The Ultimate Guide to Choosing the Right Payment Processor for Your Small Business

As a small business, being able to accept debit or credit cards can be essential. But, with so many options out there, choosing a payment processor for your small business can feel daunting or overwhelming.  

What is Credit Card Processing? 

Simply put, a payment processor is a merchant service for businesses that makes paying with a credit or debit card possible. Most businesses establish credit card processing through a third party, sometimes called a merchant service or credit card processor. 

Credit card processing can occur online, over the phone, by mail, or in person at the point of sale. You may need a payment processor to accept credit or debit cards at your small business.  

What Do I Need Before I Can Receive Payments? 

It’s not as simple as picking the best payment processor and receiving payments instantaneously. Your small business requires a few things before it can start using a payment processor (and getting paid). 

• Merchant account. A merchant account is essential to most payment processes (with a few exceptions). When a customer makes a transaction using a credit or debit card, the funds are first entered into a merchant account. Then, the bank will interface with the payment processor to verify the electronic payment information. 

Some payment processors, like PayPal, will not require a merchant account. However, cutting out that middleman has drawbacks, including higher per-transaction fees. 

• Business bank account. Once the payment processor verifies a payment in the merchant count, the transaction “goes through” and can be transferred to the business bank account. You’ll need a business bank account and a merchant account because you can’t make transfers in and out of a merchant account the way you would with a traditional one.

If you don’t have a way to handle the electronic payments once they start going through, you won’t be able to get paid. Before accepting electronic payments, you must establish a merchant and business bank account that interfaces with your chosen small business payment processor.  

What to Consider Before Choosing a Payment Processor for My Small Business

There are many different payment processors for small businesses to choose from, and each will have its benefits and drawbacks. As you start considering options, it’s essential to consider these factors. 

Fees

Most small business payment processing options will include an initial set-up fee and could consist of additional fees each month. When considering the best payment processor for your small business, pay attention to the fine print and costs you’ll initially take on, in addition to monthly expenses. Some processors may have a sizeable upfront fee but no additional monthly fees (beyond transactions). Others may include monthly fees that will cost you more than a one-time start-up fee.  

Transaction fees

Payment processors make money by taking a small cut of every electronic payment. But, the fees will vary based on the processor, and choosing the right gateway will depend on how your business does sales. Some will charge a flat fee per transaction, while others will charge based on the number of sales or a varied rate depending on the value of the transaction. You’ll want to look at your sales trend and pick a payment processor with a transaction fee structure that doesn’t eat too much into profits. 

Subscription structure

If you’re not ready to commit to a payment processor long-term, your small business might benefit from working with a processor that provides month-to-month contracts instead of annual or longer. 

Recurring charges

Does your business provide subscriptions or memberships that charge monthly? You’ll want to ask your potential payment processor if they can store financial information and recurring billing for customers. 

Cards allowed

Most payment processors can handle Visa and Mastercard, but not all payment processors permit American Express or smaller cards, like a Diners Club card. Look at your potential customers to decide how important the types of cards are to your sales.  

Currencies permitted

Seamlessly processing different currencies might be necessary if your online storefront deals with international orders. Similarly, if you’re open to accepting other forms of payment, such as Bitcoin, you’ll have to find a small business payment processor that handles digital currency.   

Additional services

Busy handling the day-to-day of your business? Having a payment processor with excellent customer service is likely a priority. They can contact you when there’s an issue and provide tools to help you better understand sales trends.

Hosted or non-hosted

A hosted payment processor means your shopper will be taken to the third-party site to enter their information. A non-hosted payment gateway means the shopper will stay on your branded site the entire time. Using each has benefits and drawbacks, but the choice might come down to how much website maintenance you want to do.  

Security

When you’re asking a customer to input sensitive credit card information, the last thing you want is a leak or breach of their data. Make sure you choose a payment processor who is PCI-DSS compliant. 

Transaction limits

Be aware if your payment processor has transaction limits each month. You’re unlikely to hit the limit if you have a small number of electronic transactions a month or a low dollar amount of many transactions. However, if most sales are high value, or you anticipate a large growth in sales, it’s best to check the transaction limits under the payment processor. You could lose sales and revenue if you repeatedly hit the limit each month. 

Third-party integration

Want to integrate data from payment processing with your web host or SEO? Double-check that the processor can “talk” to your other digital services to make the most of the data they collect. If you’re not tech savvy, this is when good customer service can come in handy, as a responsive payment processor will help integrate services and show you how to track shopper behaviors. 

The best payment processor for your small business will be the one that best suits your specific needs. If you want your business to accept electronic payment, the worst decision you can make is not picking a payment processor at all. 

When you have an idea of what you want from a payment processor, it’s time to start shopping around for the perfect fit. 

If you need more resources to make the right decision, check out the Get Beyond blog for more small business insights.