A flower shop owner uses  laptop and is taking a call with a potential payment processor on her mobile phone.

Questions to ask when choosing a payment provider

Tuesday, February 07, 2023

Payment processing is likely one of the biggest expenses besides labor, product costs and rent that small business owners face. It’s really tempting to go with whichever payment provider can get you up and processing credit cards ASAP. Before locking yourself into a one-to-five-year processing agreement, consider shopping around. Asking key questions and evaluating service providers may help you get the best processing rates, tech and hardware to meet your business’ needs.

Ready to get started? We’ve created a handy checklist for you to help evaluate potential payment processors. If you already have a processor, you can use it to routinely evaluate their services (and potentially re-negotiate).

Your payment processor interrogation checklist

What pricing structures are available to me?

Payment processors don’t keep any part of the interchange fees they collect on behalf of the card brands. But they do charge fees for the service they provide. Whether those fees are combined or listed separately from interchange and other costs can vary by the processor and by the processing rate structure of your processing contract. Some processors add markup fees to each payment (Heartland doesn’t) — others bill and list them separately. Keep in mind, some payment service providers have multiple pricing structures to offer clients (Heartland does).

Today, two different pricing structures are most popular in the industry: interchange-plus pricing aka “cost-plus pricing,” and flat-rate pricing. Knowing which pricing structures a potential processor offers, as well as your business’ average ticket, transaction volume and processing habits, can help you make a decision that makes sense. If you’re opening a business for the first time, knowing what types of goods/services you sell and the price range of your inventory will help potential processors understand your business model and quote your costs accordingly.

An entrepreneur with white hair and beard smiles as he talks to a potential payment processor in front of his laptop.

Keep in mind, some payment service providers have multiple pricing structures to offer clients (Heartland does).

What fees exist with your platform?

You’re paying a payment processor to accept credit card payments. All of the money goes to them, right? Not so fast. There are a lot of players and different costs involved with credit card processing. The payment processor is one small link in a much larger chain.

Learn about the fees and pricing associated with transaction volume or per-transaction fees for payment processing. Don’t be afraid to ask:

  • Do you have hidden fees?

  • Are there any installation or setup fees?

  • Do you pad interchange?

  • Are different fees associated with different card types or payment types (for example, if a customer uses a digital wallet, such as Apple Pay®)?

  • Can you explain your chargeback fees and your chargeback process?

How long do payouts take?

You will want to know how long it will take to process payments from start to finish. This information will help you prepare cash flow projections and the time it will take for various payment methods to process fully. You may also want to ask if they offer instant or same-day deposits, which can help you get money in your bank account faster.

What is the contract length?

You should be clear about the terms of the processing agreement before signing a contract. Depending on your needs, a long-term contract or a monthly-term contract may make sense for your business. Be sure to know if there is an early termination fee clause, which could make it hard for you to switch providers if you’re unhappy or if your business needs change.

A Heartland Terminal+ POS sits next to a pair of florist shears, twine, flowers and vines.

What hardware would I need?

Point of sale, register, terminal, mobile card reader, ecommerce… oh my. There are a lot of hardware options for taking payments in-store, online, and anywhere your customers are. You should understand what types of hardware are required to work with the processor. You’ll also want to know if the processor provides the hardware or if you’ll need to purchase or rent equipment to take payments smoothly.

Can you walk me through your merchant statement?

Asking for a sample merchant statement for you to review can show you how the processor reports to its customers about their transactions and fees. A merchant statement under interchange-plus pricing will look different than flat rate, which is OK — but are they being transparent about why? Asking the processor’s representative to walk you through a statement can give you an idea about the transparency of the processor.

What kind of customer support do you offer?

Knowing up front what kind of customer service and support you can expect from a processor is key. You don’t want to be in a situation where your POS or card reader isn’t working to find out you’ll have to be your own support team scouring through an online FAQ. Some things to consider:

An icon of a mobile phone with three text message bubbles on it.

Is the customer support team available 24/7?

An icon of a laptop with graphs and a security shield.

Are you expected to troubleshoot yourself before escalating an issue?

An icon of an analog clock, depicting time tracking.

What is the turnaround time for your potential question or issue to be resolved?

What security options are available?

We’ve probably all heard the saying about how great power comes with great responsibility. When you sign a contract with a processor to accept credit or debit cards, you enter into a merchant agreement with the Payment Card Industry (PCI) Security Standards Council, which includes Visa, Mastercard, American Express, Discover and JCB. Their PCI Data Security Standards (PCI DSS) help protect sensitive cardholder data from fraud.

A key aspect of PCI compliance for small businesses is using fintech equipment that meets the Council’s security standards for technology applications like POS systems. You’ll want to make sure your payment processor minimizes your liability by encrypting card data during the transaction process and using tokenization for stored data.

Why? Failing to be PCI compliant can be devastating to your business: A whopping 60% of small businesses will go out of business within six months of a data breach. The average cost to a business after a data breach is $200,000. This number includes the costs for:

  • Forensic investigation into the data breach.

  • Fines and penalties from the payment processor and financial institution, which can vary depending on the business’ size and the scope and duration of the non-compliance. (Fines can vary from $5,000 to $100,00 per month.)

So, security is a big deal when choosing a service provider. Consider:

  • Will they validate your PCI-DSS compliance, or are you expected to find a vendor on your own?

  • What is their expertise in fraud management?

  • What fraud prevention measures has the processor built into their system for ongoing prevention?

Choose a payment processor who can help you succeed

There’s a lot that goes into choosing a payment processor and payments tech. But as a small business owner, you know your business better than anyone else. Stay grounded in your business’ goals and your customers’ needs — and you’ll find your way to the right payment solutions.

Make sure you cover these topics in your conversation:

An icon mimicking a family tree with the text Pricing structure.
An icon of price tags with the text, “Fees.”
An icon of a hand and acoin with the text, Payout.
An icon of a piece of paper and a pen with the text, Contract.
An icon of a handheld POS terminal with the text, Hardware.
An icon of a paper with graphs on it with the text, Merchant statement.
An icon of a customer support representative wearing a phone headset with the text, Customer support.
An icon of a padlock with a password text box with four asterisks within, with the text Security.

Consider partnering with a provider who can offer you:

  • Payment processing that’s transparent and gives you the insights you need to save on your processing

  • The secure payments technology to accomplish all your goals

  • The processing pricing fee structure that’s advantageous to your business’ processing habits

  • The customer experience and support you deserve

You deserve transparency

Your payment processor shouldn’t be a challenge for your business. Since 2006, Heartland has championed transparency in payment processing with the creation of The Merchant Bill of Rights. If you’re concerned that you’re overpaying or don’t feel like your processor has your best interest at heart, let us know. We're happy to give you a competitive rate review or just provide a listening ear and straightforward information. You can also get a pricing quote in a few clicks without a phone call. We’re here to help.

Apple Pay® is a trademark of Apple, Inc. All trademarks contained herein are the sole and exclusive property of their respective owners.

Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at heartland.us