Blog > 6 Ways Small Businesses Can Get the Cheapest Credit Card Processing
6 Ways Small Businesses Can Get the Cheapest Credit Card Processing
Does the thought of spending hard-earned revenue on credit card processing fees stress you out?
Many small business owners find credit card processing fees to be extremely overwhelming.
According to the 2020 Bureau of Labor Statistics, about 50% of small businesses fail within the first four years of operation.
By 2024, credit card payment volume is expected to increase by over 33%, while cash payment volume is expected to decrease to about 27% of all transactions.
Without the ability to accept credit cards, the future of your business could be in serious jeopardy.
So how can you accept credit cards while also turning a profit?
Average costs of credit card processing
Each business has a unique set of fees that they must pay to accept credit and debit card payments from your customers:
- Transaction fees. These fees are typically charged as a percentage of the sales and can range from 1% to 4%. Some payment processors will also have an additional fee below $0.50.
- Service fees. Some payment processors (or MSPs) will charge a monthly or annual fee to subscribe to their services. This fee is paid in addition to transaction fees.
- Equipment setup. Some merchants require a POS machine and a credit card reader. Some processors give you the equipment for free, while others lease or sell the equipment.
- Incidental fees. These are one-time fees that are paid in specific situations like chargebacks, insufficient funds, or special verification services.
Credit card processing pricing structures
- Flat rate. This pricing model allows merchants to pay the same rate for every transaction, typically a percentage and a small fee. This fee structure is typically suggested for low-priced monthly transactions under $5,000 a month.
- Interchange plus. This is a good pricing model for businesses that processes a lot of credit card transactions because there’s tons of room for negotiation. Merchants pay a flat fee per transaction (the processor’s cut) plus an additional percentage that varies based on the fees charged by the credit card companies (also known as interchange fees).
- Tiered pricing. This model is pricy and difficult to negotiate. Experts typically advise against using this model because pricing isn’t transparent. Processors will bundle interchange and tiers pricing, so you’ll pay a variable rate in three tiers, rather than on each credit card type.
The top payment processors for small businesses
- PayPal. PayPal is a simple-to-use payment processor that utilizes a flat rate pricing method with no monthly fees. Customers pay either online, in store, or using the mobile application.
- Square. Square provides retailers with a mobile payment and POS system method of accepting payments. The transaction fees associated with Square vary depending on whether you’re using the POS system or mobile payment method. Square also doesn’t charge any monthly fees.
- Stripe. Stripe integrates to your company’s website or invoicing service and merchants pay a flat rate pricing method with no monthly fees.
- Shopify. Shopify is an eCommerce platform that also offers their own payment processing solution. Customers will pay you through your online Shopify website. Merchants transaction fees will vary depending on which version of Shopify you purchased. Using Shopify comes with many three different versions with varying monthly fees from $29 to $299.
- EBizCharge. EBizCharge chooses their pricing structure based on which option is best for your company and saves you the most money. With 7 different payment features, your business can easily accept credit card payments without worrying about heavy transaction costs or monthly fees.
Here are 6 ways to get the cheapest credit card processing for small businesses:
- Use a merchant services provider instead of a bank
- Choose a PCI-compliant payment gateway
- Integrate your payments
- Get personalized service
- Select a flat-rate pricing option; avoid tiered pricing
- Watch out for hidden fees and mandatory contracts
Prefer to watch it? Check out our video on how to lower credit card processing costs:
1. Use a merchant services provider instead of a bank
A merchant services provider will supply your business with a merchant account so you can securely process credit cards.
Banks don’t always provide their own merchant services. Instead, banks will typically contract out to a third party to process transactions for them, and can even charge you additional fees to hand your business to someone else.
With a merchant services provider, your business can process payments online without having to redirect customers to a third-party website. Additionally, you’ll gain fraud protection to guarantee safe credit card transactions and secure merchant services.
According to the U.S. Small Business Administrations, 82% of businesses that fail do so because of cash flow problems.
Merchant services will help your business increase cash flow and manage finances more efficiently by encouraging a prompt collection of accounts receivable. An efficient merchant service should be able to automatically mark your invoices as paid and update your accounts receivable.
In addition, make sure that your merchant services provider can obtain the lowest charges on business-type and government purchasing credit cards. This will lower your overall costs and ensure the cheapest credit card processing for small businesses.
Lastly, you will need to determine the best way for your small business to accept credit cards. Since processing costs vary by each method, this will likely impact which merchant services provider you choose.
Best way to accept credit cards for small business
When it comes to accepting credit cards for small businesses, all payment methods can be broken down into three categories: in person, over the phone, and online.
- In-person: This payment method is typically the lowest risk option and therefore has lower fees attached to it. In-person payments are usually preferred by small businesses accepting credit cards since they tend to be brick-and-mortar. To accept in-person transactions, you’ll need a POS system and card reader.
- Over the phone: Since these transactions require a merchant to gather credit card information over the phone and manually enter it into a card reader, they’re typically more high-risk and incur higher fees. Despite this increase in cost, these payments are still used by small businesses, especially in the restaurant and food industry.
- Online: Like over-the-phone payments, online transactions include higher fees. For any small business taking credit cards online, you will need to set up an eCommerce website and choose a reliable payment gateway.
While it’s crucial to choose the right payment methods and merchant services for small businesses, finding the right software is just as important. Finding a payment gateway that allows you to securely process credit card payments will also be very beneficial.
2. Choose a PCI-compliant payment gateway
Essentially, a payment gateway is cloud-based credit card processing software. It facilitates credit card transactions, linking transaction information between the credit card network and the card-issuing bank to authorize the payment. Once approved, the payment gateway passes funds from your customer’s credit card into your merchant account.
Since this process deals with sensitive credit card information, it is crucial to ensure that data is being handled by a PCI-compliant payment gateway.
A PCI-compliant payment gateway should utilize both tokenization and encryption technologies and meet all PCI specifications set by the Payment Card Industry. This ensures that credit card information is being protected throughout each stage of the transaction process.
A payment gateway that is not PCI compliant can result in severe data breaches and cause thousands of dollars in credit card fraud.
Processing with a PCI-compliant payment gateway minimizes security risks and protects your business from hefty fines. The fine for not being PCI-compliant can cost your business as much as $100,000 per month in fees.
3. Integrate your payments
Rather than processing transactions outside of your accounting software and manually marking your invoices as paid, you should consider a provider that offers a way to process transactions within your ERP/accounting software. This eliminates double data entry and the potential for human error.
Integrating your payments can automate the process and provide you with more time to focus on current customers and bringing in new clients.
Small Business Digest reported that 91% of small to medium business owners with integrated payment systems reduced back-office expenses by at least 21%.
4. Get personalized service
As a business owner, your time is valuable. Find a provider that can do it all.
If their idea of customer service is an outsourced phone number or email address, then stop and say no thank you.
In fact, according to the American Express Survey, 67% of customers are unable to resolve customer service issues when they cannot talk to a live person. What’s more, the average American spends nearly 43 days on hold in a lifetime.
Can you afford to lose more than a month of revenue waiting on hold?
Personalized service can help guarantee the cheapest credit card processing for small businesses.
Avoid the middleman and get straight to the source with an in-house customer support team. You’ll have the privilege of speaking with a live representative who will be able to process your inquiries and quickly resolve any issues with your services. You should also know your relationship manager and contact them directly with any questions regarding your account.
Also, choose a provider that offers an all-in-one solution. They should develop their own integration and payment gateway and provide payment processing for your business. This avoids third-party complications and allows for prompt, in-house customer support.
5. Select flat rate or interchange plus pricing; avoid tiered pricing
Before you decide to do business with a merchant services provider, make sure they offer flat rate pricing or interchange plus pricing.
Flat rate pricing guarantees the same low monthly rate for any type of credit card and makes it easy to see exactly how much you’ll be paying in processing fees each month. This pricing is a fixed percentage based on what the credit card processor, card brand, and issuing bank charge.
In addition to flat rate credit card processing, interchange plus pricing is another option that can benefit small businesses.
Interchange plus pricing offers more transparency and can lower your costs. This pricing model is divided into charges based on the cost of interchange and assessments and includes an additional markup cost — all three will be visible and separated on your monthly processing statement, so there are no surprises.
Steer clear of any provider that offers a tiered pricing option. Tiered pricing is a red flag.
With tiered pricing, processors typically offer a “qualified rate,” which is very low but can hide their margin behind a much higher “non-qualified” rate.
With flat rate pricing and interchange plus pricing, you can process credit cards at the same low rate each month without having to pay any additional transaction fees.
6. Watch out for hidden fees and mandatory contracts
Many merchant service providers will attach a mass of additional fees to your credit card processing services. If you’re not careful, these can quickly add up and create a debt of unnecessary charges.
Here are some common hidden fees and agreements to be cautious of:
- Application/setup fees
- Mandatory long-term contracts
- Monthly or annual minimums
- Installation/upgrade charges
- Support fees
A credit card processor should be transparent with nothing to hide. Some important features to look for include: $0 setup fees, $0 upgrade fees, $0 maintenance fees, free in-house customer support, flat rate and interchange plus processing options, and an experienced chargeback management team.
In addition to avoiding hidden costs, small businesses should check to see if they qualify for level 3 credit card processing, which can help further reduce their fees.
Your merchant services provider should be confident in their ability to provide you with exceptional, affordable service without having to lock you into a contract or sneak in hidden fees.
Secure the lowest credit card processing fees for your business
Credit card processing doesn’t have to be overwhelming.
Remember to choose a secure merchant services provider that offers a PCI-compliant payment gateway and integrated payment services to optimize your processing solutions. Also, ensure that your processor offers flat rate or interchange plus pricing and in-house customer support.
With these simple steps, you’ll be on your way to getting the cheapest credit card processing for small businesses.
EBizCharge can provide the cheapest credit card processing for small businesses
EBizCharge provides the cheapest credit card processing costs for small businesses with its all-in-one payment platform which includes merchant services, a secure payment gateway, and over 50 payment integrations to streamline their accounting process.
EBizCharge will allow your small business to securely accept credit and debit cards and ACH payments and provides in-house support, transparent pricing, and PCI-compliant solutions. With features like email payment links, recurring billing, and a branded payment portal for customers to pay off multiple invoices, your small business can reduce late payments and increase long-term cash flow.