Accepting Credit Cards Online in 2020

Most processors charge processing costs and an assortment of fees. The amount of money that you pay for each transaction you run is the processing cost. This usually includes a small percentage of each sale as well as a small, set per-transaction fee.

There are also fees that you pay on your account each month, such as the monthly fee and monthly gateway fee, and fees that you pay each year, such as the PCI-compliance fee. Depending on your processor, there may also be fees that you pay to get your account up and running, such as a setup fee or a gateway setup fee.

Online Credit Card Processing Pricing Models

There are three pricing models that processors typically use to configure your processing costs: tiered, flat-rate and interchange-plus.

• Tiered Pricing: The most common pricing model in the credit card processing industry is tiered pricing, which is sometimes also referred to as "bucket pricing" or "bundled pricing" because of the way the tiers are determined. Tiered pricing combines the processor's markup with actual processing costs, which are comprised of the interchange rate and the card brand fee. It then bundles them together into tiers, or buckets, to create a simplified pricing structure.

Most processors set three tiers: qualified, mid-qualified and non-qualified. It's important to ask how many tiers there are and what cards are included in each tier because when you call for pricing quotes, many processors only give you the qualified rate unless you specifically ask about the other tiers.

The problem with only receiving the qualified rate is that usually only standard debit and credit cards receive this rate. However, most consumers prefer to pay with rewards or premium cards, and these types of cards are usually processed at the mid- or non-qualified rate. Business credit cards typically receive the non-qualified rate, as do international and government cards.

• Flat-Rate Pricing: The simplest pricing model is flat-rate pricing. In this pricing model, you pay a single rate for each transaction, and there are very few additional fees. There is some variance to how each processor configures their flat rates. Some processors charge you a small percentage of each sale, and the percentage is the same no matter what type of card you accept

Some processors charge a higher rate if you manually key in the transaction. Other processors charge one rate for debit cards and another for credit cards. Some processors add a per-transaction fee to each sale while others don't.

At first glance, this pricing model looks like it would be more expensive than tiered or interchange-plus, but because there are fewer fees, it can actually be the more cost-effective choice, particularly if you process a lower volume of transactions each month. One cost to watch with flat-rate pricing is the per-transaction fee because it can add up quickly if your average ticket amount is on the small side.

• Interchange-Plus Pricing: Industry experts recommend this pricing model because it's the most transparent and often the most cost-effective option. It may initially seem very complex, but once you understand how it works, it's the easiest pricing model to compare.

Interchange-plus pricing comprises the actual processing costs and the processor's markup. The actual processing cost is the interchange rate plus the card-brand fee. These are non-negotiable rates and every processor pays the same amount. The processor's markup is the second part of this pricing model, and it includes a percentage of the sale and a small, set fee. The benefit of this pricing model is that you can see what markup you're actually paying, which helps you choose the most cost-effective service.

Online Credit Card Processing Fees

Depending on the price structure, the processor may charge additional fees that you want to be aware of as you're selecting a processing service. Some are one-time fees for setting up your account or your gateway; others are recurring fees that you pay monthly or annually. You want to make sure that you read the application and contract to find out which fees you can expect to pay.

• Fees May Be Flexible: Before you sign up with a processor, you may be able to negotiate with your rep. You want to get fees waived and get waivers or contract amendments before you sign the contact because it's unlikely the processor will be willing to renegotiate your terms after the contract is signed.

In our testing, we found that some companies were willing to waive early termination fees and PCI-compliance fees. Some were also willing to waive or lower the monthly minimum. If the company you're interested in charges a setup fee or an annual fee, your rep may be willing to waive these fees; the best online credit card processing companies don't commonly charge them.

• Monthly Fee: Most processors charge a monthly service fee, which may also be called a statement fee or a customer service fee. In addition to paying for statement and customer-support services, this fee also typically covers account maintenance. Payment Depot is unique in that it gives you a discount if you pay this fee as an annual lump sum instead of monthly. A few processors, such as Square, Amazon Payments, Moolah and PayJunction, don't charge this fee.
• Monthly Minimum: Approximately half of the processors that we reviewed expect you to meet a monthly minimum. In most cases, the processor expects you to generate this dollar amount in transaction fees each month. On rare occasions, this fee is simply used to ensure that you keep your account active and the full amount of the transaction is applied to it, but most of the time, it's to ensure you're processing enough transactions each month for the processor to consider your account profitable.

Of the processors that require a monthly minimum, goEmerchant has the lowest in our review at $15 per month, and Gotmerchant.com requires the highest at $50 per month; however, most require $25. If you don't generate enough fees to meet the monthly minimum, you're required pay the difference between the generated fees and the minimum.

• Monthly Gateway Fee: A payment gateway is necessary if you intend to accept credit cards. Small business owners with online shops need a gateway because it encrypts and securely transmits credit card data from your website to the processor. Approximately half of the processors we reviewed charge a monthly fee for this service, and the average is $10. An additional fourth of processors we reviewed include the payment gateway as part of their monthly fees. Some processors also charge an additional per-transaction fee.
• Gateway Setup Fee: A few of the processors we reviewed charge a fee to set up the payment gateway connection with your website. This can be an expensive one-time fee that may cost $49 to $99.
• PCI-Compliance Fee: If you work with a standard processor that provides you with your own merchant account, you're required to be PCI compliant, which means that you adhere to the Data Security Standards the Payment Card Industry developed to help merchants prevent data theft and fraud.
• Several processors charge a fee to help you achieve compliance. Most processors that charge this fee offer to help you complete the annual questionnaire that you're required to complete to demonstrate your compliance. Your rep may call or email to remind you to take it each year, or the processor may note it on your statement. On average, this fee costs $99.

• PCI Non-Compliance: If you have your own merchant account, you're required to complete the annual PCI questionnaire. Even if the processor doesn't require you to pay an annual PCI-compliance fee, it may charge you a monthly non-compliance fee if you fail to establish compliance by filling out the questionnaire. You can easily avoid this fee by staying up to date with your PCI responsibilities.
• Chargeback Fee: If a customer disputes a charge and requests his or her money back, the processor charges you this fee. It's most commonly seen in online sales because of the typical reasons for chargebacks, which include delivery failures, technical errors, fraud and customer dissatisfaction. Another common cause of chargebacks is if your store name is different from the name on your merchant account and your customer doesn't recognize your merchant name on his or her credit card statement.

Tips for Lowering Your Online Processing Costs

There are several steps you can take to lower your online processing costs or to ensure that you receive the best possible rates.

• Review Your Statement Every Month: This is a good habit to get into so you can identify any changes on your account, such as any new fees or rate increases. This is important to watch for as most contracts don't include pricing guarantees.

You also want to watch for any notices about your account, such as PCI-compliance reminders that help you stay on top of your PCI compliance so you can avoid expensive non-compliance fees. If there are new charges or rate increases, you can call your rep to discuss your account.

• Ask Your Rep to Review Your Pricing: If you've been processing for a while, you may qualify for a pricing review and be eligible for lower rates, especially if your processing volume has increased since you signed up. If your processor offers additional pricing models, it may be worth asking your processor if another pricing model would be more cost effective for your business.

Before switching, ask your rep if any new fees or requirements come with the new pricing plan. Industry experts recommend interchange-plus pricing as the most affordable, transparent pricing model.

• Shop Around & Renegotiate Your Rates: There are few things more frustrating than finding out you've been overpaying; for this reason, it's important to shop around every year or two to make sure that the rates you're paying are still competitive. If another processor offers better rates, don't hesitate to call your rep and ask him or her to review your pricing or renegotiate your rates.

If you're on a month-to-month service contract, you're in a better position to negotiate since you can easily switch services. If you're under contract and the rep is unwilling to negotiate, it may be a good time to review your contract and figure out when it expires or renews and what you need to do cancel your account.

Shopping for an Online Payments Processor

You want to give yourself enough time to shop around for a processor that enables you to accept credit card payments online. The reason for this is that even though reading articles about online processors can help you create a short list of companies to consider, it's still important to contact these companies directly so you can get pricing quotes specific to your business. You want to give yourself enough time to request contracts, read them, and negotiate fees and terms.

You also want to evaluate which rep provides you with the best customer support, and keep in mind that most often, the person who you're working with will be your main point of contact once you sign up with the processor.

Because pricing is the first thing you look for when choosing a service that lets you receive payments online, this is the first factor we considered. We looked for processors with competitive pricing and minimal fees. Because flexibility and the ability to switch services if you find a better deal is important, we searched for companies with favorable service terms that don't require lengthy contracts or penalize you if you decide to switch services. Because your time is valuable, we looked for companies that can approve your application and set up your account quickly.

Our testers thoroughly researched each processor and reached out multiple times to each company's representatives as potential customers, at various times and on various days, by both phone and email. Using this information, we scored each company on pricing, consistency, ease of application and customer service.

• Transparency & Consistency: This score indicates the public availability of key information for pricing, fees and service terms on the processor's website. Transparency is important because it saves you time finding the information you need to make a decision, and it helps you to feel confident that there won't be surprise charges on your bill and that you're getting same rates as the company's other customers. It also helps you to estimate what you can expect to pay if you engage the company's services.

We found a wide variance in transparency among the processors we reviewed. While the best online credit card processing companies are extremely open and clearly post their pricing and terms on their websites, some post low starting rates and others don't post any key information at all. Companies that have flat-rate or interchange-plus pricing are often the most forthcoming with their information while the majority of the companies that offer tiered pricing don't have much pricing information posted on their websites.

This score also evaluates the willingness of company representatives to share key information with our testers and the completeness of that information. Most of the reps we spoke with were eager to tell us about the services their companies provide and answered our questions patiently. However, most didn't volunteer all of the information we were looking for, such as all of the fees that we would be expected to pay or if there were any unfavorable contract terms, such as early termination fees. For this reason, it's important to ask detailed questions about processing costs and service terms and to get a contract that you can read through to verify this information.

We evaluated the consistency of the information we received throughout the testing process. The highest scores went to the companies that were consistent in providing complete information.

• Ease of Application: This score gauges how easy it is to apply for an account with the processor. We looked at the time it takes the processor to set up an account, the availability of an online application and the documentation you're required to submit during the application process. We also considered the requirement of a lengthy contract and the time it takes the processor to clear the account and deposit your funds into your business bank account.

The majority of the processors can get your online payment processing account set up in two days or less. Just a quarter of them take longer, requiring up to three or five days to set up your account. None of the processors we reviewed require you to sign a lengthy contract; however, it's still important that you read the contract and verify that it specifies whether you're on a month-to-month or pay-as-you-go plan. If the contract lists a three-year term, you want to make sure that you ask your rep for a waiver that eliminates the term requirement as well as any early cancellation penalties.

The majority of processors we reviewed take two days or less to clear the account and deposit your money into your business bank account. This is an important feature if your cash flow is tight and you need to be able to quickly access your money. Square is the fastest, due to its instant-deposit feature that allows you to have transaction funds deposited into your account immediately. Several others, including Amazon Payment, Chase Paymentech, National Bankcard and Payline, can deposit your money in one day. Only four of the processors we reviewed take longer than two days. FreeAuthNet, Gotmerchant.com and QuickBooks Payments may take up to three days to clear the account, and MerchantPlus may take up to five days.

• Customer Service Score: This score reflects our testers' interactions with each processor's representatives. When selecting a processor, it's important to know that if you encounter any issues that hinder your ability to accept credit card payments online, you can count on your rep to help you resolve the problem as quickly as possible.

We contacted each processor multiple times in order to gauge reps' responsiveness and accessibility. We assessed whether the reps responded to the online forms our testers filled out, provided pricing quotes over the phone, were knowledgeable about how to accept credit cards and were polite. The highest scores went to the processors whose reps also took the time to follow up with our testers either by phone or by email.

The best online processors we reviewed don't require lengthy contracts, they demonstrate transparency by posting their rates and fees on their websites, and they have reps that are upfront about service terms and the costs you can expect.

If you want a processor that offers pay-as-you-go service with simple pricing, no fees and no contract, Square, Amazon Payments, and Moolah are all good choices. Because these companies are account aggregators, they're also good options if you want to accept credit cards online without a merchant account.

• Square can be a particularly good choice if you want a processor that offers tools that can help your business with various tasks, such as appointments, marketing, invoicing and inventory management.
• Amazon Payments lets you give your customers the familiar experience of paying for the merchandise they purchase on your website using their Amazon account.
• Moolah grants you access to the popular Authorize.net payment gateway.

• Payment Depot has an innovative membership-based pricing structure.
• Payline, National Bankcard and Cayan have very competitive rates.
• Helcim charges fewer fees than many of its competitors.

If you want to be able to choose between interchange-plus and tiered pricing models to see which is more advantageous for your business, consider National Bankcard, CreditCardProcessing.com, Flagship Merchant Services and Gotmerchant.com.

No matter what your specific needs are for an online payments processor, it's important to take the time to carefully research your options, request pricing quotes and thoroughly read contracts before you sign any applications. By following these steps, you can choose the best online credit card processing company for your business.

You should expect your online payment processing company to enable you to accept every major credit and debit card, including American Express and Discover, so that you don't miss any potential sales because you don't accept the type of card your customer wants to use.

You should expect your transactions to be encrypted and transmitted securely either through the processor or through a payment gateway the processor gives you access to. The processor shouldn't require you to sign any lengthy contracts that lock you in for several years, but it should be confident enough in its service quality and value that it's willing to provide service to you on a month-to-month or pay-as-you-go basis.

Additionally, should you decide to cancel the service, you shouldn't incur any sort of penalty or cancellation fee. You should also expect the processor to provide you with customer support, and you should be able to reach the service by both phone and email.

• Data Security: Most processors are very proactive when it comes to data encryption and security regulations. If you process with a master merchant account holder or aggregator, it takes care of PCI compliance and ensures your online dashboard and gateway are secure and meet the Payment Card Industry's Data Security Standards (PCI DSS).

If you process with a standard processor that provides you with your own merchant account, it sets you up with a payment gateway to encrypt and securely transmit your transaction data. Although some processors have proprietary gateways, most processors set you up with the popular Authorize.net payment gateway. As an additional security measure, processors expect you to comply with the PCI DSS and complete an annual questionnaire to establish your certification.

Many processors charge an annual fee for their assistance in reminding and helping you to do this, and they charge expensive monthly fees if you fail to do so in order to spur you to get it done. The reason for this is that complying with the PCI DSS effectively deters fraud, as evidenced by a recent study that revealed that 96 percent of merchants that had data breaches in 2011 were not PCI compliant.

Online credit card processing services enable you to accept payments through your business's website, online store or eCommerce shop. When your customer makes a purchase and enters his or her credit card information, the data from the transaction travels through a secure online connection, called a payment gateway, where it's encrypted and sent to the processor. The data is then sent to the credit card network and your customer's issuing bank before the money from the transaction, minus processing costs, is deposited into your business bank account.

Because the ability to accept credit cards online is the lifeblood of businesses that sell goods or services on the internet, it's important to choose an online payment processing company that makes it as inexpensive and easy as possible.

We conducted extensive research and testing in order to find the best way to accept credit cards online. After you use the information we've presented in this article, the matrix and our reviews to familiarize yourself with this complex industry and the companies in it, it's important that you do your due diligence and contact the companies you're most interested in to get pricing quotes tailored to your specific business. Because many processors customize the pricing they offer businesses, the pricing that you're quoted may vary from the pricing we received during our testing process. This article presents the following information:

• Choosing the best pricing model for your business: Flat-rate, interchange-plus and tiered pricing models are available from payment processors. Learn more about each model so you can choose the one that works best for your business.
• Fees to expect when you process payments online: Some processors don't charge any fees but have higher processing costs, while others charge an assortment of fees. Find out which fees you can expect to pay with an online merchant account.
• Tips for lowering your processing costs: Some of the things you can do to lower your processing costs include asking for a pricing review and asking to have certain fees waived.
• Contract tips: Read the contract to discover details that could cost you money, such as cancellation fees and additional service clauses.
• Our recommendations for specific online processing needs: Find out which online processors may be best suited to your business's specific needs.

Why Online Credit Card Processors Are Difficult to Evaluate

Online payment processors are difficult to evaluate because there are so many options to choose from. Another difficulty is that these companies use different pricing models. Where retail credit card processing services typically offer interchange-plus and tiered pricing models, and the majority of mobile credit card processors offer flat-rate pricing, the companies that provide online credit card processing services offer a mix of all three pricing models, which makes it extremely difficult to evaluate which processors offer the best pricing.

In addition to different pricing models, there is also a wide variance in the fees processors charge. Although some processors don't charge per-transaction fees, most do. Some don't charge any additional monthly or gateway fees but have higher processing costs, while others charge an assortment of fees, such as monthly fees and monthly gateway fees, but have lower processing costs. What this means is that your monthly volume and ticket size can factor in to which processor offers the most cost-effective processing solution for your online business.

Most processors are eager for you to fill out their applications; however, it's important to note that the applications are part of the contract. This means that once you've filled out the application and signed it, you've actually signed up with the processor and signed the contract. While you can expect to give the rep your name, company name, average ticket size and average monthly processing volume, you don't want to give the rep your social security number or bank account information until you're ready to sign up with that company.

Contracts for standard processors typically have two to three parts: the application, the Terms of Service document and the Program Guide. It's important you read all three parts of the contract before you sign the application, and you may have to specifically request each document from your rep.

If the processor is a master merchant account holder or an aggregator, the user agreement is usually shorter and more straightforward than a traditional contract, and you can often find it on the processor's website.

Following are some of the factors you want to watch for as you read processors' contracts:

• Contract Length: The best online processors provide month-to-month or pay-as-you-go service. If you receive a contract with a lengthy term, such as a three-year automatically renewing contract, it's in your best interest to request a waiver that puts you on a month-to-month plan.
• Early Termination Fees: Lengthy contracts may include penalties if you choose to cancel your account before the term expires. Early termination fees are expensive; most are a few hundred dollars and some include liquidated damages, which is either the full amount or a percentage of the revenue the processor expected to earn on your account and can be exorbitant. If you receive a contract with an early termination fee or liquidated damages, it's very important that you obtain a waiver that eliminates these penalties before you sign it.
• Personal Guarantees: Most contracts include personal guarantee clauses that allow the processor to check your personal credit. These clauses may also allow the processor to pursue collections from you personally if your business fails to meet its contractual obligations; it may also hold your successors responsible if you die.
• Additional Service Clauses: The contract may include additional service clauses that automatically sign you up for additional services. You want to make sure that you understand what these services are and how much they cost before you sign the contract so that you can opt out of them if they don't suit your online processing needs.