Credit Card Processing Merchant Guide 101

Your ultimate guide to processing credit cards.

By Isaiah Shelton

1. What is the difference between credit card processing and merchant services?

Credit card processing is one facet of merchant services. Merchant services as a whole deals with payment processing, the equipment used to process those payments, as well as the processing methods available through your provider, be it a credit card terminal, automated response unit (ARU), etc. If you’re not sure where to start, but are looking for a merchant service provider that pretty much does it all, Flagship Merchant Services is our popular choice.

2. What should I look for in a credit processor?

While price will and should be a huge factor in the provider you select, it’s not encouraged that price determine your decision. For example, boasts some of the lowest processing rates in the industry, but also bets a $50 AmEx gift card that it can beat anyone’s price – furthering customer incentive beyond cost. Merchants should have a few more checklist items to go by before making a decision. Other things to consider include:

Customer Service:

Being able to answer sales related questions quickly could make or break your business. It’s imperative that you find a processor that has a high mark for merchant support and, ideally, one that is available 24/7. Especially for merchants running e-commerce stores, customers could be shopping at any time and it’s crucial that you provide a smooth platform for them to do so. A trustworthy support structure makes doing so that much easier. Flagship Merchant Services is known for its top notch customer service, and the fact that it’s available round-the-clock earns a very high rating from our site.

Risk and Fraud Management:

Not every business is the same and credit card processing companies are aware of this when outlining a specific merchant’s risk. Along the curve of customer service, make sure to select a payment processor that will clearly go over your risk management options. What’s your financial stability like? Is your business especially prone to identify theft? It’s crucial that you have a clear understanding of your own business model first and then select a processing provider that is ready to accommodate you and understands what it will take to successfully manage your business.

Technical Capabilities:

Payment processing is such an intricate and wide ranging industry that it’s in the best interest of the merchant to double check that the processor is capable of making the type of arrangements necessary for his or her business model to succeed. Does the company offer a payment gateway? Credit card storage? Depending on what type of acceptance channels you’ll be using, the technical services you’ll need will vary. Be sure that you have all of your tracks covered.

3. What are some of the fees associated with credit processing?

Many people think that the coast is clear after having credit card processing set up for their businesses, but, unfortunately, this is not the case. Here’ is a non-exhaustive list of additional fees that usually come with the territory of having your merchant account set up:

Annual Fee:

The first fee merchants will usually have to pay is called an annual fee, sometimes referred to as a “start-up” fee. This comes with having your merchant account approved and having your equipment set up. This fee may or may not turn into an annual fee depending on the processing company.

Statement Fee:

Merchants should expect a small fee assed to them for viewing monthly statements. Many credit card processors will charge this fee as they realize how valuable it is for businesses to have a neatly outlined report of transactions and the details that go along with each one.

Discount Rate:

Your discount rate fee is a percentage of each credit card transaction made and will vary depending on the types of cards your business takes for payment. It’s imperative that you understand the different rates for the various types of credit cards out there in order to formulate a plan that makes the most sense for your company.

Transaction Fee:

Not to be confused with a discount fee, a transaction fee is the minimum fee charged my processors per credit card transaction. This charge will vary depending on the amount of your business’ income achieved through credit cards. In essence, the fewer dollars you’re bringing in via credit cards, the higher the transaction fee will be, given transaction fees are set fees. With transaction fees ranging from $0.10-$0.25, Payment Depot could be a great solution for those looking to save money on this end.

Equipment Charge:

Providers that provide processing equipment will either allow merchants to purchase or lease the equipment. Either way, you should be prepared to add these costs into your budget. As with many leasing options, you might find that buying the equipment is the cheaper often, so choose wisely if the option presents itself. Be sure to check out Flagship for your chance to receive a free virtual terminal and mobile card reader today.

Chargeback Fees:

While some credit card processing companies will allow for a set amount of chargebacks per month, this is not standard throughout the industry, so it’s important that you talk this through with potential providers before signing some lengthy contract. Chargeback fees are pretty self-explanatory, as we’ve all purchased something only to realize that we no longer wanted/needed the item. Chargeback fees occur when a customer returns the said item, requiring processors to make reverse charges and puts more stress on resources if returns happen often for your business. To balance the hassle, processing companies will charge merchants a fee for each successful or unsuccessful charge reversal.

Termination Fee:

If you are required to sign a contract as part of setting up your merchant account, be sure to read the fine print as fees may apply if you decide to opt out of the contract early.

4. What equipment will I be needing?

This will depend on what type of business you’re running and how you’re running it. For example, if you’re operating a food truck or a retail booth at a shopping mall, it’s probably necessary that you be able to accept mobile payments. In this case, your best bet might be to acquire a mobile card reader from your provider so that you can accept credit card payments from your smartphone or tablet. is offering loads of free equipment, including a free virtual terminal and mobile card reader. However, if you’re business is online, you might not need any external equipment at all, but instead might consider paying a gateway fee to have your shopping cart set up. For these merchants, we suggest visiting National Bankcard and getting an payment gateway set up through its online services. Understanding the nature of your business is tantamount to knowing what equipment you’ll be needing for credit card processing.

5. Do I need a business license to obtain a merchant account?

It’s difficult to give a definitive “yes” to this question, but it would be wise to acquire a business license for your business at any rate. Understand that processing companies are taking a risk when offering business owners a merchant account, so the more legitimate you can make your services, the better. A business license will open up more doors when trying to figure out which provider best meets your needs and could give you more wiggle room when negotiating certain fees with providers.

6. What does “risk” mean?

In understanding risk, it helps if you look at a merchant account as a line of credit provided by your respective processing company. So, if you are unable to sell your products are have a large number of returns, the merchant account provider will then be buried in chargeback costs and other losses. As a foresight, this is where risk management comes into play. A merchant’s risk depends on various factors such as industry, the services/products sold, the longevity of your individual company, etc. and is often contingent upon some combination of each. At any rate, there are processors out there that are willing to open doors to merchants of all risk, this includes our top choice in processing: Flagship Merchant Services is ideal for merchants who aren’t exactly sure where there margin of risk falls, as both companies offer open eligibility.

7. What if I don’t have the best credit history?

You will be viewed as a greater risk and may have to shop around longer than a business owner with better credit; however, your credit history should not deter you from implementing your payment initiative. Take a look at some of our top advertisers and you’ll see that one of the reasons ranks so highly, for example, is because of the focused effort the processing company puts towards considering merchants of all risk levels. With the right resources at your fingertips, you’ll be accepting payments in no time, bad credit or not.

8. What is the process of switching payment processors?

This can be a very daunting task, but doesn’t have to be if preceded by a few proactive measures. Firstly, take note of all of the issues you’re having with your current provider and remember these issues when seeking a new, better company. Make sure to do your research and not simply rely on the company’s website and forums to get a clear understanding of what it has to offer. On that note, set up a phone call or meeting with representatives of potential company’s and listen to what they tell you about the benefits of switching over, given the troubles they notice with your current provider. See if these issues collaborate with the inefficiencies you’ve already noted and inform your decision accordingly. It’s also important to re-read the fine print of your current contract and check for information regarding early termination fees so that you can budget these costs with the costs of setting up a new merchant account. If you’re thinking about ditching your current processor and aren’t sure where to go next, be sure to check out Payment Depot for low transaction rates. Want a processor that’s more flexible than the one you have? Flagship Merchant Services should be able to accommodate you with its processing infrastructure.

9. I’m planning on opening new business locations. How will this affect my merchant account?

This will depend on your initial risk and is something worth discussing with a company representative. Assuming that the new locations will bring you more business, this could be a great mark for both you and your merchant provider. More business could result in lower transaction rates and make you an all -around more viable asset to your provider. Are these new locations international? Are you setting up a virtual location online? It could very well be the case that your new business initiatives will require you transfer services over to a more accommodating processor, which means that it would be of benefit to consider growth before opting into a long-term contracts.

10. How do I protect my business against credit card fraud?

It’s important to consider fraud protection in your search for a suitable merchant provider. While fraud protection usually comes at an additional charge, many processing companies keep these fees manageable as to encourage merchants to protect their businesses and the line of credit being issued to them. For example, National Bankcard has one of the largest fraud prevention departments in the industry, which helps with many of the accolades the company has received for its customer service. Be sure to meet with a representative to discuss available fraud prevention options before having to clean up a mess that you weren’t prepared for.

Our 2021 Top 5 SEE ALSO: *Our Top 5 Credit Card Processing Company Picks