Comparison of credit card merchant services

Written by jonathan bechtel
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Comparison of credit card merchant services
Determine your business needs for card processing before you shop. (Stockbyte/Stockbyte/Getty Images)

For someone unfamiliar with credit card processing, it can be intimidating to compare the services available. Fee structures, product language and underwriting standards can be very different from one company to another. To effectively compare credit card merchant services, its best to define how you will use your merchant services and what your transactional volume will be before you begin shopping around.

Business Needs

Merchant services come in all varieties, and a business needs credit card processing for different objectives. If you operate an online business accepting credit cards is mandatory, but you probably don't need any physical equipment. A landscaping company might not process very many transactions, but may have to use portable credit card terminals to accept payments. Thinking about your business needs will allow you to easily hone in on the merchant services you need when making comparisons between two companies.


The equipment a business needs to accept credit card payments depends on how it will accept transactions. An online business will need no physical equipment, only a virtual terminal. A restaurant or convenience store will most likely need a cash register and a personal identification number (PIN) pad. Merchant companies will give you the option of having a PIN pad that is built into the register or one that is used separately. Some companies, like Chase Paymentech, have portable merchant terminals that communicate through wireless networks with a base terminal for street vendors or contractors who work outside.


Businesses can now use their cell phone or iPad to accept credit card transactions. Mobile merchant services give merchants a card reader that they can attach to smart phones and turn them into credit card terminals. Some companies, like Square, also allow merchants to accept credit card transactions without the card being present. "Card not present" transactions allow the reader to enter in their card information without swiping it, and the merchant is paid when he processes the payments with a payment network like Visa or MasterCard. Card not present transactions are more expensive to process because they have higher rates of default.


The fee structures charged by merchant providers are just as varied as the products they offer. A common model is called "interchange plus pricing." Interchange plus pricing is when a merchant is charged a processing fee for each transaction, plus a flat processing fee for each transaction. Another model is tiered pricing. Tiered pricing separates every transaction into different pricing buckets based on the type of transaction and card used. Merchant providers may also charge fees for equipment, starting up an account or charge a minimum usage fee, among others.

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