Credit Card Processing Buyer's Guide

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In this article...

Introduction
Accepting credit cards
Types of processors
Qualifying
Pricing
Negotiating with providers
Choosing a service
Buying tips

Types of processors

There are several types of companies you can turn to for credit card processors.

Bank:   The bank you use for your business finances should be the first place you contact. Banks can be the easiest source to turn to for credit card services; many offer service packages for businesses that include merchant services. Most banks do not process credit card transactions themselves, though.

Instead, they outsource credit card processing to a third-party credit card processors. It can be tough to get approved from this channel, however. Banks are likely to scrutinize your business more closely before deciding whether or not to accept your application.

Third-Party Credit Card Processors:   Third-party credit card processors dedicate themselves to handling credit card processing. As such, they take care of different aspects of the transaction process such as authorization, billing, reporting, and settlement.

Independent Sales Organization:   An independent sales organization (ISO) is essentially a registered credit card merchant broker that represents one or more third-party processors. It sets up and services credit card merchants, but does not do the actual processing. ISOs are less selective than banks, but that comes at a somewhat higher price.

They are also not strictly regulated the way banks are, so there's a wide range of ISOs out there, from reputable, established companies that provide good customer support, to shady one-man operations that use questionable "sign-up sheets" in place of contracts. Some of these sign-up sheets even hold you responsible for terms and conditions not listed in the document! Be particularly vigilant when evaluating potential suppliers, and make sure you get the full contract.

Financial Service Provider:   MasterCard and Visa require you to establish a merchant account through an intermediary. However, American Express and Discover give you the option of applying directly to them.

Association:   Small-business and trade associations often offer credit card merchant processing at discount prices. They are a particularly good resource if companies in your industry historically have trouble attaining credit card merchant status.

Introduction

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