The Best Credit Card Processors
The power of plastic, without swiping away all your profits
Credit card processing contracts have long been confusing, fee-ridden mazes. We talked with 30 merchants who've been through the process and found five processors that all have transparent fees and stellar customer service — and won't lock you into long-term contracts.
Payment Depot has a number of big-name, national clients under its belt, like Subway and Arco. It backs up its range of pricing plans with solid customer support and transparent pricing, making it a great choice — especially for companies dealing with larger transactions.
The quickest way to make you feel completely unqualified to run your own business is to tackle finding the best credit card processor for your needs. It doesn’t matter how savvy you are: The industry is frustratingly opaque and no matter which service you decide to go with, there’s always one more that can promise you a better rate (or so they say). Your business is unique and unfortunately there is no one-size-fits-all solution. All our top picks — Payment Depot, Shopify Lite, Square, PayPal, and Dharma Merchant Services — deliver in different ways.
After examining 106 services and interviewing 30 merchants, we found that a transparent pricing structure is paramount in order to compare credit card processors. Finding that is rarer than you would think, something Paul Downs, Founder and President of Paul Downs Custom Conference Tables in Philadelphia, knows well. In 2013, The New York Times published a series on its business blog about his journey through the legal obfuscation and false promises. When we chatted with him for this review, not much had changed: He continues to believe the industry is shadowed by a lack of transparency that makes it difficult for smaller businesses especially to understand or predict their processing costs.
Beyond transparent pricing, we were drawn to companies that were attentive in their customer service and offered equipment to bustling online shops or brand-new brick-and-mortar locations.
How We Found the Best Credit Card Processors
We cut companies that didn’t show their pricing.
Every time you accept a credit card transaction, you enter a foursome — you, your credit card processor, the credit card company, and the card’s issuing bank — and you have to pay all three to play.
There are three major pricing models. The first gives control to the processor: You pay them, and they pay the credit card companies and the banks. It’s like paying a contractor to remodel your house, where the contractor takes care of paying the painter and the plumber. This is called tiered pricing, but is also referred to as “bundled” or “bucket” pricing. It sounds simple, but it’s actually just a black box of fees: Your processor can set different rates for different types of transactions (like credit cards with ZIP codes verified versus debit cards with a PIN), and you can never be sure how much of your fee is getting passed on to the other companies and how much your processor is pocketing.
In fact, Downs found that with tiered pricing, you don’t really know what you’re getting until you legally commit to using a company. “The pricing you will be shown up front is a tease because pricing is always different depending on the merchant and different kinds of transactions,” he told us. “The real pricing will be revealed after you apply, but the act of applying is also the act of accepting the deal, in every case I examined.”
There are lots of hidden and potential costs that won’t be shown when you sign up. The whole subject is unbelievably complex and way too difficult for the average busy business owner to comprehend. Providers know this and take advantage of that fact.
There is another and increasingly popular pricing option: transparency. There are two main transparent models, interchange-plus and flat-rate. “Interchange” is the catch-all term for the fees that the credit card companies and banks charge; it’s a set fee that’s public and varies based on the card type and the transaction type (MasterCard has 139 different fee categories (!) that range from 0 percent + 65 cents to 3.25 percent + 10 cents). The “plus” part of interchange-plus is the fee your processor tacks on. Flat-rate means you pay one rate to your processor no matter what — regardless of interchange rate, card type, or transaction type. Compared to the black box of tiered pricing, these are crystal clear.
We cut any contenders that don’t operate with transparent, up-front pricing. We think that if there’s a company that’s going to get a piece off the top of every swipe, it should tell you exactly what that is before you sign up.
360 Payment Solutions, Acculynk, Ace Merchant Processing, Alacriti, Aliant Payments, BankCard USA, Beacon Payments, Best Merchant Card Services, BestMerchantRates, BluePay, C&H Financial Services, Cardconnect, Cayan, CCPS, Certified Payment Processing, Change Merchant Solutions, Chase Paymentech, Client Solutions Group, CoCard, Cornerstone Merchant, CPN, Credit Card Processing, Credit Card Processing Specialists, Crescent Processing Solutions, CyberSource, e-Data, Electronic Cash Payments, Electronic Payment Systems, eMerchant, Encore, EPX, Federated Payments, First Affiliates, First Bankcard, FirstData, Flagship Credit Card Processing, Global Payments, Gotmerchant, HarborTouch, Heartland, Intrix, iTransact, Leaders Merchant Services, Leap Payments, Maverick Bankcard, Merchant Cash Advance, Merchant Cash Group, Merchant Solutions, Merchantone, MersaTech, Moneris Solutions, MSI Merchant Service, National Bankcard, National Processing, National Transaction, Nationwide Merchant Solutions, Newtek, NMI, North American Bancard, North American Bancard Holdings, OnDeck, PayLeap, Paysafe, Pelican Simply Intelligent, Planet Payment, Priority Payment Systems, Redfynn, Regal Payment Systems, Sage Payment Solutions, Signature Card Services, SwiftPay, The Transaction Group, Total Merchant Services, Total-Apps, TSYS, Merchant Solutions, United Payment Services, USMerchant Services, Velocity Merchant Services, Velocity Payment System, Worldpay, Yoozy
We took price per transaction into consideration — but didn’t emphasize it.
When it comes to costs, credit card processors differentiate in two ways: their monthly fee and their price per transaction.
Not all services have monthly fees; the ones that do range from as low as $9 to as high as $199. (Typically a higher fee either pays for additional services or will push down the per-transaction charge. Sometimes it’ll do both.)
Transaction fees come in a few types: a flat percentage of the swipe (say 3 percent), a flat percentage plus a fixed fee (say 3 percent + 10 cents), or a fixed fee plus the interchange rate (something like 10 cents + interchange).
For high-ticket sales — think auto repair shop or art gallery — a percentage of the swipe is likely going to be more expensive in the long run than a small transaction fee. Vice versa for low-priced transactions, like in a coffee shop.
$400 car repair
A 15-cent transaction fee adds a meaningful cost to the coffee vendor, but proportionately much less to the car repair shop.
Initially, we strived to only recommend credit card processors that took less than 3 percent of each transaction across low-, mid-, and high-price items, but how the bottom line plays out varies too greatly from business to business.
But perhaps not everyone takes time to do the analysis. “Many merchants don’t know the prices vary so widely,” says Rieva Lesonsky, a small business consultant. “And a lot of the fees are hidden so what looks like good pricing up front turns out to be not so great once you read the fine print, or get surprised by what you’re really paying. This is about doing your homework and not trusting the marketing.”
That homework comes down to really digging into what’s important to you and your business. About half of the merchants we spoke with said pricing was it (although in several cases, merchants were more nonchalant, explaining they were able to simply build their credit card processing costs into the pricing of their goods and services). Others said that service features mattered just as much.
What are some of those other features? The ability to sync a processor with accounting software was big (QuickBooks and Xero being the two mentioned most), because it provides cost savings in merchants’ back-office operations. “Having a credit processor that integrates with QuickBooks is very helpful in tracking my revenue and simplifying my taxes,” says Lisa Chu, principal at Black N Bianco, a childrenswear online retailer. And it makes sense — a higher swipe fee might not matter as much if your processor allows you to save money elsewhere.
We wanted to be able to process payments online and offline.
Many credit card processors use third-party suppliers for their equipment — Verifone is a popular one — so rather than look at the quality of their devices, it’s really which options they provide that matters. We live in both an online and an offline world, which means needing equipment to accept payments via a website and in person with a swipe reader. We also cut any processors without the capability to accept chip cards (also called EMV cards) — they’re the new standard in fraud-protection and if you’re not accepting them properly, you could be on the hook for false charges.
If you’re only going to be processing payments online or in your app, just stop reading. Your answer is either Braintree or Stripe. Both are built with developers in mind and have identical pricing structures (a flat fee of 2.9 percent + 30 cents). They’re both active on GitHub and both have test environments to use. The difference? Stripe wins in clear API documentation and ease of use; Braintree wins for having PayPal integration.
Braintree, CapitalOne SparkPay, GotMerchant, Halo Pays, Merchant Anywhere, NextPay, Stripe
We looked for customer service that was actually helpful.
In an industry as complex as credit card processing — and with as much money riding on the decisions you make — getting your questions answered is key. We contacted each of our remaining contenders and scored them on their customer service, including a readable website with clear terms of service, FAQs and quality educational materials, and 24/7 support.
- The Great: Payment Depot, Shopify, Square
- The Good: Charge, CDG Commerce, Dharma Merchant Services, Fattmerchant, Payline Data, PayPal, QuickBooks Payments, TransFirst, Transparent Merchant Services
- The Rest: Credit Card Processing, Elavon, ElectronicTransfer, PaymentMax
If a credit card processing service didn’t score at least “Good,” we cut it.
Credit Card Processing, Elavon, ElectronicTransfer, PaymentMax
At the end of it all, we still couldn’t name one single best credit card processor. But! Out of the 14 left in the running, we found a few services that stood out from the rest.
Our Picks for the Best Credit Card Processors
Payment Depot is the go-to for some major national retailers: Super 8, Subway, Arco, Dominoes. It has a few different membership plans with monthly and per-transaction fees that vary depending on your volume of transactions: to process up to $20,000 each month, you would pay a monthly fee of $29 and a per-transaction fee of 25 cents + interchange. If you process more payments, you pay a higher monthly fee (as much as $99), but get a lower per-transaction fee (as little as 5 cents + interchange).
If you’ve shopped at one of Payment Depot’s retail clients, you may have come across hardware like this VeriFone VX 820.
All its other costs are referred to as “wholesale,” meaning they’re simply interchange costs set by the credit card companies and banks — no markups here. This type of structure, paying only an additional per-transaction fee, is especially attractive to sellers of higher-priced goods and services.
I’m a huge Payment Depot fan. I think their transparency is outstanding. The only vendors this company would not be great for are those with small transactions, like a coffee shop or breakfast cafe. I have large transactions, and my credit card charges went from 3.5 percent to 1.6 percent by switching to Payment Depot. With my past processor, each month I was paying them almost 2 percent of my profits.
Square is the most (and only?) name-recognized processor out there, with a full line of proprietary equipment that looks designed by Apple diehards: sleek and hip. While its services can accommodate more robust businesses, it’s especially attractive to newer, smaller merchants that may not have the credit history and assets to get started with other processors.
For startups, it’s not really about price comparisons; it’s about finding companies that will give them merchant status. It’s way too hard to find that.
Unlike Payment Depot, which charges interchange plus a set amount per swipe, Square builds the interchange into one flat rate and has no swipe fee. For merchants with low-priced goods (think coffee shop or farmer’s market), that 0 cent swipe fee has a huge effect on what percentage of your sale is going to your credit card processor. After all, 25 cents is 10 percent of a $2.50 muffin.
That flat rate is higher than interchange plus can be, particularly for merchants with a high average ticket price. But, merchant status availability often outweighs Square’s higher per-transaction fee (2.75 percent per swipe or the not-so-pretty rate of 3.5 percent + 15 cents per manually entered transaction). It also boasts a no-hassle, fee-free model for the rest of its services. That includes $250 in monthly chargeback protection — if a customer disputes a charge, as long as you followed Square’s best practices, it’ll cover the first $250 no matter the outcome. (With Shopify, you’ll be paying a $9 monthly fee, and it not only doesn’t cover your for chargebacks, but also actually takes a $15 fee for each one.)
Square’s retail hardware is easy to spot thanks to its sleek, minimalist design.
Square’s services were what stood out with several of the merchants we spoke with. Aside from having a clean, informative website with plenty of customer support, the Square smartphone app enables point-of-sale and inventory-management features, as well as payroll functions. “It’s extremely important to be able to integrate with software,” says Danita Harris, principal at Rated M Wine Infused Foods. “I keep inventory on Square, and can bill direct from Square or QuickBooks (converted from Xero). It makes my life much easier and more efficient.”
There are no monthly fees or equipment leasing fees — you just pay as you get paid. The little square card reader is free for the swipe version; the chip reader is just $49. And while we love Square for the little guys, if you’re a big merchant — say, with more than $250,000 in sales a year — it might still be your best bet. With that much in sales, Square is willing to negotiate with you on the swipe fee.
Best Online/Offline Integration
Shopify Lite Shopify earned a spot on our list thanks to its outstanding mix of services for both online and offline transactions, but issues with debit card acceptance may be cause for concern.
We were shocked by how well Shopify provided for in-person credit card processing considering its primary business is helping merchants launch online stores. On the Lite plan, which runs $9 a month, in-person transaction costs are a competitive 2.7 percent flat rate — compared to Square’s 2.75 percent. If you’re charging more than $180 in transactions a month, you’ll make that $9 back and more.
The plan allows you to accept in-person credit cards of all types, or embed an online buy button and shopping cart onto your website or Facebook page. (Online charges ring up at 2.9 percent + 30 cents per transaction.) That’s for an unlimited number of products, with unlimited file storage, 24/7 support, and QuickBooks integration.
It even has a $19 card swiper and, like Square, offers the first one for free. If you want to take chip cards, that’ll set you back $129 or so for the reader. The biggest downside: Shopify doesn’t work with debit cards (though some debit cards can be processed just fine as credit cards). To officially accept debit cards, you’ll need to add an external terminal, and if you’re in an industry that can expect chargebacks, you should definitely go with Square.
Shopify gave me the instant ability to process credit cards, had very competitive rates, and all my store operations data (including credit card processing) could be handled from one interface. That sort of functionality is incredibly helpful. However, industries that have high risk of chargebacks need to be aware that they’ll lose practically every chargeback since Shopify just doesn’t have the tools to help you win.
When it comes to the digital universe, PayPal has some distinct advantages — and not only because it’s been around the longest. Its convenience factor alone carries a lot of weight: “I use PayPal as my payment portal because it integrates easily with my website,” explains Shilonda Downing, founder of Virtual Work Team. “The benefits of PayPal are two fold: our clients who want to use their PayPal balance to pay us can do so with ease, and the funds in my PayPal account can be easily transferred to other business accounts.” Tim Thoelecke Jr., president of InOut Labs, a wellness testing firm that operates in both retail and commercial markets, had similar thoughts: “PayPal integrates with both my accounting software, Xero, and our e-commerce business. Workflow and avoiding double entry are important to me.”
In addition to its online services, PayPal also offers a card reader that plugs into a smartphone’s headphone jack.
PayPal has a 2.9 percent + 30 cent online transaction fee, which is consistent with every other processor’s online rates. Plus, it has robust customer service and DIY help features on its website. Equipment is limited to either a chip card reader or mobile card reader — your first mobile card reader is free — making PayPal a tough sell for high-volume brick-and-mortar merchants looking for a full-on POS system or cash register, but online transactions remain PayPal’s bread and butter.
Best for Established Nonprofits
Dharma Merchant Services Dharma Merchant Services could be a good fit for retail and commercial businesses, but nonprofits especially should take a look at its discounted rates.
While Dharma Merchant Services does the bulk of its work in the retail and commercial sector, it has a strong niche in nonprofit transactions — which are booming especially via online donations. Dharma, a B Corporation with subscriptions for $15 a month, offers reduced nonprofit rates. Like Payment Depot, Dharma doesn’t offer one lump rate for all transactions, so your ultimate costs would depend on each credit card’s interchange rate, which can vary upward of 2 percentage points depending on the card. For nonprofits, Dharma charges 0.20 percent + 10 cents + interchange for storefront operations; online it’s 0.30 percent + 15 cents + interchange. PayPal, by contrast, has a flat nonprofit fee of 2.2 percent + 30 cents that’s constant despite interchange fees.
Dharma scores well for having a clean, easily navigated website. It also provides excellent educational information on how interchange rates work (including links to the current official Visa and MasterCard rates), and it walks the merchant and nonprofit through transactional cost scenarios. “We took pricing questions off the table by transparently posting our pricing model on the website,” says Jeff Marcous, chief evolutionary officer and co-founder of Dharma.
Most notably, Dharma openly discourages new customers that transact less than $10,000 per month, or don’t have a long credit history. Marcous explains that for companies that fall below the $10K threshold, it’s in their best interests to go with an aggregator like Square or PayPal, adding that the barrier to entry allows Dharma to offer a high level of customer service. “One of the primary goals of Dharma is to build a strong community,” he says, “and by setting the intention of being truly ‘present’ for our merchants, our loyalty and retention rate is quite high.”
We've been with Dharma Merchant Services for probably about seven years now. I liked all of the information they provided upfront and the fact that they had been in the business for a long time. I've gotten great customer care and support from them over the years. The fees are very reasonable. If a client doesn't already have a merchant account provider chosen or is not using their bank, we will recommend Dharma.
Other Credit Card Processors to Consider
These credit card processors (featured below alongside our top picks) scored well across our primary considerations: pricing transparency, customer service, equipment features, and policies. They’re great; just not our top picks.
*Price ranges include discount rates for nonprofits (if applicable).
*Price ranges include discount rates for nonprofits (if applicable).
Did You Know?
Interchange rates are transparent, but they’re still unpredictable.
It’s obvious but bears repeating: If the processor you choose uses interchange rates as well as its own rates, your costs will not be as predictable as a processor with one flat fee. That’s because each credit card and credit card type has a unique rate: A Visa debit card might have a 0.05 percent + 22 cent rate while a Visa Rewards card could have a 1.65 percent + 10 cent rate. (This is why many smaller businesses stereotypically do not accept American Express, which used to have much higher rates.) If you want to know what you’ll always be paying — no fluctuations based on card types — go for a transparent, flat-rate processor like Square, Shopify, or PayPal. If you’re after a potentially lower rate, go for interchange-plus models like Merchant Depot or Dharma Merchant Services.
If you don’t use an EMV chip card reader, you’re liable for fraudulent charges.
In October of 2015, MasterCard and Visa both underwent a “liability shift.” According to that shift, if you’re a merchant and someone uses a chip card to make a fraudulent charge — but you didn’t use a chip reader — you’re on the hook for it. That shift also means if the fraud was caused by a simple swipe card, and you had a chip terminal, the bank would be on the hook for not issuing the right card.
If you’re buying your first terminal in 2017, it’s a good idea to spring for the chip reader. It might be an extra few hundred dollars, but it means you’re not going to have to pony up potentially a lot more in fraudulent charges.
Digital wallets are on the way.
There is a lot of anticipation for smartphone payment systems, including Apple Pay, Android Pay, and PayPal, as well as branded payment systems at Starbucks, Target, and Walmart. According to market research publisher Packaged Facts, mobile payments made at retailers’ point of sale will grow 54 percent in 2016, bringing total annual sales via smartphone apps to $65 billion.
Apple Pay is by far the leader of the pack. A survey of retailers by the consulting firm Piper Jaffray says of the 44 percent of merchants who are using or want to use mobile wallet solutions, 67 percent of US retailers lean toward Apple Pay readers, with only 18 percent preferring Android Pay/Google Wallet, and a mere 8 percent preferring PayPal. To adopt Apple Pay, you’ll need to buy an updated terminal. Is now the right time? That’s really your call.
The Bottom Line
Finding the right credit card processor is a matter of the size, shape, and scale of your business. One thing is universal: Any processor you choose should tell you how much it’s charging right up front.
Take stock of your transactions. The first step in getting the right rate for your business is knowing how much your transactions are and how many of them you have in a month. Take a look at your average cost per transaction, but also look at the types of transaction. Then, find the break-even points for each of the rates you’re considering. Is tracking your transaction types making you feel crazy? You’re not alone. “It’s pretty much impossible to figure out the cost for any given credit card transaction,” says Steven Silberberg, owner of Fitpacking, a weight-loss backpacking business. “If I do a card-not-present transaction, the fee is greater than a card-present transaction. If I don’t provide the CVV, the fees increase yet again. Foreign transactions also have a different rate, and Visa is different than MasterCard is different than Discover. A lot of times you just have to rely on the average rate over a billing period.”
Read the fine print. Any credit card processor worth working with will tell you its rates clearly, simply, and up front. There’s no reason to pay hidden fees, so don’t do it. Watch out for leased equipment (it’s usually not worth it) and multiyear contracts too. Many processors have no monthly fees and no commitments, so there’s no reason to sign up for something you’re not sure you really want or need.
Track your costs every six months. Don’t pay more when you could be paying less. Calculate the percent of sales you’re paying to your processors, then check the competition’s rates. If your sales are high, you might even be able to negotiate your rates with your current processor.