With consumers increasingly expecting the convenience of being able to pay with credit cards and mobile pay technology, it’s more important than ever to make sure you’re working with a payment processing company that’s not overcharging your business. Having said that, it’s not always easy to figure out where your money is going with payment processing. To help you make sense of where your money is going (and make sure you’re not paying too much), here are 5 ways you pay to accept credit cards and what to look for.
1. Payment Terminal “Hardware”
In order to accept payments, your business needs a payment processing terminal. The terminal is what takes the info from the customer’s credit card, encrypts the data, and sends it into the internet ether where your payment processing company then facilitates a process that ends with you getting money in your bank account. None of that happens without the right equipment.
The most important factor here is getting a terminal that fits the needs of your business. There’s no sense purchasing an expensive POS system if you don’t need it. On the other hand, don’t try to get by with a simple credit card swiper if you run a restaurant or a retail location with a large product catalog. Modern POS systems offer a lot of features that can actually save you time and money—it’s worth paying extra if you need them.
Once you figure out what type of terminal you need, determine your true cost by determining whether you’re required to purchase it, lease it, or whether it’s free or included as part of a monthly subscription with your payment processing company.
Just as important as the physical payment terminal itself is the software it’s running. In days past, you had to license on-premise software, oftentimes for exorbitant up-front fees. These days, most software is cloud-based and delivered as software as a service (SaaS). This not only splits the licensing cost up into smaller chunks, but also covers the costs of upgrades and support—or at least it should.
When figuring out software-related costs, you’ll want to determine whether you need to pay an upfront licensing fee or whether the costs are included in a monthly subscription. You’ll also want to know what features the software includes, and whether it can integrate with other apps, which leads us to our next category.
3. Integrations and Apps
Today’s high-tech payment terminals can do way more than just process credit cards and print out receipts. Want to collect customer email addresses so you can send out marketing campaigns? There are apps for that. Want to run a loyalty rewards program? There are apps for that, too. The question is whether the apps can be integrated with the hardware and software supplied by your payment processing company, and then, of course, how much they cost.
SpotOn is unique in that it includes its entire customer engagement software platform with every payment processing terminal—merchants get the hardware, software, and apps for one monthly platform fee.
Most companies require you to purchase or license integrations and apps separately. This à la carte approach can bloat your monthly costs in a hurry. In addition, many of the integrations don’t actually integrate all that well, requiring you to log in to multiple accounts just to access them.
4. Your Payment Processing Discount Rate
A whole slew of parties are involved in transferring money from the issuing bank of a customer’s credit card to your bank account: your payment processor, the credit card brand, and the issuing bank of the credit. The cost associated with that is you have to pay a small fee for every credit card or mobile pay transaction—this is what’s known as your discount rate, since the money is discounted from the payments you receive from credit card purchases.
Your discount rate begins with a fixed cost, known as Interchange, which is determined by the credit card companies and is the same no matter who you work with as your payment processor. However, payment processing companies do add a markup to cover their business costs and turn a profit.
If you’re working with a reputable processor, they will set you up with a rate that is correct for your type of business and the financial risks associated with it.
If you instead saddle your business to the wrong payment processing company, their high markup can cripple your business by gutting your revenues.
You want to make sure your payment company is transparent with their processing rates and that you educate yourself about how you’re being charged. Take a good hard look at your monthly statement and make sure you’re being charged a fair discount rate.
5. Other Fees
In addition to your advertised discount rate, many payment processing companies charge additional payment processing fees. Take a close look at a monthly statement and you’ll know you’re being charged extra fees if you see things like authorization fees, statement fees, account maintenance fees, annual fees, PCI compliance fees, batch fees, and even customer service fees.
These sort of fees are generally considered “junk fees,” and what they end up doing is making your true discount much higher than what you were promised. As much as possible, you want to avoid these sort of fees, particularly if you run a small-ticket business, since they can add up to being a huge cost for you.
Ready to get your money’s worth on payment processing? SpotOn never charges junk fees, and our hardware, software, and groundbreaking customer engagement app are all included for one low monthly platform fee.