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How to Select a Credit Card Payments Processor

Trying to pick the right card processor for your small business? Check out this guide from NerdWallet. If you need help connecting your processor to your Coop Fed business account, contact us at info@coopfed.org or call our Small Business Department -- we can work with virtually any system! Note: Cooperative Federal is not responsible for content on outside websites.


Credit and debit card processing is crucial for small businesses as the world moves further away from cash and more toward credit cards and mobile and electronic payments. By 2017, just 23% of all point-of-sale purchases will be made with cash, compared with 33% by credit card, industry research shows.

If you want to accept credit cards for your business, you’ll need an affordable and reliable payments processor. Financial institutions like Cooperative Federal can help you sort through options. Here are a few things to consider:

Look at total costs

Payments processors charge up to 5% on everything a business brings in from credit card purchases, according to the U.S. Small Business Administration. Understanding the fee structure is important because it’s the only way to tell whether you’re paying too much.

A processor may advertise low costs, but its effective rate may actually be higher after all fees are included. A processor should be able to provide a list of all the fees you’ll be charged and the total effective rate, as well as tell you whether there are ways you can trim those costs.

The total should include interchange fees, which are paid by the processor to the issuing bank or card company. This fee varies depending on the type of card (debit or credit), the kind of sale (in-store, phone or online) and your average transaction volume.

Keep in mind that fees are tied to the level of risk involved. A transaction that’s done in person will likely have lower costs than one done by phone or online. That’s because when the user and card are physically present, the fraud risk is reduced.

Watch for hidden costs

One hidden cost to look for involves “assessment fees.” These are charges from card companies that go toward expenses like network infrastructure and research and development.

Other charges you may face include those for contracts, cancellations, statements, ongoing services and applications. Some may be negotiable, depending on the processor. As with any financial product, you can do some comparison shopping to get the best deal, so don’t settle for the first processor you find.

Other factors

Fees are important, but they’re far from the only thing to consider when choosing a payments processor. The level of service and support you can expect are also important.

The processing company should be able to answer any questions and address any concerns you have and should provide technical support in case problems arise. Here are a few other questions to consider before making a choice: • Is the company experienced, and does it have good customer reviews?

  • Is the technology easy to set up and use? 
  • Does the processor support contactless payments and mobile apps, like Apple Pay? Is it important for your business to accept these forms of payment?
  • Is the company compliant with industry regulations, like the PCI Security Standards Council and IRS reporting requirements under section 6050W?
  • Does the processor disclose all fees and charges, and can it give you its total effective rate?
  • Does it provide monthly statements that are easy to read and understand?

For many small businesses, accepting credit and debit cards is not optional. These tips should help you choose a payments processor with the best rates and service.

By Steve Nicastro, NerdWallet