Best Credit Card Processing for Small Businesses

Credit card processing companies allow small businesses to accept credit and debit cards securely. Credit card processing is an added expense for small businesses, but it's a necessary one for most companies at a time when fewer people carry cash.

Square vs. Braintree vs. Stax:

Square, Braintree, and Stax by Fattmerchant are all excellent credit card processing companies that offer transparent rates for their services. They are also all PCI compliant with strong fraud detection security measures.

Square is an all-in-one POS and credit card processing company that uses one flat, per transaction rate, no matter what kind of card is used in the transaction. Square also offers integrated in-store and online commerce. In comparison, Braintree is best suited for e-commerce transactions and does not integrate with in-store payments.

However, Braintree is similar to Square in that it also offers a flat per-transaction rate but Braintree's rate remains the more costly option, with its transaction fee costing $0.39 more than Square.

Stax also differs from Square and Braintree in that it has a monthly subscription fee as well as a per-transaction fee. This monthly fee does, however, remove any merchant markup on the credit card companies' transaction fees. Also unlike its competitors, Stax is best suited for mid to large-sized companies.

Square is our top pick because it offers transparent rates for different modes of payment, including invoice transactions, card-on-file transactions, and virtual terminal transactions. It also gives users three different choices for accessing their funds and is a complete solution for POS and credit card processing.

How to Choose the Best Credit Card Processing Company:

1. Consider the type of credit card processor you want to work with.

Credit card processing companies offer different pricing structures: tiered pricing, blended pricing, interchange-plus, and membership pricing. You will need to determine the pricing structure that is best for your company.

Tiered pricing structures have low rates for qualified transactions, but unqualified transactions will have much higher rates. There are often also hidden fees with tiered pricing. Blended pricing works in almost the same way as tiered pricing, except that there is one flat rate for transactions. However, this rate will be bundled with markup fees and processing costs.

Interchange-plus pricing is one of the most transparent pricing structures and shows the interchange (how much goes to the banks and card networks) and the markup for the processing company. Membership fees are flat monthly rates that allow clients access to wholesale banking and card network fees.

We would not suggest using a company with a tiered pricing structure due to the lack of transparency in fees. We would recommend using a company with blended, interchange-plus, or membership pricing.

2. Decide which equipment you need to accept payments.

Depending on the type of payments you want to accept, you will need different types of equipment. Brick-and-mortar locations benefit from countertop check-out terminals. Restaurants, cafes, fairs, markets, and industries that require employees to travel frequently will need mobile card readers if they want to accept and process credit card payments on the spot.

Some companies also provide processing services for both in-store and online markets. If you already have a website or POS system, you will need a credit card processor that integrates well with your current system.

3. Consider your security options.

In order to prevent fraud and protect your company and your clients' data, you will want a processing company with comprehensive security and the latest in secure payment acceptance technologies. You will need to ask the company what fraud prevention tools they offer and check if they are PCI-DSS compliant.

4. Look for a company that has a good reputation in your industry.

Credit card processing companies have established partnerships with businesses in certain industries. These partnerships can benefit your business if you are in the same industry and can help you to grow your business's network. This also includes the sponsor banks that the processing companies work with. The more partnerships your chosen credit card processing company has, the more they'll be able to help your business grow long-term.

5. Call around for quotes.

There are quite a few companies that post their rates online, but there are also a lot that don't. Call at least three companies and ask in-depth questions about their rates and fees.

You may need to specifically request interchange-plus rates as some companies will only quote you their markup fees, which will be added to the interchange rate. Additionally, with blended pricing, you will not be able to see what the company's markup fees are, making it difficult to know exactly how much you're paying the company. Requesting the interchange-plus rate is the best way to see exactly what you will be paying and to whom.

Also, you will want to ask about any fees the company does not disclose on its website. This includes monthly fees, batch fees, PCI compliance fees, chargeback fees, gateway fees, and network fees. Some companies also have non-standard fees, like setup or application fees, quarterly technology fees, online reporting fees, postage or handling fees, audit fees, and access fees. You should avoid companies with non-standard fees.

6. Consider companies with month-to-month contracts.

It can be costly and difficult to close a standard three-year contract. They usually have 30 to 90-day cancellation windows and an early termination fee. A month-to-month contract will give you the freedom to switch to a different processing company if you have any issues or complaints.