Best Credit Card Processing Companies of 2022

Cost is one of the most important factors to examine when you're deciding which credit card processing service to use. You don't want to overpay thousands of dollars for the convenience of accepting credit and debit cards from customers.

What Costs Should You Expect for Credit Card Processing?

There are usually three sets of costs involved when you are choosing a credit card processor: rates, fees and equipment costs.

• Rates: These are the processing fees you pay for each transaction. Rates are typically a percentage of the total sale amount. In addition to this percentage, card processors charge a few cents per transaction.
• Fees: Most processors charge monthly account service fees, which are reflected on your statement, but some processors may levy these fees quarterly or annually.
• Equipment costs: The cost of equipment is usually a one-time expense for the hardware needed to accept credit cards. We recommend buying processing equipment upfront whenever possible. Many processors offer leasing (or free equipment), but it's typically associated with exorbitant costs.

Credit Card Processing Rates

The rate you pay a credit card processor consists of three parts: the interchange rate, the card brand's assessment fee and the processor's markup. The interchange rate and the assessment fee are set by the card networks, and everyone pays the same amount. This portion of the rate is non-negotiable. However, each processor sets its own margin, so that part is negotiable.

From these three parts, processors create their rate structure or pricing model. There are three main rate structures to know.

• Flat-rate pricing: For businesses that process less than $5,000 per month or have very small sales tickets, flat-rate pricing is usually the most affordable option, because all you pay is a fee for each transaction; there may be no monthly or annual account fees. (However, some fees, such as a PCI compliance fee, may still apply.) 

Tip: Shop around before committing to a flat-rate processor. Flat rates can be expensive for small businesses.

• Interchange-plus pricing: Most industry experts recommend interchange-plus pricing for businesses that generate a lot in credit card sales. That's because the price you're quoted is the processor's markup (the only aspect of pricing that is negotiable), which you can easily compare as you evaluate the pricing of multiple processors.
• Tiered (or bundled) pricing: With a tiered pricing model, the processor bundles the interchange rates, assessment fees and the processor's markup, and separates them into three tiers: qualified, mid-qualified and nonqualified. Companies that use the tiered pricing model usually advertise only the qualified rate (which applies to regular debit cards accepted in person using a card reader) and disclose the other tiers only if you specifically ask for them. It's impossible to determine the processor's markup with a tiered pricing model, and the number of tiers (and the types of transactions that go into each tier) vary by processor, so it's difficult to know if the rates you're offered are competitive.

What Is the Average Fee for Credit Card Processing?

The average credit card processing fee ranges from 2% to 4% of each sale. Here are some of the factors that determine the per-transaction cost:

• The type of card your customer uses (debit, credit, rewards, premium rewards, corporate)
• How you accept the card (in-person using a card reader, manually keyed in, online)
• The pricing structure your processor uses (flat rate, interchange plus, tiered)

What Fees Come With Credit Card Processing?

There may be several fees in addition to the processing rate per transaction. It can get confusing, because each processor may charge different fees; it's hard to know which fees are standard and which ones are superfluous. [Check out some tricks to help you lower your credit card processing fees.]

Processors with flat rates usually don't charge account service fees, but you still need to be aware of some incidental fees.

• Monthly fee: This fee, sometimes called a statement fee, covers customer service and statement preparation. It ranges from $5 to $15 per month, though it may be higher if it covers additional services, like PCI compliance and gateway fees.
• Payment gateway fee: This monthly fee covers the usage of the payment gateway, which allows you to accept payments online. The cost varies depending on the payment gateway, but it is often comparable to the monthly fee ($5 to $15).
• Monthly minimum fee: Some processors require you to generate a certain dollar amount in processing fees each month. For some processors, the monthly minimum is $25, but others set it higher. If you do not meet this number, you're charged the difference.
• PCI compliance fee: All full-service processors require merchants to complete a PCI compliance questionnaire each year. Not all processors charge this fee, but for those that do, the average cost is $100 per year. If you don't complete your PCI questionnaire, you're charged a high PCI noncompliance fee until you do.
• Network fees: These fees are charged by the card networks and are passed on to you as either monthly or annual fees. Examples of these fees are Mastercard's Merchant Location Fee and Visa's Fixed Acquirer Network Fee.

In addition, some fees are triggered by a certain action. Here are some examples.

• Chargeback fee: When a customer disputes a transaction, you're charged this fee. It usually costs $15 or $20 per incident, but it may be as high as $45. Some processors refund this fee if you win the dispute.
• Address Verification Service (AVS) fee: AVS is an anti-fraud tool that verifies the address and ZIP code of the cardholder. It usually costs a few cents per transaction.
• Voice authorization: This is another anti-fraud feature that requires you to call the credit card company to provide them with additional information about the transaction. It's rarely required, but you're charged for each occurrence.
• Batch fee: This is a small daily fee you pay when you close out the day's sales. It usually costs the same amount as your per-transaction fee, which is typically between 10 and 30 cents. Not all processors charge this fee.
• Non-sufficient funds (NSF) fee: This is a fee you are charged if you don't have enough money in your business bank account to pay the fees you owe the processor.

What Equipment Does a Business Owner Need to Process Payments?

At a minimum, you'll need a phone or tablet credit card reader or a credit card terminal. Additional hardware, also called peripherals – like cash drawers, receipt printers and barcode readers – can be added to your system.

When you're shopping for a card reader or terminal, look for one that lets you accept magstripe cards, chip cards, and contactless cards and mobile wallets. The best credit card readers have these capabilities and typically cost less than $100 (usually between $20 and $50). If you prefer a credit card terminal, a basic one with these capabilities usually costs $200 to $300.

Tip: The best credit card reader for small business owners may be a mobile credit card reader used with a smartphone or tablet and the processor's app. It's an affordable choice, and you save further because you can email or text receipts to your customers so you don't have to buy a receipt printer (or paper).

Credit card processing allows you to accept payments from customers who pay using a credit card, debit card or mobile wallet, like Apple Pay or Google Pay. You need to be able to accept these payment methods because that's how most customers prefer to pay. Cash use continues to decline, particularly in light of the pandemic as customers and merchants opt for contactless and online payments. With contactless payments, consumers tap their mobile device, contactless credit or debit card, or wearable on the payment terminal to check out. This payment method is quicker and safer than handing cash to a cashier or swiping a credit card. Most of the top POS providers and credit card processors support tap-to-pay.

What Are the Benefits of Credit Card Processing for Businesses?

Accepting your customers' preferred payment method has a couple of additional benefits. First, customers can spend more when they shop with a credit card than when they pay cash. Second, you won't lose potential sales from customers who don't carry cash.

What Are the Basics Business Owners Should Know About Credit Card Processing?

You have a lot of options for credit card processing, but some processors are accessible for nearly every business, even solopreneurs and freelancers.

If you are an entrepreneur or a freelancer who's just starting out, consider a mobile credit card processing company such as Square, which has flat rates, no contracts, a free mobile credit card processing app, and affordable card readers that connect to a phone or tablet. Then, as your business grows and your processing volume increases, you can add more equipment and features, or you can switch to a more advanced payment processing service.

Here's why we like mobile credit card processors for new businesses:

• Low startup costs. You already have a smartphone or maybe even a tablet; the only thing you need to buy to start accepting credit cards is a card reader. Some processors give you a free swiper when you sign up, but you want a model that accepts chip cards and contactless payments. These readers cost less than $100 (usually $20 to $50).
• Pay-as-you-go fees. Most flat-rate processors charge you only when you run a card, and you pay a flat rate for each transaction. This rate looks higher than what some processors advertise, but that's because you don't pay monthly account service fees. If you opt for a full-service processor, look for one that has interchange-plus pricing, which is more transparent and economical than tiered (or bundled) pricing structures.
• No monthly minimum. Some processors have a monthly minimum, which means you're required to process enough sales each month to generate a certain dollar amount in processing fees. If you rarely accept credit cards, you don't yet know how much you'll process each month or you have a seasonal business, you shouldn't work with a processor that charges this fee.
• No contract. Standard credit card processing contracts have three-year terms and automatically renew for additional one-year terms with just a 30-day window at the end of the term to cancel. If you want to cancel your account but you miss that window and then cancel, you're charged an expensive early-termination fee. If you choose a full-service processor, look for one that has month-to-month terms. The best credit card processors don't make you sign a lengthy contract to keep your business.

Why Is Support for Offline Transactions Beneficial to Merchants? 

The internet is usually reliable, but outages do occur. If you are a merchant that relies on the internet to process payments, you're out of luck if your provider doesn't support offline transactions. Thankfully, most do. 

With this type of transaction, the customer checks out normally, with the card data encrypted and stored on the terminal until an internet connection is established. Once the merchant is back online, the information is sent to the merchant's bank account and card network. That means your business won't lose sales during an internet outage. If you want to accept card payments outside your establishment, this feature also proves handy. 

Is credit card processing secure?

As a small business owner, you must remain vigilant against credit card fraud. Though most headlines focus on data breaches at major retail chains, small businesses are vulnerable, too. Small businesses can shore up their credit card processing security measures by doing two things.

The first step is to ensure that you comply with the Payment Card Industry Data Security Standard (PCI DSS). Created by Visa, Mastercard, American Express, Discover and JCB in 2006, this standard requires that businesses meet certain criteria to ensure their transactions are as secure as they can be.

The second action is to upgrade your card reader to accept EMV (Europay, Mastercard and Visa) chip cards. Most credit cards have a chip embedded in one end of the card, and having the technology to read it makes the transaction significantly more secure because the chip is harder to counterfeit than the standard magnetic strip.

How can you avoid credit card processing fees?

Credit card processing companies rely on fees to make their money, so there's no way to completely eliminate credit card processing fees. If you feel you're paying too much in fees, you can negotiate with credit card processors to reduce them. If you can accept cards in person instead of over the phone or online, you'll also save money on fees.

Another option is to set a minimum transaction amount that customers must meet before they can pay with a credit card. By doing this, you can ensure you come out on top of the transaction, since it makes more financial sense to pay the fee on a $10 purchase than on a $2 one. The major credit card networks have rules about minimum transaction amounts, so verify that your policy complies with their rules.

Similarly, you can move the fee to your customers entirely by using cash discounts or surcharging. Many gas stations use this method, in which a gallon of gas is discounted if you pay with cash. Though this may cause potential customers to take their business elsewhere, it could encourage people who prefer paying with cash to frequent your store more often. If you go this route, check the credit card networks' rules for surcharging to ensure you follow best practices.

How much are credit card processing fees for consumers?

Consumers usually don't pay credit card processing fees. Some processors advertise surcharging programs that pass processing fees to your customers. However, these programs aren't popular with consumers and thus could be risky.

Before implementing such a program, you need to know your customers and determine if they would accept it or if it would lead them to shop elsewhere. As mentioned above, the credit card networks have surcharge rules.

How long can a merchant hold an authorization?

Authorization holds vary depending on the status of the transaction and the card issuer's self-imposed time limits. For most transactions, a merchant has up to 30 days to clear an authorization hold, though some credit card companies, like Visa and Discover, have significantly shorter time limits before such authorizations "fall off" the account. By failing to complete a transaction hold, you run the risk of the credit card processing company charging you a misuse fee.

What are the typical credit card processing fees?

Credit card processors charge a variety of fees. Some are etched in stone; others are negotiable. One non-negotiable charge is the interchange fee, which card-issuing banks charge on every transaction made with their credit cards. That fee is passed on to the merchant. The amount charged is based on the type of credit card the customer uses, whether the transaction is in person or online, and the amount of the purchase. The riskier the payment method is, the more you pay in interchange fees.

The assessment fee or service fee is another non-negotiable cost. Payment processors must pay this fee to the card networks, and they pass that fee on to the merchant.

The payment processor's markup is the fee the payment processor charges to use its services. You may be able to negotiate this fee with some credit card processing companies.

What should I look for in a credit card processor?

When you're looking for a credit card processor that is right for you and your business, consider the fees the processor charges, the terms of the contract, and the service it provides. You don't want to be stuck with a payment processor that doesn't have live customer support or is impossible to reach when you have a problem. You also want one that will work with you to ensure you remain PCI compliant, that offers EMV-supported card readers and that accepts multiple payment methods.

What pricing structures are available for credit card processing?

There are three main credit card processing pricing models: tiered, interchange-plus and flat rate. With tiered pricing, the credit card processor charges you the interchange rate, an assessment fee and its markup in different tiers. There are usually three tiers, but some vendors have up to six. The rates might vary by transaction type and credit card. It's difficult to compare the costs of vendors with tiered pricing.

Interchange-plus pricing is a structure in which credit card processors charge you the interchange rate, the assessment fees and their markup. You know exactly how much you are paying for the transaction, since the markup stays the same regardless of the type of card or transaction.

With a flat-rate pricing model, the vendor charges you a fixed percentage of each sale regardless of whether the customer is using a Visa, Mastercard or any other credit card. There could also be a per-transaction fee that depends on whether the transaction was an in-person or card-not-present payment.

How long does it take to settle credit card sales?

It typically takes 24 hours to three days to settle a credit card sale. It depends on the merchant account provider and the type of merchant account you have. Thanks to advances in payment technology, the turnaround to clear credit card sales is faster than it used to be. If you choose a direct processor, like Chase – which is a combined processor and acquiring bank – you can expect shorter time frames.

Does online credit card processing work the same as in-store processing?

In-store and online credit card processing work the same way. The only difference is that, with online credit card processing, the consumer doesn't swipe or insert a credit card. Instead, the customer inputs their credit card information while checking out online. This information typically includes the card number, the expiration date, the CVV number and the shopper's billing address. Most credit card processors support both in-person and online payments. The latter is becoming more important as e-commerce and mobile commerce become more popular.  

Should I avoid tiered credit card processor pricing?

Most small businesses should avoid tiered credit card processor pricing, which bundles the interchange rate, assessment fees and markup into one pricing plan. Because the costs are bundled, it's difficult to tell how much you are paying for each item. It also makes it hard to comparison shop. Unless the vendor is willing to break out its fees, it's best to avoid a tiered pricing structure.  

Did the COVID-19 pandemic have any impact on how small businesses accept payments?

The COVID-19 pandemic had a big impact on how consumers pay for products and services. Contactless and digital payments, which were once considered a nice-to-have, quickly became a must-have. Mobile payments and e-commerce also grew significantly. Small businesses were forced to adapt by acquiring contactless payment terminals, accepting different digital and mobile payment methods, and embracing e-commerce as the main way to conduct business. Although the growth rate in new payment technologies has receded, these payment methods have become the norm for many consumers. 

Do people pay with cryptocurrency? 

Approximately 18% of the U.S. adult population has invested in, traded or used cryptocurrencies, according to eMarketer. Credit card companies such as Visa and Mastercard are getting involved, making it easier for small business merchants to accept bitcoin and other cryptocurrencies via credit card. Future growth in cryptocurrency remains highly speculative, and there is no guarantee that it will retain its value. That said, accepting cryptocurrency as payment could serve as a way for small businesses to distinguish themselves from competitors and gain public attention. 

What are the steps involved in credit card processing?

The steps in credit card processing are the same for most product categories and business types. The process starts with the customer selecting an item to purchase. The credit card is then swiped, scanned or entered into a payment terminal. Next, the data is transmitted to be approved. Once it goes through the authorization, which happens in seconds, the transaction will either go through or be declined. If there are enough funds, the transaction is authorized and completed. The merchant closes out all of the credit card transactions at the end of the day, and the credit card processor's acquiring bank collects the money from the credit card issuers. The sales are then deposited into the merchant's bank account, typically in two days or less.

Why do credit card processors offer high-risk merchant accounts? 

Not all credit card processors work with every business. Industries that are prone to fraud and chargebacks may have a tougher time finding a company to process their sales. Some credit card processors work with high-risk businesses, but they charge more for their services, to mitigate some of the risk. They call their accounts high-risk merchant accounts and charge you more in processing and chargeback fees. 

Which businesses do credit card processors consider high-risk? 

Tobacco and gambling are often perceived as high-risk businesses by credit card processors. Other industries a credit card processor may not work with include pawn shops, subscription services, alcohol sales and firearm dealers.

Consumers have high expectations for credit card payments, which means you should work with a credit card processor that helps you meet these standards. One requirement is a "fast, frictionless experience" that is also secure, according to 92% of the 7,000 North American and European consumers surveyed for an Ekata report.

Since the COVID-19 pandemic, the popularity of mobile and contactless payment options has surged. According to Square, just 5.4% of Square sellers were cashless in February 2020, but that percentage jumped to 23.2% in April 2020. As states relaxed their restrictions and more retail locations reopened, the percentage dropped back down and settled at 13.4% in August.

Economist Felipe Chacon said he believed the findings showed "a significant and stabilizing increase in cashless adoption rates compared to pre-pandemic, with business owners increasingly reliant upon contactless and online payments and consumers utilizing those alternatives." He suggested that COVID-19 will affect how people conduct business for years to come.

Credit card processing fees are something else to watch this year. The pandemic has increased the rate at which shoppers are using digital payments. While cash was already declining in usage, the rate at which this has happened really accelerated over the past two years. This has left small businesses accepting more credit card payments, which, in turn, has meant they've paid more in credit card processing fees. 

Those fees are becoming a significant burden for many businesses. Research from the Canadian Federation of Independent Business revealed that 78% of businesses believe their credit card processing fees have been unaffordable. We expect that small business owners who are shopping for credit card processing services will zero in on pricing and choose providers that can give them a reasonable rate both now and as their transaction volume increases.

Services that allow consumers to pay for purchases in installments have also grown in popularity. So-called buy now, pay later (BNPL) has become a preferred payment method for a growing number of younger consumers. Notably, shoppers tend to spend more when going this route.

Credit card processors are starting to integrate BNPL support into their POS systems. In August 2021, Square acquired Afterpay, which lets consumers make installment purchases for items at the point of sale. The integration was officially launched in January 2022.

When announcing the deal, Square said it would integrate Afterpay into its Seller and Cash apps, allowing small merchants to offer BNPL at checkout. Stripe, a competing payment processor, already supports Afterpay. Even Walmart is getting into the game, scrapping its layaway program for a BNPL offering. 

In addition to a "fast, frictionless experience," consumers expect their data to be secure. Although Visa found that EMV adoption has been extremely effective in reducing incidents of card-present fraud, it is still rampant. According to Juniper Research, retailers will lose $130 billion to card-not-present fraud between 2018 and 2023.

Payment processing companies are projected to spend close to $10 billion by 2023 to detect and prevent fraud. In a TSYS blog, Scott Talbott, senior vice president of government affairs at the Electronic Transactions Association, wrote that "these tools are powered by technological advancements like machine learning, biometrics, geolocation tools and artificial intelligence. They are critically important in the fight against increasingly sophisticated criminals."

Donna Fuscaldo and Lori Fairbanks contributed to the writing and research in this guide.