Payment Processing Companies And Services For Small Businesses

Payment Processing Services And Companies For Small Businesses

Navigating the world of payment processing services can be confusing for a small business owner, and it’s easy to make a mistake that can have a negative impact on your bottom line. With fast-talking sales agents lurking around every corner, waiting to sign you up for a lengthy, expensive contract, you need a good understanding of the basics of processing services, as well as specific things to watch out for.

While most merchant services providers offer a full range of products and services for every business, most of them are geared toward the needs of larger, established companies rather than small businesses and startups. Which services you need to run your business will depend primarily on the where and how you sell your products. For example, retailers and eCommerce businesses have very different requirements, although there are also some services (such as basic credit card processing) that are universally required.

In this article, we’ll provide you with a quick overview of the primary merchant services that you’ll need to accept credit card, debit card, and electronic check payments. We’ll also briefly review several of the best all-around merchant services providers for small businesses. All of them offer easy-to-use solutions at a fairly low cost compared to what the major credit card processors usually charge.

Payment Processing Services

It’s important to give your customers as many possible ways of paying for their purchases as you can, as this naturally leads to increased sales. At the same time, you don’t want to invest extra money into supporting payment methods that few, if any, of your customers actually use. Here’s a brief overview of the primary payment methods available and the services you’ll need to support them:

Credit Card Payment Processing

Providing credit card processing services is one of the most basic merchant services, and all providers will offer this feature. To accept credit cards, you’ll need either a full-service merchant account or an account with a payment service provider (PSP) such as Square (see our review). While every provider will allow you to accept major credit cards such as Visa and MasterCard, you’ll want to check carefully if you need support for less popular cards such as Discover, JCB, or Diner’s Club. American Express is also treated differently, as they function as both the issuing bank and the credit card association. Fortunately, Amex offers their OptBlue program, which simplifies the process of accepting their cards.

Debit Card Payment Processing

Virtually all merchant services providers support debit card transactions. In setting up your account, however, be aware that the interchange rates for debit transactions are usually much lower than it typically is for credit card transactions. The reason for this is simple: banks don’t have to issue a credit when the card is used like they do with credit cards. If the customer has sufficient funds in their bank account to cover the cost of the purchase, the transaction is usually approved, and funds are withdrawn immediately. Unfortunately, some merchant services providers set their processing rates without taking this distinction into account, which means you’ll end up paying much more for debit card transactions than you should. Tiered pricing plans and flat-rate plans are the usual culprits here, so look carefully at your proposed rate quote before signing up. You won’t have this problem with interchange-plus pricing, as the actual interchange rate is passed on to you, and the processor’s markup is the same for every transaction.

ACH Payment Processing

eCheck (ACH) payment processing operates on a different network from those used to process credit and debit cards. For this reason, most providers will require you to sign up for a separate ACH processing service as an optional feature when setting up your account. Adding eCheck processing to your account will allow you to accept bank transfers (i.e., eChecks) and paper checks with optional check scanning hardware. Processing rates for eChecks are very low because the money is coming directly out of the customer’s bank account. However, most providers will charge you a separate fee (usually around $20.00 – $30.00 per month) to add an eCheck processing service to your account. For small businesses, this might not be economical unless you have a significant number of customers who prefer to pay by check.

NFC Mobile Wallet Payment Acceptance

NFC-based payment methods such as Apple Pay and Google Pay have only been on the market for several years, and consumers have been slow to adopt them. However, they are becoming more popular over time, and it’s a good idea to offer them to your customers if you can. Most, but not all, modern credit card terminals and point-of-sale (POS) systems can accept these payment methods, but you’ll want to check the specific requirements for each particular NFC-based method you want to be able to accept. While NFC-based payment methods are ultimately tied to the user’s credit or debit card, they offer superior security and protection from fraud over traditional magstripe and even EMV card reading methods.

Mobile Payment Processing

Traditionally, mobile payment acceptance required a bulky wireless terminal. Not only were the terminals expensive by themselves, but they also needed a separate data plan (usually around $20.00 per month) to transmit the payment processing data. Then smartphones came along, and it wasn’t long before companies figured out that you could create an app that would effectively turn your phone into a credit card terminal. Coupled with an inexpensive card reader that plugged into the phone’s headphone jack, you had a simple mobile payment system that was far lighter and less expensive than the old wireless terminals.

While Square was the first company to pioneer this system, almost all other processors have followed suit, and today it’s hard to find a provider that doesn’t offer a similar mobile processing solution. Unfortunately, most of those competing systems fall far short of what Square has to offer. The apps themselves are very basic, and we’ve seen plenty of complaints about poor reliability, poor handling of tips, and a general lack of features. Magstripe-only card readers, while still offered for free or very low cost, are essentially obsolete liability traps with the switch to EMV-based chip cards. The gradual disappearance of the headphone jack from late-model smartphones further complicates matters. While this situation is bound to improve, today only Square and a small number of other merchant services providers offer both a fully-featured app and an EMV-compliant, Bluetooth-connected card reader.

eCommerce Payment Processing

To accept payments over the internet, you’ll need a software service called a payment gateway. Gateways can send transaction data to your provider for processing, and they also offer a number of other features you’ll need to run an online business. While features vary from one provider to another, most gateways offer support for recurring billing, online invoicing, and a secure customer information database to store your customer’s payment method data. Security features are also very important, with most providers offering some form of encryption or tokenization of data to keep it from falling into the wrong hands. Most merchant services providers offer either their own proprietary gateway or a third-party product such as Authorize.Net (see our review).

Online Reporting

Online dashboards are very popular these days, and almost all merchant services providers offer them. With these web-based dashboards, you can monitor the state of your business and track your transactions in real-time. They’re particularly valuable for eCommerce businesses and retailers who have more than one location.

Canadian Payment Processing

Unfortunately, most US-based providers do not offer accounts to businesses located in Canada. However, there are a few choices available north of the border that provide excellent service and fair prices. Helcim (see our review), one of our favorite providers, is based in Calgary and operates throughout both Canada and the United States.

Nonprofit Payment Processing

If you’re in the nonprofit sector, you’ll want to reduce your costs wherever possible. While you can sign up with any merchant services provider, it’s usually a better idea to go with one that offers reduced processing rates for nonprofits. Dharma Merchant Services (see our review), one of our highest-rated providers, specializes in helping nonprofits get set up with merchant services.

High-Risk Payment Processing

If your business falls into the high-risk category, your options for finding a provider will be more limited than they are for other merchants. The majority of merchant services providers, including most of those profiled below, do not accept high-risk merchants and will terminate your account if they later determine that you’re in the high-risk category. While there are many providers on the market that specialize in serving high-risk merchants, beware that many of them will charge you very inflated processing rates and account fees while providing poor customer service. For a look at the more reputable high-risk providers, check out our guide to the best high-risk merchant account providers.

Low-Volume Payment Processing

If your business only processes a few thousand dollars per month in credit/debit card transactions, or you’ve just launched, you’ll want to find a low-cost provider that won’t eat up your profits through high processing rates and hidden fees. Businesses at this end of the spectrum often don’t need a full-service merchant account and are better off going with a payment services provider (PSP). While you’ll pay somewhat higher processing rates, you’ll save money overall because most of these providers don’t charge any monthly fees. They also don’t require long-term contracts or charge early termination fees (ETFs), so you’ll be free to switch to a full-service merchant account with a different provider when your business is large enough to need one. For low-volume retailers, Square (see our review) is an excellent choice. The quickest and easiest option for eCommerce merchants is PayPal (see our review).

Payment Processing Companies

Below are short overviews of some of the best merchant services providers we’ve found for small businesses. Be sure to check out our full reviews for companies that you think might be a good fit for your business.

Square

Square Logo

Possibly the most popular provider for small businesses, Square offers simple flat-rate processing with month-to-month billing and no early termination fee. With Square, you can accept all major credit and debit cards. However, their processing rates don’t offer any discounts for debit card processing. Rates are fixed at 2.75% for swiped (or dipped) transactions, 2.9% + $0.30 per transaction for online payments, and 3.5% + $0.15 per transaction for keyed-in transactions.

Square offers a mobile-only processing solution with their Square Reader, which is now available in an EMV-compliant, Bluetooth-enabled product. While it’s not free like the old magstripe-only reader, it’s a great investment and much less expensive than competing products from other providers. The new reader also accepts NFC-based payment methods, future-proofing your system (at least for the time being).

Square also offers eCommerce payment processing, as well as a host of other features for both retail and eCommerce merchants. While it’s also available in Canada, high-risk merchants are not supported. There’s also no discount for nonprofit businesses. Square specializes in meeting the needs of low-volume merchants, and we recommend them for businesses processing less than $5,000 per month. For more details, see our complete review.

CDGcommerce

Another excellent choice for low-volume businesses, CDGcommerce offers a full-service merchant account for a low monthly fee of just $10.00 per month. That’s about as low as it gets for an actual merchant account, although you’ll want to seriously consider adding the optional cdg360 security package for an additional $15.00 per month. The company also offers true month-to-month billing with no early termination fee, which is a great feature for small businesses that don’t want to get trapped in a long-term contract.

In addition to basic credit/debit card processing, eCheck (ACH) processing is available for an additional fee. For eCommerce merchants, CDGcommerce offers a choice between their proprietary Quantum gateway and Authorize.Net (see our review). Either option is completely free, with no monthly gateway fees or additional per-transaction charges. For retailers, your account includes a “free” Verifone Vx520 EMV-compliant terminal. While there’s no charge for the terminal, you’ll have to pay a $79 per year maintenance fee, which is fully disclosed. You can also include a free mobile card reader with your account, but it’s magstripe-only at this time.

For businesses processing less than $10,000 per month, the company offers a simplified interchange-plus pricing plan. Rates are interchange + 0.25% + $0.10 per transaction for card-present transactions and interchange + 0.30% + $0.15 per transaction for online transactions. Discounted rates are also available for qualified nonprofit businesses.

CDGcommerce is not available in Canada and does not support high-risk merchants. For all others, it’s a great choice for a small business that wants a true merchant account with a minimum of expense or commitment. If the company sounds like a good fit for your business, check out our complete review.

Helcim

Helcim logo

With offices in both Canada and the United States, Helcim is another excellent provider that’s geared toward the needs of small business owners. Their Retail pricing plan costs only $15.00 per month and features interchange-plus rates starting at interchange + 0.25% + $0.08 per transaction. You’ll have to supply your own terminal, but the company offers them for sale at very competitive prices and doesn’t use overpriced terminal leases.

For eCommerce merchants, Helcim’s eCommerce pricing plan costs $35.00 per month and comes with the fully-featured Helcim Payment Gateway. Processing rates are all interchange-plus, and start at interchange + 0.45% + $0.25 per transaction. As with the Retail Plan, these are the highest rates available, with lower rates available if you meet their monthly processing volume requirements. Merchants who sell both online and from a storefront can get a combined Retail + eCommerce plan for $50.00 per month. Discounted rates are available for nonprofit businesses.

Helcim offers eCheck (ACH) processing as an optional add-on for $25.00 per month and $0.25 per check. Their mobile processing solution is free and included with all retail accounts. However, they currently only offer a magstripe-only card reader. To keep costs low, the company does not accept high-risk merchants. One caveat: Helcim freely discloses that their pricing structure will not be cost-effective for low-volume businesses processing less than $1500 per month. Read our full review for more details.

Dharma Merchant Services

Dharma Merchant Services review

You’d be hard-pressed to find a merchant services provider that’s more ethical and transparent than Dharma Merchant Services. They offer true month-to-month billing with no early termination fees, interchange-plus pricing, and low account fees – all of which are fully disclosed on their website. Account fees are only $10.00 per month for basic credit and debit card processing. eCheck (ACH) processing is available through one of several optional programs.

Dharma has special pricing plans for storefront, restaurant, and virtual (eCommerce) businesses. Processing rates range from interchange + 0.20% + $0.07 per transaction to interchange + 0.35% + $0.10 per transaction depending on your business type. Recurring and incidental fees are all disclosed on their website, including a $7.95 per month PCI compliance fee. The company also offers special discounted rates for nonprofits.

Mobile processing is supported through First Data’s Clover Go card reader and app. This service costs an additional $10.00 per month, plus $99 for the Clover Go Basic Reader (or $139 for the Clover Go Contactless reader). Dharma is only available to US-based merchants and can only support certain limited categories of high-risk businesses. The company’s fee structure is only suitable for businesses processing at least $10,000 per month, something which they also fully disclose on their website. For a more in-depth look at Dharma Merchant Services, please see our complete review.

Payline Data

Payline Data high risk merchant accounts

Another great option for small or new businesses is Payline Data. They offer a number of simplified pricing plans, all featuring interchange-plus pricing. Their Payline Start plan, designed specifically for new businesses, has no monthly fee and features a single processing rate of interchange + 0.50% + $0.10 per transaction. There’s also a $99.00 per year PCI compliance fee and a $25.00 monthly minimum, but that’s about it for recurring fees. Lower rates are available under the Payline Shop plan, which costs $9.95 per month. For eCommerce merchants, Payline Connect charges somewhat higher rates, but includes a payment gateway and virtual terminal for $10.00 per month.

While all accounts include basic credit/debit card processing, eCheck (ACH) processing is a separate service. Payline doesn’t disclose the cost of this option. They also offer Payline Mobile, their proprietary mobile processing solution. It costs $7.50 per month for merchants on the Payline Start plan, and features the Ingenico RP457c card reader, which can accept magstripe, EMV, and NFC-based payment methods and connects to your smartphone (or tablet) via either the headphone jack or Bluetooth.

Payline Data offers discounted rates to nonprofit businesses and can also support some high-risk merchants. It doesn’t advertise this capability, however, so you’ll have to ask your sales representative about it. The company’s services are only available to businesses in the United States. For a more detailed look at Payline Data, check out our complete review.

Fattmerchant

For a unique take on merchant account pricing, take a look at Fattmerchant and their subscription-based pricing. Their standard account pricing plan for both retail and eCommerce merchants includes a $99.00 per month subscription fee, but offers processing rates of interchange + $0.08 per transaction (for retail sales) or interchange + $0.15 per transaction (for online sales). These low rates eliminate the standard percentage markup that most other providers charge, as those charges are included as part of your monthly subscription fee. Almost all other account fees are also included in your subscription price, although you’ll have to pay an extra $7.95 per month if you need a payment gateway.

Fattmerchant can also process eCheck (ACH) payments, although they don’t disclose pricing for this option. Mobile processing is supported via the Fattmerchant Payments Mobile app, which is currently only available for iOS. The Fattmerchant Mobile Card Reader can accept either magstripe or EMV transactions and is included with your account.

Fattmerchant doesn’t advertise any discounted rates for nonprofits, and they don’t accept high-risk businesses. They’re also only available to US-based merchants. While their subscription-based pricing can result in significant savings for businesses with a sufficiently high processing volume, they’re not ideal for very low-volume merchants or businesses that are just starting out. If you’re regularly processing over several thousand dollars per month, however, we encourage you to compare their pricing with what you’re currently paying. You might be able to save a lot of money overall despite the relatively high subscription fee. For a more in-depth look at Fattmerchant, please see our complete review.

Final Thoughts

Selecting a merchant services provider should be approached with great caution. You need to really do your homework in evaluating the numerous plans and options each provider has to offer, as well as coming up with the most accurate estimate of total costs that you can. While a basic account for credit or debit card processing can be had for relatively little money, additional services will add to your costs quickly. Credit card terminals, a payment gateway, or an eCheck processing service will usually cost you more, although they will obviously be worth the price if your business needs them.

The six merchant services providers we’ve profiled here represent the best choices for a small business or one that’s just starting out. If you’re just opening your business and don’t have an established processing history or any idea of how much your processing volume will be, Square is probably your best bet. The up-front cost to start processing is exceptionally low, and the pay-as-you-go nature of their service will help you avoid monthly fees if you don’t need to process transactions every month.

When your business is large enough that you need the stability and additional features of a true merchant account, CDGcommerce, Helcim, and Payline Data are great choices. You’ll get a full-service merchant account for a very low price and will have the flexibility to switch providers without incurring a penalty. Once your business gets a little larger and more stable, Dharma Merchant Services and Fattmerchant can really save you money on your overall processing costs. To compare our top-rated providers side-by-side, check out our Merchant Account Comparison Chart.

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