5 things to consider when picking a credit card processor

CNET@Work: Cost, security and customer support are just a few of the factors worth looking at.

Natalie Gagliordi Staff Writer, ZDNet
7 min read

With technology increasingly intertwined with all aspects of business, CNET@Work can help you -- prosumers to small businesses with fewer than five employees -- get started.

When Corey Mullins first decided to find a credit card processor for his Louisville, Kentucky-based landscaping business, it was all about name recognition. "In terms of research, I did none essentially," Mullins said. "I basically decided I needed to do it and just chose a provider that was all the rage at the time."

As Mullins would eventually discover, credit card processing is all about the details. A reliable credit card-processing service is essential to the livelihood of a small business, but with so many options out there it can be difficult to figure out which one makes the most sense for your particular business needs.

For the uninitiated, a payments processor acts as the link between your business and the banks, issuers and credit card networks. Whether you plan to take payments online or in-person, a credit card processor is required to accept them.

No matter what kind of business you're building, there are a few important features every business owner should consider when comparing the bevy of credit card processing services out there in the market.

Here's a look at the factors to consider when picking a credit card processor and links to various CNET Commerce listings of services and discounts. CNET may get a share of revenue from the sale of these products and services offered by our partners.


Money matters to every business but it's the smallest enterprises that feel the pinch of additional costs and fees the most. While upfront costs, if any, differ for each credit card processor, it's usually the fees associated with credit card processing that can be especially convoluted.

A good place to start is figuring out whether a payments processor charges a monthly fee or a flat per-transaction fee. Companies such as Square and PayPal do not have monthly service fees and instead take a percentage of every transaction the merchant processes. For instance, Square charges a 2.75 percent transaction fee while PayPal's fee is 2.9 percent.

The argument for a flat, fixed fee goes back to transparency: Without a fixed rate, processors are able to charge different rates for different card types. American Express tends to be more expensive than other networks, with transaction fees ranging from 2.5 percent to 3.5 percent. MasterCard's fees range from 1.5 percent to 2.6 percent, Visa fees go from 1.43 percent to 2.4 percent and Discover's range from 1.5 percent to 2.3 percent.

"Our viewpoint is that having a transparent flat rate is in place to serve the merchant the best," said Amit Mathradas, GM of SMB at PayPal. "The best thing you can give a consumer is choice but the other side is that you have to remove any barriers for that merchant to accept other forms of payment."

Of course there's also an argument for the monthly fee option, and it goes back to understanding the products you plan to sell, how your customers will pay and whether a flat per-transaction fee would start biting into profits.

"Over time, depending on the average size of each transaction, the per-transaction fees can add up," said John Christly, Global CISO for Netsurion, a provider of managed security services for small businesses. "If you do choose one of these options, watch your monthly statements very carefully and add up what you end up paying in service fees to see if it may be worth it to switch to a service that offers a fixed monthly fee plus a much smaller per transaction fee."

It's also important to note that most processors, regardless of fee structure, distinguish between card-present (CP) and card-not-present (CNP) transactions. CNP transactions occur when a merchant keys in a credit card number by hand, and they are always more expensive because they carry an increased risk for fraud.

As you begin researching credit card processors, be on the lookout for how fees are structured by your chosen provider. Aside from transaction fees, other processing fees to watch for include compliance fees, interchange fees, statement fees, cancellation fees and gateway access fees. Not every provider tacks on every fee, and some are not automatically transparent if they do, so ask questions.

Another cost to consider is the price of equipment. If you want to process credit card payments in-person, your business will need at least one credit card reader. Some providers offer their credit card readers for free, while others charge based on a reader's capabilities. Terminals from industry giants like Verifone and Ingenico can range from the sub-$100 level to upwards of $600 (roughly £80 to £480 and AU$130 to AU$790).

Fraud prevention and security tools

Fraud prevention and security should be top of mind for every business owner, regardless of size, and fortunately most payments processors have security services baked into their system.

Fraud solutions for in-store transactions are based on EMV chip card acceptance.

EMV cards store cardholder data in an embedded smart chip, making forgery far more difficult compared to cards with magnetic stripes. But even with EMV, cardholder data is still potentially exposed and exploitable via fraud or malware on the point of sale (POS), so make sure encryption and tokenization are in place as additional safeguards. If you plan to sell online, you want to check that the processor also supports SSL certificates and CVV2 verification.

You also want to make sure your processor is compliant with PCI-DSS (Payment Card Industry Data Security Standard) regulations, which stipulate that a merchant's payment ecosystem must be inventoried, documented and secured.

"The PCI-DSS regulations can be daunting and very confusing for some new merchants to comply with," said Christly. "Seek out a provider that has experience with serving your particular industry and business type, and that also knows how to set up systems that are compliant with regulations like PCI. It's very hard to go back later and try to redesign systems, networks and processes to be compliant."

Fraud resolution services are also important, so you'll want to check that the processor provides seller protection and support if and when fraud should occur.

Payment method coverage

The best way to future-proof your business is to prepare to accept any form of payment your customers use.

Traditional credit and debit cards are the most common payment method used in the US, but digital wallet and contactless alternatives such as Apple Pay and Samsung Pay are gaining in popularity. When you're equipped to accept contactless payments, you are by default able to accept all forms of Near Field Communication (NFC)-based payments, including payment made with cards, phones and wearables.

Contactless payments can also provide an additional layer of transaction security. Apple Pay, for instance, relies on the same cryptographic functions as EMV chip card transactions but with the use of biometrics to authenticate cardholder identity. As a result, contactless payments like Apple Pay are processed with the exact same fees associated with physical cards and CP transactions.

"Businesses should think through if these are options they want to offer their customers, and the business model impact of payment methods that behave differently than cards," said Kamran Zaki, president for the North America arm of Dutch payments firm Adyen.


For ease of use and reporting reasons, you'll likely want to connect your processing network directly to your point of sale system. Some processors offer POS software that integrates natively into their system and hardware, while others build out a network of partners for merchants to choose from. It really boils down to the needs of your business and the complexity of your inventory when deciding what POS software to go with.

As you get further along, look for a processor that provides more than just processing, such as invoicing, reporting and bookkeeping. Also look to see that a processor has a robust partner ecosystem beyond the POS, which will make connecting to other services such as Shopify, BigCommerce, Intuit and Xero hassle free.

Customer support

You will inevitably need help at some point, for some reason, so it's wise to look for a processor that offers customer support 24 hours a day, 7 days a week, preferably with direct help from an account representative.

"A lot of businesses start off knowing what they want to be but most of them don't know about payments and processing -- they just want them to work," said PayPal's Mathradas. "At some point they want to pick up the phone and talk to someone."

Going back to the case of Corey Mullins, owner of Mullins Turf and Lawn Care in Kentucky, it was a lack of customer service that prompted him to switch processors after nearly three years with the same provider. A customer dispute triggered an automatic chargeback that took $2,500 out of Mullins' business account. But when he contacted his payments processor to resolve the issue, Mullins discovered that the entire customer service chain was virtual, automated and highly frustrating.

"After that ordeal, my number one priority wasn't the rates -- I wanted a single person that I could call and talk to when I needed them," Mullins said.

Try reaching out to potential processing candidates; you'll quickly get a feel for how they treat customers and handle customer support.

Choosing a credit card processor can be almost as important as deciding to go into business in the first place. Talk to peers, research reviews online and analyze all the fine print. With a little bit of legwork you can ensure that the choice you make is best for you, your business and your customers.