The Best Credit Card Processors of 2022

Credit card processing rates are typically expressed as a percentage of the sale plus a small per-transaction fee. Most rates average 2% to 4% of each transaction. The processor considers several factors to determine the processing fees it charges you, including your monthly processing volume, your average ticket size, your business's industry and your processing history. It may also consider your business and personal credit.

The credit card processing industry is very competitive. Companies want to work with you, especially if you've been in business a few years and process a high volume of payments each month. Many are open to negotiating a deal with you and advertise that they're willing to meet or beat your current rates. But first, you need to understand what costs go into credit card processing rates and which are negotiable. All rates have three parts:

• Interchange fees. This is a non-negotiable rate set by the card networks, and every processor pays the same amount. There are hundreds of rates, arranged by industry, card type, sales ticket amount and acceptance method. You can view interchange rate tables on the card networks' websites.
  
• Assessment fees. Like interchange rates, these are non-negotiable, and every processor pays the same amount. These rates vary by card brand.
  
• Processor's markup. This is the only negotiable part of the processing rate.

Here's why you need to know this information:

• If a company says it has lower interchange rates than other processors, it's not true. All processors pay the same amount.
• If a company posts links to interchange rate tables, indicating that this is what you'll pay, you need to know that this is only a portion of the rates you'll pay the processor.

Second, you need to identify which pricing model is best for your business. For most businesses, industry experts recommend interchange-plus pricing, but credit card processing companies prefer tiered pricing because they make more money with it. Some processors give you a choice of pricing models and may allow you to switch so you can evaluate for yourself which one provides the best savings for your business. Here are the three most common:

Credit Card Processing Pricing Models

Tiered Pricing

This is the most common pricing model, but it's widely criticized by industry experts because it's not as transparent as interchange-plus pricing. It attempts to simplify the interchange table by combining interchange rates, assessment fees, and markups and then sorting them into tiers. Tiered pricing is also referred to as "bundled pricing" or "bucket pricing."

Most processors categorize these tiers as qualified, mid-qualified, and non-qualified transactions, although some plans may have only two or up to six tiers, with separate rates for credit and debit cards. The factors that determine the transaction category include the type of card (whether it's debit or credit and if it's a regular, rewards, corporate, government-issued, or international card) and how the transaction is processed (whether you accept the card in person using a card reader, accept it online, or manually key it in). 

Did you know? Some processors have a special lower rate for PIN debit transactions.

Critics note a variance between processors as to which interchange rates fall into each tier, which makes it difficult to compare pricing between services. We found this to be true in our research, as some processors categorize rewards cards as mid-qualified and others define them as non-qualified. This variance in tier categorization, sometimes referred to as "inconsistent buckets," makes it difficult to determine how much you can expect to pay above the set costs for your processing.

• Low rates advertised on processor websites are usually qualified debit rates. These only apply to non-rewards debit cards accepted in person with a card reader.
• Qualified debit and qualified credit may be the only rates the sales rep quotes you, so it's important to ask about the number of tiers, what they cost, which types of cards and acceptance methods each tier includes, and what actions may cause a transaction to be downgraded to a lower tier.
• The tiered pricing model is best for businesses whose customers prefer paying by debit card.
  

Interchange-Plus Pricing

Most industry experts prefer this model because it promotes pricing transparency. The interchange-plus pricing model may also be called "pass-through pricing" or "cost-plus pricing," because the processor passes the interchange rates and assessment fees to you at cost and adds a markup.

The processor's markup stays the same no matter what card type your customers pay with, so you can see how much you're paying the processor. This makes it easier to spot savings when you're comparing services. Also, many of the companies that offer interchange-plus pricing post their rates on their websites, which saves you time in gathering rates from the companies you're interested in learning more about.

• Many companies will quote you interchange-plus rates if you specifically request it, but some only offer this type of pricing to established customers, requiring you to process with them for a certain amount of time before you qualify. The best companies offer this pricing to all their customers.
• The rate you're quoted is only the markup. You'll pay this amount in addition to the actual interchange rate and assessment fee.
• Interchange-plus pricing is best for most businesses; it's the pricing model recommended by industry experts.
  

Flat-Rate Pricing

This is the simplest pricing model. Most processors that use this model charge a fixed percentage rate for each sale, regardless of card type. Alternatively, some processors charge a fixed percentage rate and a per-transaction fee. There are usually different rates for cards accepted in person and online.

Mobile credit card processing companies commonly use this pricing model. There are typically no monthly or annual fees, making it a good option for small businesses that don't process enough transactions to cover these costs. Most of the time, the only other fee is a chargeback fee, which is only triggered when a customer disputes a transaction.

• If your business processes less than $2,500 per month, some credit card processors will refer you to a processor with flat-rate pricing.
• Most companies that offer this pricing structure set you up as a submerchant under their master merchant accounts, allowing for fast setup.
• Flat-rate pricing is best for businesses that have small sales tickets or process a low volume of credit card transactions each month.

In addition to processing rates, you'll pay various fees to whichever credit card processor you choose. Some of these are one-time or per-occurrence fees, and others are charged monthly or annually.

Tip: For a complete list and explanation of fees, including nonstandard fees that you should never pay, see our small business guide to credit card processing fees.

Common Credit Card Processing Fees

Most credit card processing companies charge these recurring fees:

• The monthly fee (sometimes called a statement fee) usually ranges from $5 to $15. It may be higher if it includes PCI compliance and gateway fees.
• The monthly minimum fee is normally $25, though this usually means the amount you pay in processing costs, not the minimum dollar amount of sales you must process per month.
• PCI compliance is $100 per year on average, though some companies may prorate it and charge it monthly, sometimes baking it into the monthly fee.
• The payment gateway fee varies by the payment gateway you use. Most are charged monthly, though some companies also charge a small per-transaction fee.
• Various network fees, such as Mastercard's Merchant Location Fee and Visa's Fixed Acquirer Network Fee, may be passed on to you as either monthly or annual fees.

These fees are also common but only charged per occurrence:

• Batch fees are nominal daily fees that you pay when you close out the day's sales, costing 10 to 30 cents (usually the same amount as your per-transaction fee).
• Address Verification Service (AVS) fees are usually a few cents per transaction when you use this anti-fraud tool to verify the address and ZIP code of the cardholder.
• Voice authorization is another anti-fraud tool with a small per-use fee. It's rarely required, but you're charged for each occurrence.
• Chargeback fees are usually $15 or $20 per incident but may be as much as $45.
• PCI noncompliance is a high monthly fee that you must pay if you fail to establish and maintain your PCI compliance. [Learn about other payment processing laws and regulations.]
• A non-sufficient funds (NSF) fee is charged if you don't have enough money in your business bank account to pay the fees you owe the processor.

Fees to Avoid

Some processors charge a variety of miscellaneous fees in addition to the standard fees listed above. Some of the worst are cancellation fees, club or membership fees, and fees for what the contract vaguely defines as "additional services."

Hidden Fees

Again, it's important to read the entire contract before you sign anything to make sure no fees are tucked away in the fine print. As you read the contract, note every fee it lists. Then, before you sign the contract, ask your sales rep what each fee is for, how much it costs, how frequently it's charged, and if it can be waived. If the sales rep agrees to waive a fee, be sure to get this in writing, either in the contract or as an addendum. [Read related article: 7 Tips to Save on Credit Card Processing Fees]

No matter which credit card processing service you select, you should expect it to provide the basic services that you need to accept payments. The processor should:

• Allow you to accept all major cards, including Discover and American Express, so you don't lose sales from users of certain cards.
• Comply fully with the Payment Card Industry Data Security Standard (PCI DSS) and help you attain PCI compliance.
• Offer EMV-compliant card readers to reduce your vulnerability to fraud and to ensure that, in the event of a security breach, you aren't held liable for using outdated equipment.
• Provide readily accessible customer support that you can reach by phone 24/7 so that, no matter what hours your business keeps, you can immediately get the assistance you need.

In addition to these criteria, we considered the following factors to evaluate each processing company.

• Pricing: We looked at processing rates and account fees to find out how much it costs to accept credit card payments with each company. We also considered the pricing model the company uses and how transparent it is about its pricing.
  
  
• Contracts and service terms: Standard processing contracts have lengthy terms and hefty early termination fees that make it difficult to switch providers. We looked for processors that offer month-to-month service with no cancellation fees, rather than locking you into a service.
  
  
• Selection of processing types: Many small businesses want to accept payments wherever their customers are, so we considered whether the processor offers multiple processing methods. We looked for those that allow you to accept PayPal and ACH payments in addition to all major credit cards.
  
  
• Processing equipment options: This industry is notorious for bad leasing contracts, so we looked for processors that allow you to purchase credit card terminals and other processing equipment upfront. Also, whether you need a countertop credit card terminal or a mobile card reader, the processing equipment should allow you to accept chip cards, contactless cards, and mobile wallets.
  
  
• Third-party integrations: Because the ability to integrate with POS systems, accounting software, and other commonly used business software saves you valuable time, it was one of the features we looked for in a processor.
  
  
• Tap-to-pay capabilities: The pandemic changed the way people pay for things. Cash and credit card transactions are declining in favor of contactless payment methods. With this payment method, customers tap their credit or debit card, wearable device, or mobile phone on a contactless payment terminal to complete the transaction. This can speed up the checkout process and keep customers feeling safe. Most newer POS terminals have built-in tap-to-pay capabilities.
  
  
• Funds: We also considered how long it takes the processor to clear the account and deposit the transaction money in your business bank account and whether it offers additional funding options.

The main benefit of credit card processing is that it allows you to accept credit and debit cards and, in many instances, mobile wallets like Apple Pay and Google Pay. Acceptance of these payment types is increasingly important for nearly every type of business, as many customers don't carry cash anymore.

HOW DOES CREDIT CARD PROCESSING HELP WITH BUSINESS FINANCES?

In addition to preventing loss of business from customers who prefer to pay with cards, credit card processing helps you analyze your sales. Most services either connect with a POS system or provide an online dashboard that lets you run detailed reports on your sales. Many also integrate with accounting software, which saves you the effort of manually entering transaction data and reduces the risk of error due to manually entered data.

WHAT IS OFFLINE CREDIT CARD PROCESSING AND WHY DOES IT MATTER? 

Online and contactless payment adoption rates are rising, but what happens if your internet goes down? Knowing that is a very real possibility, you should make sure your credit card processor can support you when you lose internet connectivity. That's where offline credit card processing comes in. With offline processing, a customer still provides their payment card to the terminal, which encrypts and saves the card data. When your business is back online, the terminal sends the information to the merchant's bank and card network. From the customer's point of view, the transaction happened like normal.

Offline card processing isn't only beneficial when the internet is down. It also enables you to accept payments outside your store. Most credit card processors, including the ones we reviewed, support offline card processing.

WHAT ARE THE OTHER BENEFITS OF CREDIT CARD PROCESSING?

Another important benefit is that credit card processors make it easy to accept payments across multiple sales channels.

• In person: You can accept payments at your brick-and-mortar location with a payment terminal, card reader or POS system. You can also accept payments offsite with an app and mobile card reader.
  
  
• Over the phone: Using a virtual terminal, you can manually record card details in your computer.
  
  
• Online: You can accept online payments in various ways. On your website, you can embed a payment form or hosted payment page. On social media channels and in your text messages, invoices, and emails, you can post payment links.
  
  
• Crypto: Cryptocurrency is gaining popularity as more payment companies roll out services to support this method. Mastercard is a great example. The credit card company has teamed up with Bakkt, a company that makes digital crypto wallets, to make it easy for merchants in the U.S. to offer support for bitcoin payments. Merchants will also be able to offer customers cryptocurrency for rewards and loyalty programs.

When you ask a processor to send you the contract to look over, the rep usually sends a "merchant application," "merchant agreement," or even a "pre-application form" for you to fill out. The term "application" is misleading, because it's actually part of the contract, and signing the application is signing the contract.

Although some applications include the terms and conditions and act as a full contract, most don't. Some applications include links in the fine print to the terms and conditions and the program guide, but in most cases, you'll have to specifically ask your rep for these additional documents.

You should read the full contract so you know exactly what you're agreeing to and can verify the rates, fees, and terms you were quoted.

• Don't enter your bank account information on an application until you're ready to sign up with a company.
• Don't sign the application until you've thoroughly read the full contract and verified that the rates and fees are correct, waivers are noted, and you understand the term length and cancellation policy.
• Contracts usually have three parts: the merchant application, terms and conditions (or terms of service), and the program guide (or merchant operating guide). Make sure you get the full contract to review.

Here are some factors to look for as you review contracts.

Term Length

The industry is shifting away from three-year contracts in favor of month-to-month agreements, and all the best processors offer this as an option. A processor should be confident enough in the quality of its service and the competitive value of its pricing that it doesn't require its customers to sign lengthy contracts.

The only exception that justifies a contract is if you accept free equipment, in which case it's reasonable for a company to expect you to remain a customer long enough for it to recoup its costs. We recommend purchasing your equipment instead, to avoid long-term contracts, but if you decide to sign a contract for this reason, the contract term length shouldn't be excessive, and the contract shouldn't automatically renew for additional lengthy terms. 

FYI: An excessive contract would span three years or longer and renew for additional two-year terms.

Even if the sales rep tells you that the service is a month-to-month plan with no cancellation fees, it's still important for you to read the contract and make sure this information is consistent with what the contract says.

• If the contract says the term is for three years or there's an early termination fee (ETF), ask for a waiver or amendment that stipulates the service is provided on a month-to-month basis and waives all ETFs.
• If the processor you want to work with has a lengthy contract, it's worth trying to negotiate for better terms. Ask the rep if they can give you an amendment that puts you on a month-to-month plan and waives all ETFs.

Automatic Renewals

If you do choose a company with a traditional three-year contract, be aware that these contracts typically renew automatically for additional one- or two-year terms. It's worth your time to ask for a waiver that puts you on a month-to-month plan after the initial term ends.

Early Termination Fees

There's usually a very short window before a term expires in which you can cancel your account without incurring an ETF. Most early cancellation fees are a few hundred dollars, but some are very expensive.

Scour any contract you sign for "liquidated damages," which is either a percentage or the full amount of the projected revenue the processor expected to make on your account. This is a very punitive fee that can be exorbitant. The ETF may be disguised as an "early deconversion fee" (EDF), so look for this term in the contract text as well.

Personal Guarantees

Most application forms include personal guarantee clauses that grant the processor the right to perform credit checks. This guarantee also gives the processor the right to collect money from you personally if your business is unable to meet its obligations for any reason. 

Did you know? In addition to holding you personally responsible for all expenses, some of these clauses hold your successors and heirs responsible for your debt if you die.

Additional Service Clauses

These indicate that the processor may sign you up for various additional services that cost extra, and you have a very short period (typically 30 days) to cancel or opt out. Again, you may be automatically enrolled in additional services, and you must figure out what they are and how to cancel them or you will be charged for them. 

WHAT IS CREDIT CARD PROCESSING?

Credit card processing is the process of transferring money from a cardholder's account to a merchant's account when the cardholder pays for a purchase with a credit or debit card. Though the process is simple and takes just a few seconds on the front end, the back end of the process is intricate, with data traveling between the merchant, processor, credit card network, and multiple banks.

HOW DOES CREDIT CARD PROCESSING WORK?

When a customer inserts a credit card into a merchant's card reader, it initiates a complex series of data transfers that results in money being debited from the cardholder's account and credited to the merchant's bank account. The data passes through the terminal via secure connection to the processor, the credit card network, the bank that issued the customer's credit card, and the merchant's bank.

WHY SHOULD BUSINESSES USE CREDIT CARD PROCESSING?

Businesses should use credit card processing because it allows them to accept credit card payments, which is the increasingly preferred payment method for consumers. Although it costs you money to accept credit card payments, consumers tend to spend more money with credit and debit cards than with cash, potentially increasing your sales.

HOW CAN I SAVE MONEY ON CREDIT CARD PROCESSING?

If you currently use a certain processor and want better rates, it may be worth asking your account manager if they can help you reduce your costs. Also, by reviewing your statement on a regular basis, you may be able to identify costs or fees that you're overpaying.

Take these five steps to make sure you're getting the best pricing on your credit card processing service:

1. Review your statement every month. Credit card processing contracts rarely include pricing guarantees, so monitor your statements closely so you know what's going on with your account. Regularly review your rates and fees to get a sense of what you'll pay for processing on average each month. Watch for notifications and reminders of rate increases, new fees, and PCI compliance requirements, such as the annual questionnaire you must take to avoid costly noncompliance fees. If you notice a change in your pricing, don't understand certain fees, or receive notification of a lapse in your compliance status, call your rep to discuss your account.
   
   
2. Request a pricing review. If you are an established merchant and want lower fees, you may be able to get a pricing review or audit to see if you qualify for lower prices. Requesting an account analysis could be particularly worthwhile if your business has grown since you signed up with the processor and your transaction volume exceeds your initial estimates, as you may be eligible for lower rates.
   
   
3. Request interchange-plus pricing. If you're currently on a tiered pricing plan, ask your processor if it can switch your account to interchange-plus pricing. Many processors allow you to switch to a different pricing model so that you see for yourself which model works best for your business. If you do this, be sure to ask if the new plan triggers any different fees or requirements. For example, ask about the new plan's monthly minimum and how much you need to process to meet that requirement.
   
   
4. Ask if fees can be waived. Some fees are negotiable, and your rep may be able to waive or lower them for you. For example, if your business is seasonal and having trouble meeting the monthly minimum in the offseason, your rep might waive or reduce it for you. They might also waive the PCI compliance fee after you complete the annual questionnaire.
   
   
5. Shop around and renegotiate your rates. If you've been with your current processor for a year or longer, consider shopping around to see if its rates are still competitive. As with car insurance, it's beneficial to take the time to look for better deals every year or two. This is particularly important if your rates have increased over time, or if you have been with your processor for several years and don't know what pricing is available elsewhere.

If you do find better pricing from another processor, don't be afraid to contact your current processor to see if you can renegotiate your rates. You have more negotiating power if your service is provided on a month-to-month basis and you own your equipment, since you can switch to a new service without penalty. If you're under contract, the rep may be less willing to renegotiate, but it's still worth a try.

If you're overpaying for your processing and the rep won't renegotiate your rates, read your contract to find out the procedure you need to follow to switch processors when your contract finally expires. Be aware that most contracts renew automatically, that you have a very short window in which you may cancel without penalty, and that you may need to begin the cancellation process well in advance of the contract's expiration date.

CARD READERS, TERMINALS AND POS SYSTEMS: WHAT SHOULD I USE TO ACCEPT CREDIT CARDS?

You have several options for the processing hardware you use to accept credit cards at your business. Which one is the best credit card reader for your business depends on how and where you plan to accept cards, and whether you want something basic and inexpensive or a solution built into a larger system.

You should be able to accept magstripe cards, chip cards, contactless cards and mobile wallets. No matter which style of card reader you choose, it should be EMV compliant, letting you accept chip cards and avoid liability for fraud occurring at the point of sale. This also allows you to skip signature authorization, speeding up checkout.

If you're purchasing new equipment, you also want it to include near-field communication (NFC) technology so you can accept mobile wallets like Apple Pay and Google Pay as well as contactless cards, saving you the expense of updating your equipment later as these payment methods grow in popularity.

Consider choosing a device with a built-in keypad or a connected PIN pad if your customers prefer paying with debit cards, as many full-service processors offer special low rates for debit PIN transactions.

Before buying processing equipment from a third-party vendor, check with your credit card processing company to make sure it will be compatible. Here are three types of equipment, along with some of the top brands for each:

1. Mobile credit card readers are the most affordable option, typically ranging from free to $100. These card readers connect to your phone or tablet through the headphone jack or Bluetooth and work using a credit card payment app that you've installed on your device. Many processors offer free magstripe card readers to their new customers, no strings attached. However, in most cases, you'll want to upgrade to one that accepts chip cards or splurge on a model that supports all three acceptance methods – magstripe, EMV chip and NFC contactless payments. Mobile card readers are available from both full-service and mobile credit card processing companies. See our mobile credit card processing reviews to learn more.
   
   
2. Stand-alone and wireless terminals are the next-cheapest options, usually costing $150 to $600. These countertop credit card readers have built-in receipt printers and keypads. Most connect through either dial-up or Ethernet, and wireless models connect with 3G, GPRS, or Wi-Fi via Bluetooth. All new terminals are EMV compliant and allow you to accept both magstripe and chip cards. Many also accept NFC payments. Top terminal brands include Dejavoo, Ingenico, PAX and Verifone.
   
   
3. Point-of-sale systems are usually the most expensive option, though there's a wide range of prices, depending on the type you choose. If you plan to use a specific POS system, ask the company which processors the system is compatible with, as some only integrate with a few. Others are proprietary and require you to use that POS company as your payment processor. Tablet-based systems are the cheapest and work with mobile card readers. POS systems with built-in card readers cost $1,000 to $1,500. Top brands include Clover, Square and NCR Silver. See our POS systems review to learn more.

HOW DO SMALL BUSINESSES SET UP CREDIT CARD PROCESSING?

The easiest way for a small business to set up credit card processing is to start an account with a mobile credit card processor that offers an app and a mobile credit card reader. Then, all you have to do to start accepting credit cards is download the app to your phone or tablet and connect the card reader.

WHICH KIND OF CREDIT CARD PROCESSING IS CHEAPEST FOR SMALL BUSINESSES?

If your small business processes less than $5,000 per month, you'll save money with a processor that has a flat-rate pricing structure and doesn't charge any account fees (no monthly fee, annual fee or PCI compliance fee). The rates are higher but preferable to other pricing models, as you aren't processing enough to offset account fees.

If you process more than $5,000 per month, the cheapest credit card processing service will be one that has an interchange-plus pricing structure with a low margin. Fees can be problematic for this type of service as well, so pay attention to the fees different processors charge. For instance, some might have a very low monthly fee but charge a handful of extra fees that add up to high overall costs. Look for a service that is transparent about both its rates and fees, as these companies tend to have the lowest credit card processing fees.

SHOULD I BUY, LEASE, OR ACCEPT FREE PROCESSING EQUIPMENT?

Nearly every credit card processing company has some sort of free equipment offer. Some processors give you a terminal if you sign a contract, while others have a free placement program in which you borrow the equipment.

Accepting free equipment sounds like a great way to save money, but as a perceptive businessperson, you know that "free" often isn't really free, and you need to do the math to determine whether the free offer is actually the best option for your small business.

Purchasing Credit Card Processing Equipment

Buying processing hardware outright is nearly always your best bet. Although it may be a big upfront cost, it's less expensive and less restrictive over time than other equipment options. You can keep your purchasing costs low by shopping around for the best price, choosing a basic terminal instead of a fancy POS system, and asking if used equipment is available for purchase.

As you shop around for equipment, find out if the equipment is proprietary or "locked." This is an important consideration, because you don't want your purchased equipment to be unusable if you switch processors. If you already own unlocked equipment or decide to shop for new or used equipment online, ask your new processor how much it charges to reprogram the equipment, including shipping and handling costs, and how long the process takes. Many processors offer this as a free service.

Free Credit Card Terminals

Although "free" sounds fantastic, even the best processors may require you to sign a contract in return for free equipment. The best contract terms for free equipment are one year and then go forward on a month-to-month basis. Most free equipment contracts last for three years, and many automatically renew for two-year terms. Some companies require you to sign up for a different pricing plan if you accept free equipment.

Also, some processors may charge you the full price of the terminal in addition to an early termination fee if you end your relationship with the company before your contract expires. Before accepting free equipment, consider whether being tied to a contract or paying higher processing costs is worth cutting out the purchase price of the equipment.

Free Placement Programs

These may sound like a good deal, and many processors offer this option, but as with free equipment offers, you might be required to sign a long-term contract. When your contract expires or you switch processors, you have to return the equipment.

Many free placement programs charge monthly fees, and some have additional monthly minimums that you must meet to avoid penalty fees. Be sure to request the contract and a list of all the fees associated with the program – such as insurance or maintenance fees – to read over before you agree to such an arrangement.

Leasing Equipment

Many processors encourage you to accept a lease on equipment because it's a very lucrative arrangement for them. Some reps give persuasive reasons for leasing equipment, such as "it's like a cell phone plan" or "many customers choose to lease for tax reasons." However, carefully consider every other option before you lease equipment, as this is generally one of the worst decisions a small business can make when setting up credit card processing.

Consider these leasing myths and truths.

Leasing myth No. 1: It's like getting a cell phone, because if the equipment breaks, the processor will replace it.

Truth: While this is technically true, most equipment comes with a manufacturer's warranty, and you might be able to purchase an extended warranty or insurance. If your purchased equipment breaks while under warranty or insured, the manufacturer replaces the equipment anyway, according to the terms of the warranty or insurance.

Leasing myth No. 2: It's easier to update to the newest model if you lease your equipment.

Truth: This myth assumes that if you purchase equipment, you probably keep it longer than the four-year term of your lease. The processor expects that when your lease expires, instead of purchasing your existing equipment, you'll take out a new lease on new equipment. However, the money you save by purchasing the equipment outright puts you in a better position to buy new equipment when it becomes available.

Leasing myth No. 3: Leasing is better for tax write-offs, since you'll have an expense that you can write off yearly instead of just a one-time purchase.

Truth: The long-term expense of leasing is still higher than the cost of purchasing equipment outright, even if you factor in the tax write-offs you expect to receive. If you're considering leasing for these tax reasons, do the math to verify that the costs and savings are what they're purported to be.

Remember, leasing is short-term cheap and long-term expensive. You'll often find that you could have purchased the equipment several times over with what you paid over the life of the lease. Additionally, most equipment leasing contracts are noncancelable, which means that you can't return the equipment – and you pay a fee to get out of it. Even if your business fails, you return the equipment, and you get out of your processing contract, you'll still be held personally responsible for the remaining time on your equipment lease.

HOW CAN I PROTECT MY BUSINESS FROM CREDIT CARD FRAUD?

Data and overall payment security is a huge issue in the credit card processing industry. Although the large breaches that you read about in the news, such as those sustained by Home Depot and Target, may lead you to believe that your business is too small for criminals to be interested in, that isn't the case. In fact, small businesses are often the preferred targets of security attacks.

According to the PCI Security Standards Council, 71% of cybersecurity attacks are aimed at small businesses. Even more grim is the criminals' success with their small business targets: The Trustwave Global Security Report found that 90% of data breaches affect small businesses. Criminals target small businesses because many of them don't prioritize data security, so the data often isn't as secure as it is with large companies that have the resources and personnel to put stronger security protocols in place.

You can take two important steps to increase your security, protect your data and reduce fraud. First, comply with PCI DSS. Second, if you haven't done so already, upgrade to EMV-compliant processing equipment. Visa reports that EMV-compliant merchants have seen counterfeit fraud drop by 76% since the liability shift of 2015.

IS CREDIT CARD PROCESSING SECURE?

As we've all seen over the years with major credit card breaches at some of the largest retail chains in the country, there's no such thing as a completely secure credit card transaction. However, there are measures you can take to secure these transactions against potential intrusions.

The first step you should take is to make sure your credit card processing service is PCI compliant – and that your business complies with these guidelines too, since this dramatically reduces your vulnerability.

Second, make sure your credit card processing equipment can read EMV (Europay, Mastercard and Visa) chips. When comparing the number of card-present counterfeit payment fraud incidents in December 2018 to those in September 2015, Visa estimated that merchants who upgraded to EMV readers saw a 76% decrease in incidents.

If you ensure compliance with these two tech standards, your credit card transactions will be significantly more secure.

HOW CAN YOU AVOID CREDIT CARD PROCESSING FEES?

Credit card processing fees are how credit card companies make their money. With that in mind, there's no real way to avoid those fees. What you can do, however, is negotiate those rates before signing up with a processor. By taking certain steps during the application process and beyond, you can potentially cut your fees down to a more manageable level.

Your customers can also help you offset these fees in a couple of ways. One of the more common ways is for merchants to set transaction thresholds for credit card purchases. By disallowing credit cards for any purchase below $5 or $10, for example, you come out ahead of the fees. Check the guidelines on minimum transaction amounts from each of the major credit card networks to comply with their rules.

Some retailers tack on the fees to the transaction itself. This surcharging tactic is common at gas stations, where cash customers pay a lower price for each gallon of gas, but it could also work in a retail setting. This method could backfire, but people who pay with cash will likely see it as a discount. 

HOW LONG CAN A MERCHANT HOLD AN AUTHORIZATION?

Authorization holds are based on the banking practice of holding electronic transactions in limbo until the merchant marks the payment as settled. If it hasn't been settled within the time determined by the cardholder's bank, it "falls off" the account.

An authorization hold can last as long as 30 days, but American Express cards have a limit of seven days and Discover cards have a 10-day limit. Merchants who don't complete a transaction hold within the allotted time could be charged a misuse fee by the credit card processor.

HOW LONG DOES IT TAKE TO SETTLE CREDIT CARD SALES?

The time it takes to settle a credit card sale varies by credit card processor. Merchant accounts are used to complete the credit card payment process efficiently; the type of merchant account will determine if it takes only 24 hours or as long as three days.

HOW DOES ONLINE CREDIT CARD PROCESSING WORK?

You know how consumers swipe their credit cards at checkout in a store? They do the same online – digitally. When a consumer makes a purchase online, they input their credit card information (number, expiration date, CVV). The payment is then processed just like an in-person transaction. 

WHY SHOULD SMALL BUSINESSES AVOID TIERED PRICING WHEN SELECTING A CREDIT CARD PROCESSOR?

Some credit card processors charge on a tiered pricing basis. This means they bundle the interchange rate, assessment fees and markups into different plans. This isn't that transparent, because they don't break down what each cost is, making it more difficult to shop around for the best deal.

WHAT ARE THE STEPS INVOLVED IN CREDIT CARD PROCESSING?

Whether you sell baseball hats or cars, when you accept a credit card as payment, it goes through the same process:

1. The consumer uses a credit card to make a purchase.
2. The transaction is entered into the terminal.
3. Data is transmitted for approval.
4. The transaction goes through authorization to ensure there are enough funds to cover the purchase.
5. The transaction is authorized and completed.
6. The merchant closes out the transactions for the day in what's known as a batch closure. The credit card processor's acquiring bank collects the money from the credit card companies.
7. The processor's acquiring bank deposits the cash into the merchant's bank account.

WHAT IS A HIGH-RISK MERCHANT ACCOUNT? 

A high-risk merchant account is used for businesses with a higher risk of chargebacks or fraud. Many credit card processors won't work with high-risk businesses, but some will. The ones that do, however, typically charge more because of the risk. In addition to higher processing fees, high-risk merchants pay more in chargeback fees. They also have to undergo a more arduous application process. 

WHAT INDUSTRIES DO PAYMENT PROCESSORS CONSIDER HIGH-RISK? 

Payment processors consider a variety of industries high-risk, but these are some of the most common: 

• Alcohol 
• Firearms
• Gambling
• Pawn shops
• Payday lenders
• Ticket sellers
• Tobacco