How To Choose A Merchant Service Provider: 7 Things To Look For

Mobile card readers connect to a smartphone or tablet and allow businesses to accept payments from almost anywhere. They’re especially useful for service businesses, market vendors, food trucks, and other mobile sellers.

Look for a reader that supports EMV chip cards, contactless cards, and mobile wallets.

Countertop credit card terminals are a reliable option for businesses with a fixed checkout location. Modern terminals generally support EMV chip cards, NFC payments, and traditional card swipes.

Buying equipment outright is usually preferable to leasing, since terminal leases can be expensive and may include long-term contracts.

A POS system combines payment processing with tools for tracking sales, inventory, customers, employees, and other business data.

POS hardware can range from a tablet and card reader to a complete countertop system with customer displays, receipt printers, and barcode scanners. Compare hardware compatibility, software costs, and industry-specific features before choosing a system.

See our best small business POS article for more specific recommendations.

A virtual terminal lets you process payments through a computer or web browser. You can manually enter card information for phone or mail orders, and some systems also support connected card readers for in-person payments.

Virtual terminals are especially useful for businesses that take remote payments but don’t need a full eCommerce website.

A payment gateway securely sends transaction information between your website, payment processor, and the customer’s bank.

Online businesses need a gateway that works with their website or eCommerce platform. Compare supported integrations, security features, recurring billing tools, and gateway fees.

Shopping cart software lets customers browse products, add items to an order, and complete checkout through your website.

Some eCommerce platforms include the shopping cart, website builder, payment gateway, and inventory tools in one system. Others allow you to add a third-party shopping cart to an existing website.

POS software helps in-person businesses process payments and manage daily operations. Depending on the system, features may include inventory tracking, sales reporting, customer profiles, employee management, and loyalty programs.

Look for software that fits your industry, integrates with your preferred hardware, and includes the features you’ll actually use.

• Setup Or Application Fees: Some providers charge a one-time fee to open or underwrite your account. These fees are less common than they once were, so compare providers before agreeing to pay one.
• Monthly Or Annual Account Fees: Providers may charge a recurring fee for maintaining your account or bundling services such as reporting, PCI compliance assistance, a virtual terminal, or customer support. Consider whether the included services justify the cost.
• Monthly Minimums: A monthly minimum requires you to generate a certain amount in processing fees each month. If you fall short, you pay the difference. These requirements can be costly for new, seasonal, or low-volume businesses.
• PCI Compliance Fees: Some providers charge for PCI compliance tools, questionnaires, or security scans, while others include these services in another account fee. PCI noncompliance fees may apply if you fail to complete the required steps, so make sure you understand how to maintain compliance.
• Statement & Miscellaneous Fees: Your statement may include charges for paper statements, online reporting, batch processing, regulatory programs, or other account services. Small fees can add up, so request a complete fee schedule.
• Early Termination Fees: Providers with long-term contracts may charge a fee if you close your account before the contract ends. Look for month-to-month billing or a written waiver of the early termination fee whenever possible.
• Chargeback Fees: A chargeback occurs when a cardholder disputes a transaction through the card issuer. Most processors charge a fee when a chargeback is filed, even if you later win the dispute. Review both the fee and the provider’s dispute-management process.

Interchange-plus pricing separates the underlying interchange and card-network costs from the provider’s markup.

A quote may be expressed as interchange plus a percentage and a fixed per-transaction fee. Because the processor’s markup is clearly identified, interchange-plus is generally one of the most transparent pricing models and can be cost-effective for established businesses.

Tiered pricing groups transactions into categories such as qualified, mid-qualified, and non-qualified. The rate charged depends on factors such as the card type and how the transaction is processed.

Providers often advertise the lowest qualified rate, while many transactions are charged at higher tiers. Because the qualification rules and processor markup can be difficult to evaluate, tiered pricing is usually less transparent than other models.

Flat-rate pricing charges a set percentage and, in many cases, a fixed fee for each transaction. Rates may differ for in-person, online, and manually entered payments.

This model is simple and predictable, and providers often charge fewer recurring account fees. However, the per-transaction rate may be higher than interchange-plus pricing, particularly for businesses with higher processing volumes.

Your effective rate is the total amount you pay in processing costs divided by your total card sales, expressed as a percentage.

For example, if you pay $300 in processing costs on $10,000 in card sales, your effective rate is 3%.

Use your effective rate to compare the overall cost of different providers, but remember that card types, transaction methods, sales volume, average ticket size, and business risk can all affect the result.