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Questions to Ask Credit Card Vendors

Answered by Pat Moran on October 14, 2013

Q:

Art Goudey, Compass Consulting asks:

When I get new clients who are just starting a business, they ask me what questions they should ask credit card processors or vendors to make sure they get the best rate and the system that is best for them. Since I'm not well-versed in that area, can you come up with some basic questions to ask the credit card vendors so my clients can make smart decisions about credit cards?

A:

Expert Pat Moran answers:

Pat Moran low res headshot

When deciding on a processor there are a few questions you should ask:

How long has the salesperson been selling merchant processing? You should be concerned if it is less than a year.

Who is the sponsor bank for their contracts and who does their processing? You want to make sure they are affiliated with well-known players. In addition, if the salesperson does not know the answer, they probably are not very qualified.

What are the terms of the contract? You should not accept anything longer than three years.
Are there early termination fees? These fees should be low – no more than $250.

What pricing model is offered? Do they surcharge transactions more than the interchange differential (a complex topic)? If the merchant does more than $1 million a year in volume, they should be on “interchange plus pricing.”

Do I get a relationship manager? How do they handle customer service?

Who installs the equipment? Do not lease equipment as it will increase your costs – a terminal should not cost more than $500 if it’s a standalone terminal.

Can they give you references for merchants in the area who process with them?

Are they are getting paid by the processor to make these deals? You should understand their incentives for promoting one processor over another.

Lastly, make sure you get these answers in writing to ensure accuracy and always feel free to ask for the contract to review with an attorney or trusted advisor.

Pat Moran»
Pat Moran is a payments executive and advisor with specific areas of expertise in payments economics, interchange management, merchant contracting, as well as product development and deployment. Mr. Moran is currently working with several private VC backed firms to help them develop their payments related business strategies including MineralTree a SMB payables solution provider. Mr. Moran conducts small business seminars on behalf of Master Your Card, a public education program sponsored by MasterCard that helps consumers, small businesses and governments get more from their money through the wise use of electronic payment technology.

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