Request a Call
Chapter 5

Credit Card Processing for Small Business

Choosing the Credit Card Processing for Small Business that is right for you

Credit card processing for small business
Employee accepting credit card payment

Let's Get You Started!

The Complete Guide to Credit Card Processing is an in-depth explanation of how credit card processing works. This guide will help you evaluate and decide on the best merchant account without the false starts and missteps that others have fallen prey to in the past. Download your copy of the world’s most-comprehensive guide on credit card processing

Understanding how Credit Card Processing can work for you!

Download the Free PDF

Finding the right credit card processor is no easy feat and can easily become overwhelming. This can lead you to make a rash decision to choose the most popular one without considering that finding the right processor is individual and unique to your business. Choosing the wrong one can end up costing you a lot of money!

In this guide, we will go over some basics of credit card processing. We will discuss common pricing models and walk through the qualities that make the best credit card processors. We’ve got a handy checklist that you can use to help evaluate a credit card processor – so you can a truer sense of what you will be signing up for. You’ll also be able to view a comparison of some of the top credit card processors so you can get a feel for what is best for you.

5.1 How can a small business accept credit cards?

A small business can accept credit cards by first finding a processing company, which is a company that provides the service of processing your credit transactions. You can’t just get any old card reader off the internet, plug it in and hope that it works. Once you’ve decided to accept credit cards, the next step is to find a credit card processor (or merchant account) for your small business. Some business owners will just go to their banks to process credit cards, but often that is the most expensive option!

You’ll need to consider many different components to be able to accept credit cards. These include credit card fees (interchange & cost per swipe), contracts, other fees, equipment, software, and the processing company’s reputation for their customer service. There is no one-size-fits-all processor – which is why we’ve put together this guide on how to choose the best credit card processor for you.

Before you consider any merchant account, here are the top 5 things to consider:

  1. Never sign a long term contract
  2. Never lease equipment
  3. Transparent pricing structure & no hidden fees
  4. Excellent customer service
  5. Card Terminal should be compatible with many different POS Software

Before we dive into the details, let’s get a basic overview of how credit card processing fees are calculated and then build from there.

Want to save this entire guide for later?
Download the PDF

5.2 ​How small business credit card processing fees are calculated

In your search for a merchant account provider (the company that will process your transactions), you’ll come across these two terms : interchange & processor mark-up.

Interchange is a combination of 2 fees:

  1. Fees from the issuing bank, like Chase, Capital One, Bank of America, Wells Fargo, etc.
  2. Fees from the card brands: Visa & Mastercard. Discover & American Express are their own bank and card brand.

Interchange fees are non-negotiable. Everyone will pay the interchange, but it the amount will vary by the brand of card and type of transaction.

Processor Markup are the fees your merchant account provider charges in order to process your credit cards.

It can include a certain percentage in mark-up, plus a small amount of cents that is charged every time the card is swiped. This fee is highly variable between processors.

How processors charge the business owner for interchange and their mark-up will vary. Regardless of their pricing model, there will always be interchange to pay.

  • Monthly Fees a monthly fee you pay regardless of how many sales you process
  • Transaction percentage fees: a small percentage of your sale that you will pay to use the credit card.
  • Other fees include: minimum processing fee, batch fees, contract termination fees, etc. Check out this guide where we dive deep into the hidden & made-up fees of credit card processing.

Your equipment will also be an additional upfront cost (never lease a credit card reader). Equipment includes the credit card reader, printer, cash drawer, etc. and POS software which will enable you to actually make a transaction. Some companies may offer a free terminal and free point of sale software. If you decide to switch processors, make sure you know whether they expect you to return the reader to the processor or if they will make you pay for it.

Which pricing model should a small business choose to process credit cards?

There are several pricing models available to a business owner. There are those like Square and PayPal Here which offer one flat cost per transaction which encompass all their fees plus interchange. The flat fee pricing model accounts for all different types of cards and their specific interchange.

Other companies, like Dharma or Fatt Merchant, will charge a monthly subscription rate and then only charge you interchange plus a much smaller transaction fee. This pricing model is called “interchange-plus.” These are generally a cheaper option if you process more than 10K a month.

There are also tiered-pricing models, but those are often more expensive. They are based on whether a transaction is “qualified” or not.

5.3 ​What is the cheapest way to accept credit cards?

There are also companies that offer a zero fee pricing model, like Dual Payments. This type will always be the lowest cost for the business owner. It means absolutely no fees for the business owner.

This doesn’t mean that there are no fees at all, but what the zero-fee pricing structure does is pass the cost of purchasing with a credit card onto the consumer. How? There are 2 ways of doing this: a cash discount program and/or a surcharge program.

Both cash discount programs and surcharge programs are ways for merchants recoup the cost of accepting credit card payments.

need merchant services
By offering a discount to the consumer if they pay with cash, the choice then becomes the consumer’s on how they want to pay. The could pay with cash & save or still decide to pay with a credit card. Spoiler alert: most still pay with credit cards.

A surcharge program is where a fee is added on top of the total when they decide to use a credit card to pay. Click here for more detail on how both cash discount & surcharge work.

Regardless of the pricing model you choose, it’s important to calculate how much each swipe will actually cost you – the cost may seem to be a good deal at first glance, but the more you dig and add up fees, it may end up costing you more in the long run.

5.4 ​What makes the best credit card processing for small business?

The best credit card processing for small business will not be a clear cut answer. The best one for you will depend on your industry, your average ticket, your monthly volume of sales, and your other needs.

A credit card processing company is first and foremost a business. Think about what makes a great business when making your decision – you are their customer. How do they make you feel like a # 1 customer?

The best credit card processing will have the lowest fees & transparent pricing with no contracts or hidden fees. They are even up front about the fees you might not think about or know to ask about. The equipment will be easy to set up. They will have a user friendly and reliable POS system, and will integrate with accounting software easily. They will have reliable, talk-with-a-real-person 24/7 customer support based in the US.

The best will offer a dedicated account representative that will be your go-to person instead of playing the phone-tree run around. They will also offer in-store processing that can also easily expand into online orders & mobile processing. The best will have affordable equipment – never a lease – and equipment that can integrate to other POS systems should you need to change processors. The last thing you want to do is have to repurchase equipment and software.

How to choose the best credit card processing for your business?

Do your research! We’ve provided a checklist for you so you can have a starting point while you shop for a credit card processing company. You can print it off and use it to interview potential credit card processing companies. Click here to jump to the checklist.

The information you need to know to start is: what is my average ticket cost? What is my average monthly volume of sales?

Although fees are a big part of the processing puzzle, there are other considerations to make as well. Besides being competitive with processing fees, you should also consider the following when evaluating a credit card processor:

The best credit card proces​sor will have:

  • Lowest fees – or they can be negotiated
  • Up front about ALL fees – including the ones you don’t think to ask about
  • No pressure sales – be wary of high pressure sales, no one should make you feel pressured into using their service without due consideration
  • No contracts – stay far far away from any contracts, they do NOT have your best interest at heart. They also don’t have to work hard to keep you happy.
  • No early termination fee
  • Equipment is affordable can be purchased, bonus if it can used with other POS systemsUS Based Customer service
  • US Based Customer service
  • Dedicated account representative – someone who you always talk to regarding your business so solutions can be quick and efficient. You also build trust and rapport. Huge processors will be hard pressed to have this type of customer service.
  • 24/7 Support – and NOT just an online forum
  • In-store processing that can also expand into eCommerce & mobile: the last thing you want to do is have to redo all this research if you decide to expand your market. Make it easy on yourself and choose the one you KNOW can grow with you.
  • Great review history – do research on company reviews, and NOT just on the company website. They’ll only want you to see favorable reviews so you go with them. Do a quick google search of reviews and read through several. Decide if the common complaints are worth dealing with.

5.5 ​Evaluate a Merchant Account Checklist

Evaluate a Merchant Account Checklist

  • What type of pricing model do you use?
  • Do you have a monthly fee?
  • What is your processing rate?
  • What do you charge for interchange?
  • What do you charge for processor mark-up?
  • What do you charge for card not present (keyed in) or online transactions?
  • What makes a card qualified & unqualified? What are the specific charges for each type of card?
  • Will these rates ever increase?
  • Is there a monthly minimum I have to meet? What is the fee if I don’t meet that?
  • What other fees should I be expecting?
    • Batch fee
    • PCI Compliance fee
    • Statement fee
    • Annual fee
    • Monthly minimum fee
    • Early termination fee
    • Card network fee
    • AVS fee
    • Voice authorization fee
    • Retrieval request fee
    • Web login fees
    • Account maintenance fees
  • Under what conditions would you hold back funds from my account?
  • Contracts (Be very wary about signing a long term contract!)
    • What are the terms of the contract?
    • Is there an auto-renew clause?
    • What about early termination?
    • What will that cost me?
  • Equipment
    • What kind of equipment do you offer?
    • What does that cost? (Never lease equipment!)
    • Does that integrate with various Point of Sale software?
    • How easy is it to set up?
    • Who do I call if it doesn’t work?
    • If I decide to switch processors – what happens to the equipment?
  • Customer Service
    • Is your customer service US Based?
    • Will I have a designated account representative?
    • Can I talk to a live person 24/7?
  • Point of Sale Software
    • What Point of Sale software will I be using?
    • Can you add custom tips or sales tax?
    • Can it track my cash and check drawer too?
    • Can I manage inventory?
    • Who do I call if it doesn’t work or if I have problems?
    • How much does that cost per month?
    • Cash discounting?
    • Can I invoice payments?
    • Can it integrate easily with my accounting software?
  • Review history – look up reviews online from various sources to see what the general feel is for the company.

OK, now that you know what to look for in a credit card processing company, it’s time to see how the industry leaders compare. We’ve already done the research for you.

In our next chapter, we compare the data from the top credit card processing companies so you can see the numbers for yourself!

Request A Call From A Dual Payments Representative

We know you’ve got questions. You could spend the day reading every word of our website, but you might find answers more quickly by just asking someone from our team. That’s what we’re here for!

Don't have time to read it all right now?​

Download your free PDF of “The Complete Guide to Credit Card Processing“. Just give us your email and we’ll send it to you right away!

Download a Zero Fee Case Study

Learn more about how Zero Fee Processing has actually put money back in the pockets of a real-life business owner.

Example of High Risk Merchants

  • 1-900 Phone companies – If you’re the type of company that charges people to have a chat on the phone, you’ll be considered high risk.
  • Adult Bookstores – Clearly a part of the adult entertainment industry, and an easy mark for the high risk tag.
  • Adult Entertainment – Any business labeled with the “adult” descriptor will automatically be assigned a high risk status.
  • Adult Toys – As “adult” is in the name, it’s an easy target for association with the adult entertainment market.
  • Airline Industry – Due to cancellations on high ticket purchases, this will put your airline company in the high risk category
  • Amazon Stores – By having a high rate of return, Amazon stores are seen as high risk.
  • Ammo Sales – Association with the weapons industry guarantees high risk status.
  • Annual Contracts – Any time an annual contract is involved it can be considered highrisk because most consumers forget they signed up and chance of chargeback can be high.
  • Antiques – With a high average ticket per item, antiques are considered a risky merchant type.
  • Astrology – The study of the celestial bodies and the influence on human affairs can be a chargeback target if customers feel like they aren’t getting the answers they want.
  • Auctions – Because of the nature of bidding on a product and not having a set price the risk level goes up.
  • Autographed Collectables – There is almost always a question as to whether an autograph is authentic, and therefore chargebacks are much higher in this industry.
  • Automotive Brokers – Brokers of automobiles have a very high average ticket are are therefore of higher risk.
  • Bankruptcy Attorneys – Since the people who are working with bankruptcy attorneys are usually in financial trouble, the odds that a payment would be charged back is higher.
  • Betting Services – In many states betting is illegal but for the legal states betting with a credit card has huge chargeback implications.
  • Brokering – When a third party is involved with selling a product the risk level goes up ten fold.
  • Business Loans (Merchant Cash Advances) – Loaning money is always risky, but with business loans and startup lending, high risk is present by the nature of the business.
  • Casino – Just like a betting service, if a customer gambles with their credit card the chargeback rate sky rockets.
  • CBD Products – CBD itself poses high chargebacks because of the legitimacy of the product and the health benefits promised.
  • CBD E commerce – CBD E Commerce has twice the charge back of retail CBD because many consumers don’t feel like the product they receive gives them the benefits promised.
  • Check Cashing (Check Processing) – The level of fraud in check cashing and cash advances is what gives this industry a higher risk consideration.
  • Cigarettes – With higher levels of risk for theft and criminal activity, cigarette sales are deemed high risk.
  • Collection Agencies (Collection Agency) – Many banks see collections as an unsustainable business model that is many times unreliable.
  • Collectible Coins – A higher level of chargeback in this industry gives it a high risk tag.
  • Collectible Currency – Due to the level of inauthentic collectibles, the risk of chargebacks are much higher with collectibles.
  • Copyrighted eBooks – When someone sells something copyrighted without permission many legal issues can arise.
  • Coupon Programs – With many coupon programs the coupons expire and once they expire the consumer wants the money back they spend.
  • Credit Counseling – Due to their clients usually being in financial problems, this industry is fraught with non-payment and fraud.
  • Credit Protection – Most people that need credit protection are bad with money so chargebacks abound.
  • Credit Repair – If a consumer needs credit repair then chances are they are a high risk for chargebacks.
  • Currency Sales – Many businesses that exchange currency do it at incorrect rates hence more chargebacks.
  • Dating Services – Dating is a volatile industry, and is also lumped in with the adult entertainment industry, making it a high risk account.
  • Debt Collection Services – As the collection of debt isn’t always possible, this industry retains the tag of risky.
  • Debt Consolidation Services (Debt Consolidators) – Consolidating debt is a challenging business and as debt is usually the problem, it’s seen as unsecure from a payment perspective.
  • Debt Repair Services – Since the clients of debt repair services are usually having financial challenges, it makes this industry seem a higher risk.
  • Discount Health Programs – Many people don’t feel they are really getting a discount so they try to get their money back and if they don’t the chargebacks sky rocket.
  • Discount Medical Care Programs – Just like the discount health programs if they don’t save the consumer wants their money back.
  • Drug Paraphernalia – Anything that is associated with the drug trade is considered high risk. Offshore merchant accounts are commonly used for this type of business.
  • E Commerce – As the source of the payment is unverifiable at the point of sale, any transaction without the card present has a higher risk of credit card fraud.
  • Ebay Stores – Many people sell items that aren’t as described so chargebacks can be an issue.
  • Electronic cigarettes – much like traditional cigarettes, e-cigarette sales are also deemed high risk.
  • Electronics – This industry has a much higher ticket compared with many other businesses. A chargeback for a $3,000 tv or two and your account can be in jeopardy rather quickly.
  • Escort Services – This is deemed a part of the adult entertainment industry and therefore needs a high risk merchant account and payment solution.
  • Event Ticket Brokers – If a customer buys a ticket and doesn’t use it they feel like they can charge the transaction back.
  • Extended Warranty Companies – Warranties are rarely used so people try to charge back the money that has been spent paying for them.
  • Federal Firearms License Dealers – Any organization associated with guns or firearms is automatically considered in this category.
  • Fantasy Sports Websites – Just like gambling, if a person starts to lose too often they try and charge back the transaction.
  • Finance Brokers – The entire financing industry is risky. By simply extending credit to other individuals, this business is betting that a majority of them will actually pay what they say they will.
  • Financial Advising/Consulting – The high risk tag on financial advisors isn’t about the advisors or their firm. It’s about the clientele and their current circumstances.
  • Financial Loan Modification Services – Due to a clientele in financial struggles, the high risk term is applied to any payments in this industry.
  • Financial Planning – Anything that includes risk for the consumer can have consumer implications with chargebacks.
  • Financial Strategy – Another risk and reward category, if money is lost, consumers try charging back making this a high risk industry.
  • Fortune Tellers – When a person doesn’t hear what they want to hear, or what is told doesn’t happen, the fortune teller can receive huge chargebacks.
  • Furniture Sellers – High risk only when its custom furniture.
  • Gambling – If money is lost the chargebacks rise.
  • Gaming – Chargeback levels skyrocket when consumers don’t win.
  • Get Rich Quick Programs – It’s rather common in this industry for an individual to purchase the training and then chargeback their purchase saying it didn’t deliver on what was promised.
  • Google Stores – With a high rate of return on their items, Google stores are considered high risk.
  • Gun Sales (Firearm Sales) – The gun and projectile industry is automatically associated with high risk credit card processing.
  • High Average Ticket Sales – With any high average ticket, just a couple of chargebacks can mean a massive shift in how risky the account is deemed by the processor.
  • Home/Vacation Rentals – Many issues with chargebacks can take place if the consumer decides not to travel.
  • Horoscopes – Many people believe this is hocum so will chargeback transactions.
  • How To Programs – A common practice in this industry is to purchase the program and charge it back with the description that it didn’t deliver what it promised.
  • Hypnotists – Many merchants will charge back these transactions if results they hoped for were not met.
  • Import/Export Business – Another example of taking goods over country borders which automatically brings in additional risk to any processing account.
  • Indirect Financial Consulting – When using a third party to consult, the high risk status gives the processor fraud protection.
  • International Cargo – Any time you introduce a multi-country element to credit card processing, the ability for fraud to be introduced skyrockets.
  • International Merchants operating in the US – Since the merchant isn’t operating from the United States, there are many unknowns about what is happening on the other side of their business, thus increasing the risk.
  • International Shipping – Transporting goods between countries is risky and introduces all sorts of elements to the financial stability of any transaction.
  • Investment Books – consumers get upset if the investor isn’t right which can lead to chargebacks.
  • Investment Firms – As investments are never a “sure thing” this is considered a risky industry for having a merchant account.
  • Investment Strategy – Anything with future promises can lead to chargeback.
  • Knife Sales – weapons of any kind are automatically given high risk status.
  • Kratom E Commerce – Accepting payments online is high risk, and Kratom is a substance in the health and wellness industry, which is also considered high risk.
  • Life Coaching – With no tangible goods involved in the transaction, life coaching is considered high risk.
  • Lingerie Businesses – Associated with the adult entertainment industry, chargebacks abound.
  • Lotteries – In most states you can buy lottery tickets with a credit card but if you’re allowed to and the ticket is not a winner, consumers try to chargeback the transactions.
  • Magazine Sales – Many magazine sales are recurring subscriptions, which can have issues with chargebacks.
  • Magazine Subscriptions – Same as magazine sales chargebacks can be huge when a recurring subscription happens. (often referred to as recurring billing.)
  • Mail Order Companies – When something is ordered through the mail chargeback risk can go up.
  • Marijuana Dispensaries – As marijuana isn’t a legal substance in every state, this is considered high risk due to the legality of the product. Cannabis credit card processing is available through Shift Processing.
  • Matchmaking Services – Another branch of the dating tree, and often associated with the adult entertainment industry.
  • Medical Devices – If a medical device doesn’t do what’s promised the purchaser may chargeback the transaction.
  • Membership Organizations – This is another instance of where the transactions don’t have any tangible product and are easily charged back to the merchant account.
  • Merchants on the MATCH list – If you are a merchant who has been reported to the MATCH list (Member Alert to Control High Risk Merchants) or the TMF (Terminated Merchant File) you are given high risk status.
  • Merchants with Poor Credit – Merchant accounts are given based on the credit score of the business owner. It’s assumed that the business owner is going to be making the financial decisions for the business, and a poor credit score reflects on the viability of any business transactions.
  • Modeling Agencies – At many agencies models are promised the world and it doesn’t happen. The consumer then wants their money back.
  • Movie Downloads – Transference of a digital product is considered of higher risk. Also, rarely is a physical card present at time of purchase.
  • Multilevel Marketing Sales – Often associated with pyramid schemes, MLM sales are considered a risky business.
  • Music Downloads – Purchasing any digital product is considered to be of higher risk than a physical transaction. Most of the time the card is not present in a digital transaction using a shopping cart.
  • Not A US Citizen Doing Business In The US – It’s possible to get a merchant account without a US social security number, but not having a SSN will increase the risk the processor will have in issuing a merchant account for your business.
  • Online Adult Membership Sites – If you’re running a website that is adult themed and requires payment for access, this is a highly volatile account and definitely high risk.
  • Offshore Corporations (Offshore Merchants) – The international element is what gives the high risk tag when looking for domestic merchant accounts.
  • Online Gambling (Online Gaming) – Without a card being present and gambling as the activity, there are two reasons why this would be on this list. Online payment alone is risky even without the gambling element.
  • Overseas Exporting Services – The introduction of the international element is what gains access to this list.
  • Pawn Shops – There’s a general stigma that goes along with pawn shops, and it’s reflected in their assignment to the high risk processors list.
  • Penny Auction Sites – Even though the customers are usually bidding at only a penny more per bid, users will commonly charge back the transaction when they don’t win.
  • Pepper Spray – Considered a type of weapon, pepper spray vendors are considered risky.
  • Points Programs – Points programs that cost money can cause chargeback issues if points are not used.
  • Pornographic Merchants – If you’re a part of the adult entertainment industry in any way, you’re considered high risk.
  • Precious Metals – Counterfeit metals can be a problem in this industry, making it more risky to accept payments for.
  • Prepaid Calling Cards – Anything prepaid that a consumer may not use increases chargeback issues.
  • Prepaid Debit Cards – When they expire or are lost consumers want their money back.
  • Psychic Services – “Honey, did you visit a psychic? No babe, I don’t remember visiting a psychic.” I’ll just reverse that charge then.
  • Real Estate – A common target for scams and identity theft is how real estate makes this list.
  • Replica Products (Watches, Handbags, Wallets, Sunglasses, Etc…) – As the product being sold isn’t authentic to the original manufacturer, the percentage of requests for refund is much higher than a traditional merchant.
  • Rewards Programs – If rewards are not spent, the consumer wants the money back.
  • Self-Defense – Since the payment provided is for instruction and not a physical product, the self-defense industry makes this list.
  • Self-Hypnosis Services – Yet another instance where the goods being transferred are of a service and not a physical product.
  • SEO Services – With a high rate of request for refund, SEO agencies make this list.
  • Social Networking Sites – Just like a dating site, if a consumer does not get what they want from it, they always like to chargeback.
  • Software Downloads – The software industry makes their way on to this list because of the digital nature of the goods being sold.
  • Sports Forecasting – An example of paying for information and not for a product, and usually not in person where the card would be present for the transaction.
  • Startups – Every startup is considered risky, and the percentage of startups that make it is quite small compared to the number that fail.
  • Student Loans – With the cost of a college education continually on the rise, so is the percentage of loans that default and never receive payment.
  • Strip Clubs – Associated with the adult entertainment industry gains the strip club access to this list.
  • Stun Gun Sales – considered a type of weapon, which makes it a high risk merchant.
  • Supplement Sales – The request for refund in this industry is quite high due to the nature of the product.
  • Sweepstakes – “Hey, I entered a sweepstake and I didn’t win. I’d like my money back please.”
  • Talent Agencies – “I paid thousands of dollars for headshots and glamorous outfits and I haven’t gotten any paid gigs. Pay me back my money please.”
  • Telemarketing Services – Telemarketing services many times do not have the results the purchaser would like to see, so the services are charged back.
  • Telephone Order Sales – Anything ordered over the phone has a increased risk of chargeback.
  • Timeshare Companies – When timeshares aren’t used, people want their money back.
  • Travel Agencies – If trips are not taken, consumers would like their funds returned.
  • Travel Clubs – Many travel club discounts aren’t what they were promised, increasing risk for chargebacks.
  • Vacation Rental Brokers – Third party brokers on prepaid vacation can have issues when customers cancel their trips.
  • Vape Shops – The level of criminal activity and theft is higher with vape shop merchants and therefore carries a high risk label.
  • Vitamin Sales – If the vitamins don’t provide the results the merchant would like to see they chargeback the transactions.
  • Web Designer – Because this service is prone to chargebacks, it has been classified as high risk.
  • Weight Loss – Considered risky because the results aren’t really up to the company, but rather the individual has to stick to the plan to get results, often resulting in chargebacks.
  • Yahoo Stores – Since the goods sold through Yahoo can easily be returned, they are considered a risky merchant.

Turn Your Residuals into Immediate Cash Today

Selling your residuals doesn’t impact your merchants—they’ll keep processing happily. So, if you need extra funds, explore a credit card residual buyout. It’s fast, easy, and a smart move for your financial game plan.