1. Never Lease a Terminal
Credit card terminals can be purchased for $100 to $400 with no strings attached at Staples.com. Many small businesses lease a credit card terminal for between $10 and $40 per month over a three year term, paying 3 to 5 times the actual value over the course of the lease.
Owning your own terminal also increases your ability to switch if you become unhappy with your provider.
2. Don’t Accept Cancellation Charges
The fine print of many credit card processing contracts include a cancellation charge of at least $250 and as much as several thousand dollars. There is no reason for a cancel fee and most salespeople have the authority to waive this fee. Make certain that the fee is waived in writing, either in the contract or as an amendment.
3. Use Interchange-Plus Pricing
Credit card processors’ largest expenses are the payments they make to Visa and Mastercard. Those payments are set by a complicated formula called Interchange and vary for each transaction (for example, the fee is higher when a rewards card is used). It is set by Visa and Mastercard and cannot be negotiated.
When you use interchange-plus pricing, you agree to pay the processor their costs (interchange) plus a constant markup. Since the markup never changes you ensure that you avoid any tricky fees.
Large businesses such as Wal-Mart and American Airlines have always negotiated on an interchange plus basis because it results in a better deal. Every credit card processor can provide interchange plus pricing and smaller businesses can benefit from this kind of pricing as much as big ones.
4. Comparison Shop
Best results are achieved by businesses who comparison shop between at least 5 credit card processors.
Make sure that you compare the offers on an apples-to-apples basis (interchange-plus pricing makes this easier) and make sure to let each of the prospective service providers know that you are comparison shopping.
5. Beware of Downgrades
Unscrupulous processors who are not kept in check with an interchange-plus pricing scheme often charge an extra 1% to 2% for transactions that occur over the phone or using a rewards or business card. These downgrades can impact more than 50% of your transactions and add substantially to your total cost.
FeeFighters is a technology company that provides free, web-based tools to help businesses find quality financial services providers. We were started by two small business owners who became frustrated with our financial services options and turned to technology to solve the problem.