as online. The important difference from tiered pricing is that with Interchange Plus pricing you will know these fees up-front and can check they’re being applied correctly.

It’s worth spending some time understanding the different processing rates for each card network and checking your transactions on a regular basis.

Zero-Fee Processing pricing: the easiest way to increase your revenue

You’re guaranteed to save the most per month with Zero-Fee Processing because, as the name suggests, your business doesn’t pay any processing fees. Here’s how it works:

  • Your posted rates are now considered the discounted price for payment by cash or check.
  • When someone pays by credit card, they will not be taking advantage of the discount and will pay the full amount (usually around 4% over the cash price).

By using this type of processing, your business no longer has to pay credit card processing fees and your profit margins increase immediately. Use our savings calculator tool to see how much you’ll save each month by using Zero-Fee Processing.

If you decide to use Zero-Fee Processing, it’s very important to follow some rules:

  • You cannot implement Zero-Fee Processing on your own. It must be through your provider, since there is a chance you can profit additionally off the credit card transaction. That would be considered surcharging and is illegal in many states. There is also a long process to get your business approved to be able to surcharge.
  • A sign must be posted at the location the payment is being received, or if you are invoicing someone, it must be shown on the invoice. 

Not following these rules can result in your payment processing account being shut down and you may also need to pay punitive fines levied by the credit card networks. That’s why we recommend getting help from PPS to eliminate processing fees with Zero-Fee Processing.

If you want to eliminate paying processing fees, then contact PPS today. The average business saves $1,686 per month on fees by using Zero-Fee Processing.

Flat fees charged by credit card processors

Most credit card processors will charge flat fees for you to use their payment services. If you’re not being charged a monthly flat fee, then they will certainly charge you more for your interchange or tiered payments. 

These fees do vary between processors, and are often charged on a monthly or annual basis. These types of fees may include:

  • Monthly Service Fee from the processors to provide support and services.
  • Annual Fee from the processors to provide support and services—these are typically a red flag and should be avoided. 
  • Statement Fee for mailing out paper statements to merchants. You can often avoid this by getting statements emailed to you.
  • Fixed Acquirer Network Fee (FANF) or MasterCard Merchant Location Fee are charges made by the Visa and MasterCard networks that are often passed on to the merchant.
  • PIN Debit Network Fee for accepting debit cards with Chip and PIN transactions.
  • Terminal/Equipment Fee if you’re renting equipment from the payment processor.
  • POS Software Fee if you’re using Point of Sale software provided by the payment processor.
  • Payment Gateway Fee for online transactions, the virtual equivalent to the terminal or equipment fee for ecommerce sales.
  • Monthly Minimum Fee if you don’t process a certain volume or amount of transactions in a month.
  • PCI Compliance Fee to meet regulatory and compliance needs for processing credit and debit cards.
  • IRS Reporting Fee for reporting transactions to the IRS.

In our decades of experience at PPS, we have found that most merchants should not be paying more than about $35 to $40 a month in total for all of their ongoing fees and costs.

Some of these fees are reasonable, while others, like an annual fee, may not be. It’s important to understand how much these ongoing fees add to your overall payment processing costs.

Setup and incidental fees charged by credit card processors

Credit card processors may also charge you setup fees and per occurrence fees if particular activities happen within your merchant account. These fees can include:

  • Application and Setup Fee for opening a merchant account, providing you with equipment, and similar services.
  • Early Termination Fee if you cancel your contract with the credit card processor.
  • Account Closure Fee charged when you close your account, even if you’re not closing it early.
  • Address Verification Service Fee for online transactions to help avoid fraud.
  • Retrieval Request Fee that will be charged prior to a chargeback fee.
  • Chargeback Fee for credit card transactions that are challenged or disputed by the customer.
  • Batch Fee when you transmit transactions for processing.
  • Non-Sufficient Funds Fee if you’re not able to pay for processing services.
  • PCI Non-Compliance Fee for not meeting regulatory standards.

Just like the ongoing fees we mentioned above, some of these fees are reasonable and others are not, while still more are often overcharged, like PCI. Fortunately, there is a way to understand and compare the fees charged by different processors. 

Understanding and negotiating the “Total Cost of Ownership” for processing your card transactions

As you can see, payment processing fees can be very wide-ranging. If you want to save money on your credit card processing fees, then there are five steps that you, or we, can take.

Read through your payment processing contract

Go through your contract and fees line by line to understand exactly what fees you’re being charged, how often, where they come from, and why you’re paying them. 

Understand your Total Cost of Ownership

Your TCO is the sum of all the fees you pay to process cards. It includes your per-transaction pricing, ongoing fees, per-occurrence fees, and any other fees you pay. The TCO is what matters most when trying to bring your costs down, as all of these fees impact your bottom line. 

Audit all of your fees

Once you understand your TCO and contract, you’ll need to look through your credit card processing statements to ensure your fees are being applied correctly. This means analyzing what fees should and shouldn’t be charged and seeing how that impacts your transactions.

Compare to other providers

You can use your TCO and audit to look at fees across other providers. You’ll need to complete a like-for-like comparison so you can see how much your fees are likely to increase or decrease with another provider.

Negotiate to reduce fees

Finally, once you’ve shortlisted other providers, you can negotiate various fees based on the type, value, and quantity of payments you send through the processor. Many credit card processors will be happy to reduce some of their fees for the guarantee of future business.

Understanding and analyzing all of these areas can take a lot of time, resources, and effort. That’s where we can help, by providing a fair comparison between our services and what you’re being offered by your current credit card payment processor. 

We can eliminate your processing fees

Here at Progressive Payment Solutions, we can bring down your TCO. Our comprehensive services are designed to save you money. We’re experts at developing customized merchant payment services, including some of the lowest fees you can find anywhere. We’ll compare our services to your current provider and highlight differences in your contract, TCO, actual fees paid, and more—all at no obligation to you. 

Review your contract terms so you don’t get locked into a bad deal

Credit card processors have long and somewhat complicated contracts. These agreements will provide the exact terms and conditions you’re signing up for when they process payments on your behalf. Your payment processing contract will define the fees you pay, but will also contain other vital information on how you and the processor will interact. 

It’s important to understand your processing contract and not to get locked into a deal where you have to pay too much or meet unfair conditions.

What to watch out for in your credit card processing contract

The length of some contracts means it can be difficult to focus on the most important information. While you should read and review your whole contract in detail, here are some of the more important areas where you’ll need to pay attention.

Year-to-year and multi-year contracts

Payment processing providers love to lock you into a long contract. This makes it much harder for you to shop around for a competitor with lower fees and better services. It also means they can charge you an early termination fee if you do decide to go elsewhere.

Avoid multi-year and annual contracts and get a monthly contract if possible.

Early termination fees

Many payment processors that provide longer contracts will have prohibitively expensive early termination fees that you will need to pay if you want to stop using them. Even if a contract doesn’t have an early termination fee, you should still read through the account closure section in detail so you can understand what’s involved if you decide to change providers.

Avoid contracts with early termination fees.

Auto Renewals on annual and longer contracts

It’s not just the length of time you originally commit to using a processor for, it’s also the renewal process for staying with them. These renewal terms can lock you in from year to year, or even longer.

See what the renewal terms are on your contract and ask for monthly renewals.

Tiered vs. Interchange Plus pricing

Our section on rates and fees explains why tiered pricing is generally a bad idea. Tiered pricing is still a common charging method throughout the industry, so double-check how you’re likely to be charged.

Always get Interchange Plus pricing if you can.

Inflexible rates that rise over time

Some contracts will not guarantee that your rates and fees will stay the same for the life of the contract. Instead, these processors lock you in but can still raise rates periodically, meaning that you pay more with little recourse.

Make sure that rates don’t get raised automatically at the provider’s sole discretion.

False promises of “free” credit card equipment

Many providers will offer you free credit card processing equipment. Unfortunately, this equipment isn’t really free. Instead, the cost is spread out across their other fees, so you’re still paying it even if it’s not specified as a separate cost. Additionally, this “free” equipment is typically only offered through annual or longer contracts, locking you in for the entire period.

It’s almost always better to buy or rent the equipment separately from the contract, as you’ll actually reduce your overall costs and won’t be stuck with one processor.

Liquidated Damage Fees

These fees can destroy a merchant business. If you ever see “damage fees” listed anywhere in your contract, immediately run the other way.

These fees could mean you’ll continue to pay average processing fees to the provider whether you use them or not.

We keep our contracts simple, straightforward, and fair

PPS knows that contracts can be confusing and difficult to understand. That’s why we insist on keeping things simple for our customers and always being fair and transparent in our pricing. We offer month-to-month contracts, and we’ll explain all of your options when it comes to areas like equipment rental, termination fees, and more.

Make sure your credit card processor isn’t holding onto your funds for too long

Once a customer makes payment with a credit or debit card, you want to get that money into your merchant bank account as quickly as possible. The time it takes for you to get access to your funds depends on something called “batching.” Taking advantage of batching means you’ll get your money that much faster.

Batching and next-day funding make it possible to access your funds quickly, but you also need to know the limitations.

How the credit card batching process works

Getting your funds quickly relies on a process called “Batching Out.” Here’s how it works:

  1. Your customers make payments on their cards throughout the day.
  2. At the end of the day, after sales are completed, the merchant initiates the batching out process.
  3. During this process, your credit card equipment and software send your batch of credit card transactions for the day to the bank for processing.
  4. When the bank receives the batch, that is when the transactions are actually charged and applied.
  5. A bank charges a fee each time it processes batch transactions, so many merchants batch just once a day.
  6. Once the batch has been completed and the bank has processed the transactions, the process of transferring money from the credit card to your merchant account begins.

Many payment processors promise to provide your funds on the next working day. Unfortunately, it’s not quite that simple. 

Make sure you understand the batching out process and terms for your credit card processor.

Approval for next-day funding

Next-day funding can be difficult to get. Merchants will typically need to apply for this funding with their payment processor, and acceptance is not guaranteed. It often relies on your company type, sending a certain volume or number of transactions, and your past processing history. Unless you can meet these requirements, you often need to wait longer for money.

Negotiate with your processor to see if there’s any flexibility to get access to next-day funding. 

Batching times for next-day funding

Another important aspect of next-day funding is the batching out cut-off time. This means merchants need to send their batches before a certain time, typically 7 p.m., in order for funds to be released on the next working day. If you’re not able to batch by then, this will delay transaction processing.

Take note of your batching cut-off times so you can ensure you batch and send all your transactions for rapid processing.

Processing fees for next-day funding

Some payment processors might charge you for next-day funding; that’s something you want to avoid. Next-day processing should never cost you a cent more from your payment processor. 

Never accept an additional processing fee just to get access to your funds more quickly.

Networks for next-day funding

Not all credit card processing networks offer next-day funding. Only select payment processors work with the right partners to get you your money quickly.

Ensure that your payment processor is on the right networks to allow next-day funding.

We’ll provide next-day funding

Here at Progressive Payment Solutions, we make it easy for you to get next-day funding. We have a comprehensive next-day funding program so you get fast access to your earnings. 

Choose equipment with strong security and a great set of features

A vital part of credit card processing is the equipment you use and the software you run on it. The right type of secure payment processing tools will ensure you’re able to process credit cards securely and remain compliant with PCI rules. The type of equipment and software you may need could include:

  • Swipe / Chip and PIN / Contactless machines for accepting payment.
  • Card readers that can be attached to mobile devices for payments-on-the-go.
  • Point of Sale systems that allow you to take payment and also provide additional features.
  • Virtual terminals for accepting payments online.

You can rent or purchase various types of credit card processing equipment, and this is often a much better idea than getting equipment for “free” as part of an annual or multi-year contract with a processor.

PCI compliance and fees

The payment card industry (PCI) has a set of standards that all parties need to meet to process credit cards. These standards make sure that payments are secure and protected. As a result, the various equipment and technology used for taking payments must be PCI compliant. Payment processors will charge you a fee for you to be PCI compliant.

You will need to renew your compliance every year, and not every processor will be willing to help. You should talk to your payment processor about their approach to PCI compliance to ensure you meet all the regulations.

Ensure that your provider offers PCI compliance as a standard service and that they will ensure you meet regulations.

Free equipment with long contracts

Many payment processors will offer equipment if you take on an annual or multi-year contract. In every case, it’s much better for you to buy the equipment yourself and enter a month-to-month contract. This will help you avoid being locked into one processor and means you can switch if you find a better deal elsewhere. You might think about renting equipment, but even that means you’ll end up paying much more for your technology than just buying it outright. 

Many providers will offer more equipment than you need, or lock you into a contract. Make sure you buy your own equipment according to your needs.

Equipment locked to a processor

If you get your equipment from a processor it will often be locked to work only with that particular provider. This will stop you from switching easily to another payment processor.

When you buy or rent equipment, make sure you can use it with any payment processor.

We provide PCI-compliant equipment with no strings

Here at Progressive Payment Solutions, we provide equipment that’s right for your business–whether that’s a simple card reader all the way to a fully-integrated POS system. Not only that, but we will also install it for you so you’re ready to go. Plus, we’ll help you with your PCI compliance and ensure you’re not locked in. 

Get the customer support you need for credit card processing

Finding the right payment processor isn’t just about the fees you pay, the contract you’re in, or the equipment they offer. It’s also about how good they are at providing customer support, since things can go wrong that can cost you sales and customers. Credit card payments can be complicated, and you need a processor who can help you if you have any questions and ensure you’re getting the best services.

You’ll generally get much better services from smaller payment processors that get to know you and your needs. 

Getting in touch

Sometimes you want an immediate response via telephone, other times you can wait a little longer. Review the various ways of contacting your credit card processor and ensure they have communications channels that are suitable for you.

Test out a payment processor’s contact options, see how fast they answer, and make sure they get back to you quickly.

Customer service availability

You might be taking payment at all hours of the day or night, or be doing your batch processing at an unusual time. You’ll want a processor who’s available when you need them. See if they have an emergency line that’s available outside normal working hours.

Look for a payment processor that has 24×7 customer service.

Resolving payment and processing issues

It can be frustrating not to get through to a processor or to have to call them multiple times. What you need is a processor that can resolve your issues the first time you call them, so you can get back to running your business.

Seek out processors that can solve problems at the first point of contact.

We’ll make it easy to get in touch

Here at Progressive Payment Solutions, our customer service is US based and knows your business personally. That means we’re ready to solve problems as soon as they pop up. So whether it’s getting you the right support when you call, responding to your questions, or being available 24/7, PPS has you covered.

As you can see, spending some time finding the right credit card processor can save you time, money, expensive contracts, and unnecessary fees. This will bring your total cost of ownership down and free up more of your money to grow your business.

PPS wants to help. We saw how big processors were taking advantage of businesses, and we hated it. That’s why we’re founded on the belief that credit card processing should be simple, affordable, and honest.

We started our family-owned business two decades ago to help businesses like you get the best rates and the best service possible. Chat with us today to learn how we can reduce your fees, provide a friendly contract, minimize equipment costs, and delight you with our customer service. There’s no obligation, and we’ll show you just how much you can save.

About PPS

Progressive Payment Solutions was founded in 2004 with a simple mission: To help our clients run their businesses more efficiently by reducing costs and providing unbeatable customer service. From our headquarters in New Jersey, we provide payment solutions across America.

From the beginning, Progressive Payment Solutions has lowered processing costs in offering merchant services to B2B, professional services, eCommerce, and retail verticals. We take the time to understand our clients’ expectations and then recommend personalized solutions that exceed them. As an industry leader, we live up to our name by helping our clients progress via the latest credit card processing technology that enhances cash flow and grows their business.

PPS Will Save Your Business Money on Processing Fees, Guaranteed.

Let Us Show You How Much Today.

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