For a small business just getting started out, finding the right credit card processing for your small business might seem like a Herculean task. You’ll very quickly discover that not only are there so many options to choose from, the way merchants charge for credit card processing is not at all easy to understand or transparent.
You may be considering just going with PayPal or Square to handle all your credit card transactions, just to make things easier for yourself. But what’s easier often isn’t what’s best. PayPal and Square definitely don’t offer competitive rates. In fact, their rates are some of the worst in the business.
When you think about it, getting hit with a 3% fee each time a customer buys something from you can really add up over the course of a year. For example, if your business brings in $200,000 per year in credit card transactions through Square, that’s about $6,000 eaten away by fees. Those fees are too damn high!
Your business deserves better than that (and so do you). So if you have a moment, allow us to explain how you can go about finding the best credit card processing for your small business, no matter what you do or how big your company is.
Read on to find out how you can even enjoy FREE credit card processing for your small business…
Don’t Trust Credit Card Processing Review Sites
The most important thing you should know is that you shouldn’t just trust the credit card review websites that pop up when you type “How do I get the best credit card processing rates for small business” into Google—especially if you’re a small business.
Nearly all of these websites are just paid affiliates who are being reimbursed by the merchants they’re ‘vetting’. In other words, they don’t have your best interests in mind—and the information they’re putting out there is often straight up inaccurate and can be downright dishonest.
You’re much better off looking for a local merchant services provider who is hungry and actively building up their own customer base. They’ll be much more willing to negotiate and offer you the best rate they possibly can.
Walk the walk, talk the talk (be bigger than you are)
Many small business owners aren’t that great at marketing themselves or their business when it comes to finding the best credit card processing merchant for their business. But when you consider the fact that your merchant services provider may never actually meet you (or see your business) in person, it pays to act like your business is much bigger than it actually is.
Now, we don’t mean lying about how many customers you have or anything like that. That’s not even necessary. We just mean acting like the boss that you are and demanding the best possible credit card processing rates for small business.
What a lot of small business owners don’t realize is that merchant services providers will be more willing to offer a lower rate to a business owner if they insist on it. The merchant services industry is extremely competitive, and merchants will often be willing to negotiate. But you need to act like a big business, first. Don’t just accept the first offer you’re given.
The volume needed is much less than you think
Most small business owners don’t realize that they don’t need to have millions or even tens of thousands in credit card transactions each month to get better deals from merchants.
In fact, just a few thousand dollars a month processed via credit cards is enough to get you a lower rate than the one you’re probably paying right now.
Think about it: merchant services providers aren’t actively servicing your account when you become their client. Once you’re in, you’re in. They make money off your transactions no matter what their profit margins are. So it’s always in their interest to sign you up.
That being said, when you factor in customer support, most merchant services providers won’t want to deal with the hassle of a micro-account that always wants to negotiate. If your processing volume per month is under four figures, you’re probably better off going with a flat rate processor like Square.
Know what you can and cannot negotiate
Interchange fees and assessments (which are charged directly by credit card companies) aren’t flexible. But the merchant processor’s profit markup is.
Typically, you can negotiate anywhere from 5–10% of the asking price without much a problem. That’s just basic business negotiation, which you should feel comfortable with. You can also get an even lower rate if you’re a fairly experienced negotiator and if your volume is higher.
If you’re confused by all of this, just follow these steps:
- Ask the merchant for their absolute best rate.
- Ask them what their interchange fees and assessments are.
- The difference is what their markup is. You can try to negotiate 5–10% off of that amount (not the total).
Pricing model may matter more than rates
There are two main types of pricing models for merchant services providers: tiered and interchange pass-through. Ask for interchange pass-through pricing. Here’s why:
Tiered pricing is needlessly complex and often expensive (for you). It results in expensive mid and non-qualified surcharges. But it helps processors generate higher returns on smaller businesses.
Interchange pass-through pricing, on the other hand, doesn’t have surcharges or any pricing tiers. It’s a lot easier to understand—and it helps you save a lot more money. Also, make sure you specifically ask for interchange plus with true pass-through to get the best deal possible.
Brick-and-mortar businesses can enjoy FREE credit card processing
At the end of the day, credit card processing for small business can actually be very competitive. Most local merchant services providers who aren’t big enough to go national mostly service small- to mid-size businesses anyway. If you’re a small business, you’re exactly the type of client they’re looking for.
But small business owners who run in-person, brick-and-mortar businesses (think boutique shop, restaurant, retail, salon/spa, etc.) have another option they may not even know about—cash discount programs.
This is when you offer your customers a choice: either they can pay the listed price for an item in cash—or they can pay a surcharge with a credit card. Either way, you get 100% of the sale price and make the same profit.
If you’re interested in learning more about how to set up a cash discount program legally and efficiently, Nadapayments can help you do it in just one week flat.