How to Choose the Best Credit Card Processor for Your Small Business

A credit card processor for small business is a necessary thing when you are starting or owning a business, so you also need to compare the payment processing services to find the right one for yourself. The most feasible solution for this is low transaction fees, customer support, and transparent pricing models. Additionally, there are various credit card companies that provide built-in point-of-sale (POS) systems and free up the payment gateway integration.

This roundup points out some of the best options for credit card processors for small business. It provides information about all vendor’s tools and fees for credit card processing. In this article, you will learn about the right provider and will be able to explore the credit card processing services.

Consumers usually go for non-cash payment methods and generally expect small businesses to accept the most popular credit cards. Therefore, understanding the grounds of payment processing which includes payment methods, credit card processing fees, merchant account services which can be beneficial for you in selecting a credit card processor for small business, as per your growth plan.

Cost of a credit card processor

Credit card processing fees typically range from 1.3% to 3.5% per transaction, along with a flat fee of $0.10 to $0.30 per sale. Many small businesses begin with flat-rate pricing, which averages about 2.6% for in-person payments and 2.9% for online transactions.

However, businesses processing more than $10,000 per month or those that negotiate rates through interchange-plus pricing can often secure lower costs. To find the cheapest credit card processing for small business, it's essential to compare pricing models, monthly volume thresholds, and potential savings through customized plans.

Meanwhile, higher fees may apply to:

• Specific type of online payments, like text-to-pay
• Subscription billing and card-on-file payments
• High-risk industries or companies with a history of frequent chargebacks
• Payments that are manually keyed in, known as card-not-present (CNP) transactions

Credit card processing models: flat rate vs. interchange and more

A credit card processor for small business charges your company if you accept electronic payments. Every pricing structure has its pros and cons; therefore, selecting the right model depends on how your business operates, how often you process payments, and what is most cost-effective for you. Below are the four main pricing structures for you.

Interchange-plus pricing structure

Interchange-plus pricing has more transparent features than a flat-rate credit card processor for small business structure. It is so because you will be able to see what you are paying for every transaction. You pay the original cost from the card network, along with a fixed markup from the processor.

• Pros: You have the power of negotiation and can reduce the fees with the increase in processing volume. The data on customer card usage will help inform your payment strategies.
• Cons: Interchange fees can vary a lot, which will make budgeting more challenging, and merchant accounts with interchange-plus pricing can have multiple statement fees.
• Best for: This credit card processor for small business is best for established companies, which has consistent sales or higher transaction volumes and anyone who is waiting for pricing transparency.

Flat-rate pricing model

Flat-rate pricing credit card processor for small business is straightforward, and acts like a subscription streaming service. You would have to pay a fixed percentage per transaction, regardless of card type. For example, purchases made through your online store incur a 2.9% fee plus a 30-cent charge, regardless of the amount.

• Pros: The fee is predictable in this credit card processor for small business which makes it easier to budget the cost. Most of the flat-rate pricing model does not have extra fees, as all the expenses are together in a flat rate.
• Cons: Higher percentage-based fees are not cost-effective enough for businesses that sell expensive products or services compared to those which have monthly transactions.
• Best for: This credit card processor for small business is helpful for freelancers, small businesses, startup with small transaction volume

Tiered-pricing structure

This is an unpredictable and less frequent pricing model. It bases the processing rates on the basis of the card network, the financial profile of the merchant, the card type, and the payment method. These transactions are of the three types: qualified, mid-qualified, and non-qualified.

• Pros: They can provide competitive rates for a particular type of card, which can be beneficial for merchants of certain industries.
• Cons: This credit card processor for small business is not very transparent and considered risky than others. Moreover, less qualified businesses may have larger transactions, which can fall into the non-qualified category.
• Best for: Established companies that process a lot of debit and non-reward cards.

Subscription-based model

This credit card processor for small business is like having a membership of a warehouse. You can pay monthly fees in exchange for wholesale interchange rates. They are free from processor markups and ultra-low processor fees.

• Pros: It can significantly eliminate or reduce the processor’s fees, and there is reduced pressure for negotiating the rates continuously.
• Cons: Business owners can mindfully evaluate the transaction volumes along with the costs for ensuring the ongoing savings, especially during seasonal fluctuations.
• Best for: Companies which has high processing volume consistently.

What to look for in credit card processors for a small business

Understanding your needs (and what your customers want) can help you find affordable credit card processing solutions and top 5 credit card processing companies that are convenient, scalable, and reliable. Here are the payment system features to consider when choosing a credit card processor.

Also Read: How to Choose the Best Business Credit Card for Your Need

Accepted payment methods

When choosing a credit card processor for small business, it’s essential to consider the payment methods your customers would be most comfortable with. An ideal payment processing solution  accept all major credit cards, like Visa, Mastercard  and Discover. Most of them would also support contactless payments through mobile wallets, such as Apple Pay and Google Pay.

If you send invoices, look for merchant services that offer low-cost electronic payment options like ACH (Automated Clearing House). For businesses selling high-ticket items or seeking flexible payment options, some processors provide buy now, pay later (BNPL) or installment plans to help improve cash flow. Ensuring secure handling of card information throughout these transactions is essential to protect both your business and your customers.

Supported sales channels

You should select a credit card processor for a small business that will help you to accept payments from anywhere your customers pay and shop. The most feasible credit card processor for small business tools and payment system features enables you for expanding into a new channel or offer customer alternatives by not moving to a new processing provider.

Credit card processor for small business options include the following:

• Phone payments: Virtual terminal services when you need transactions entered manually
• Online payments: Checkout cards, hosted payment pages, and free payment gateways
• Invoices: One-time and recurring billing solutions
• Text-to-pay and QR codes: QR codes, pay links, and SMS for contactless checkouts
• In-person: Mobile payment apps, stand-alone card readers, and POS systems

Guidance with chargebacks and disputes

If you are able to manage chargebacks, it will help in reducing costs, retaining customers, and keeping your brand reputation secure. Merchant accounts usually have more control over the dispute and the process of chargeback.

On the other hand, a third-party credit card processor for small business often manages disputes on behalf of you, but they can have much stricter policies. So, you should search for a credit card processor for small business which has ample resources, clear guidelines, and online dispute portals.

Integration with accounting software and existing systems

Plug-and-play integration streamlines your process of setup, and connected systems require less effort manually. The best credit card processor for small business card processing companies can provide a no-code setup along with detailed guidelines for integrating accounting software, POS systems, and e-commerce platforms.

Security and fraud prevention tools for merchants

Protect your business and keep processing costs under control by choosing a credit card processor for small business that complies with the Payment Card Industry Data Security Standard (PCI DSS). The best merchant credit card processing for small business providers offers tools and support to help you meet PCI requirements effortlessly.

To reduce chargebacks and prevent fraud, look for processors that include essential safeguards such as CVV (Card Verification Value), AVS (Address Verification Service), and encryption. For businesses considered high-risk, advanced fraud protection such as 3D Secure (3DS) authentication can further minimize risks when processing online or international transactions.

Credit card processing equipment: POS systems, terminals, and mobile readers

If you are looking for the most cost-effective way to accept credit card payments in person, it is generally through an EVM (Europay, MasterCard, and Visa) card reader.

Through these credit card processors for small business or third parties, you can lease or buy a credit card machine, POS systems, or mobile readers.

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Final Thoughts

Choosing the right credit card processor for small business is essential to managing costs, improving efficiency, and delivering a smooth payment experience for your customers. From understanding pricing models to evaluating fraud protection tools and sales channels, each factor plays a role in how your business handles credit card transactions.

Whether you're just starting out or expanding, the right partner can simplify your operations and help you grow. By comparing features, fees, and integrations, you can find a solution tailored to your needs, ensuring your financial services keep up with your business goals.

FAQs for credit card processor for small business

Can I make my own credit card processor?

You can’t own a credit card processor for small business, as you need a payment processing service that is offered by a merchant services provider. This processing consists of complex network of banks, card networks, payment processors, and merchants.

Who pays credit card processing fees?

Credit card processors for small business fees are paid through the vendor, not the holder of the card. Businesses can pay the fees for the buyer’s credit card issuer, to their network of credit cards, along with the payment processor company.

What is the minimum credit card processing fee?

The minimum fees that a credit card processor for small business needs to pay may vary.

Can I process credit cards myself?

If you have set up an account with payment service providers, you will not be asked to be a legal business entity. These accounts will allow you to accept credit card payments from anyone, which can include family, friends, clients, and customers.

How do credit card processors make money?

Credit card processors for small business and merchant service providers charge specific fees for their services, including settlement, handling authorization, and communication with card networks and banks. This markup can be your transaction amount percentage, a pre-transaction fee, or a monthly fee.

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