Credit Card Processing: A U.S. News Guide

The ability of businesses to accept credit and debit card payments is almost a necessity, and this requires a credit card processing company. These companies allow your business to accept card payments by acting as an intermediary between your business and your customers’ credit card companies.

Finding the best processing solution for your business means considering costs as well as features such as security, sales volume, how you sell your goods and services, customer support, and third-party integrations. To help you find the best credit card processor for your business, we’ve compiled a list of the 10 Best Credit Card Processing Companies of 2021.

Best Credit Card Processing Companies of 2021

We've listed the top 10 credit card processing companies below. Follow the links in the companies' names to read our full reviews. You can also read more about Best Credit Card Processing Companies here.

#1 Payment Depot
#1 Fattmerchant
#1 Helcim
#4 Square
#5 Dharma Merchant Services
#6 Stripe
#6 PayPal
#8 Flagship Merchant Services
#9 Intuit QuickBooks Payments
#10 Shopify

Best Credit Card Processing Companies for Small Businesses

A small business has different needs than larger businesses. We’ve compiled a list of the best card processing companies for small businesses. If you want more information visit our page the Best Credit Card Processing Companies for Small Businesses.

#1 Payment Depot
#1 Fattmerchant
#1 Helcim
#4 Square
#5 Dharma Merchant Services

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What Is a Credit Card Processing Company?

Credit card processing companies serve merchants by facilitating credit and debit card payments. While the process happens in seconds on the surface, a lot is involved on the back end of a transaction. The processor acts as the go-between for the customer’s bank (where the payment comes from) and the merchant’s bank (where the payment ends up).

Merchants who wish to accept credit or debit card payments must partner with a credit card processing company. Processing companies can facilitate other forms of payment as well, such as Apple Pay, Google Pay, PayPal, ACH, and checks.

When choosing a credit card processing service, remember that there is no one-size-fits-all solution. It’s important to find one that matches your business needs, budget and goals. Some specialize in online payments while others focus on in-person transactions and point-of-sale (POS) systems, and still others provide an all-in-one solution for all types of sales.

Credit card processing companies may cater to specific types of businesses or merchants that process a certain level of volume.

What Are the Typical Credit Card Processing Fees?

Credit card processing fees can vary widely between processors, especially if they are using different pricing models. There are vast differences between transaction rates and monthly fees. However, there are some common elements that may factor into the processing fees that businesses ultimately will pay.

Interchange rate: This rate is the same no matter which processing company is used because it is charged by the card payment networks. When someone swipes a Visa, Mastercard, Discover, or American Express card, those networks will collect a fee. Interchange fees are typically a percentage of the transaction plus a flat rate and can differ depending on whether the customer is using a debit, credit, or business card, as well as whether the transaction is keyed in or swiped.

When comparing fees between credit card processing companies, you’ll really be evaluating fees that are on top of the interchange fees, because interchange fees are nonnegotiable.

Assessment fee: Like the interchange rate, the assessment fee is not something that you can change because it is related to the payment networks. This fee is usually paired with the interchange rate, and together they comprise the interchange fee.

Markup fee: You’ll want to look at this fee carefully when comparing credit card processing companies. It refers to how much you’ll pay to the actual processor per transaction on top of the interchange fees. These fees might seem small, but they can add up and cut into a company’s profits.

Flat fees: Some credit card processing companies may charge a monthly service fee to use their platform and software. In some cases, a higher monthly fee might end up being more cost-effective if it’s paired with lower transaction fees.

Credit card processing may come with other fees on top of any monthly services and transaction costs. These can include:

Pricing Models

Now that you have a sense of the various fees associated with payment processing, you’ll need a good understanding of the different pricing models that credit card processing companies might offer. Because every business is unique, it’s wise to evaluate how each pricing model might work for your particular business.

Flat-Rate Pricing

A flat-rate pricing model could be a good solution for businesses with low transaction volumes. You’ll pay the same fixed fee per transaction, including the interchange fees. This keeps things simple because you’ll always know how much each transaction will cost, but these per-transaction costs usually come out to be higher than in other pricing models. These types of credit card processors typically don’t charge a high monthly fee.

Credit card processors using flat-rate pricing include Square, PayPal, Stripe, and Shopify.

Cost-plus Pricing

Cost-plus pricing (also called interchange-plus pricing) is transparent in that you’ll see an itemized breakdown of your transaction fee. It will include the interchange rate and the processor’s markup or margin. It’s usually expressed as a percentage plus a fixed fee markup; just remember that it’s on top of the interchange.

There is also a hybrid type of pricing model in which some merchants require a monthly subscription fee but charge lower interchange-plus fees per transaction. The more transactions a company completes per month with this model, the more money it saves.

Credit card processors using cost-plus pricing include Intuit QuickBooks Payments, Fattmerchant, Helcim, Dharma Merchant Services, and Payment Depot.

Tiered Pricing

This is the most confusing of the pricing models. Each credit card transaction is classified as qualified, mid-qualified, or non-qualified, and the transaction fee is different for each. It can be difficult to figure out why some transactions are categorized in a particular way, and therefore transparency is lost.

How to Save Money on Credit Card Processing Fees

Working with outside vendors always requires some research and comparison shopping to find the best match for your budget. For credit card processing companies, it comes down to understanding the fees and pricing models being used, and how that might look when applied to your transaction totals.

“When you’re looking at the different processing options, you're looking at the processors' fees to try to find a break on,” says Brennon M. Wilson, volunteer with SCORE, a resource partner of the Small Business Association. He points out that interchange fees are nonnegotiable and standard across the board. It’s “abnormal to find a processor that’s charging more than 3% plus 30 cents,” says Wilson, who is also the chairman of the Canton, Ohio chapter of SCORE. “That’s a big red flag.”

Other key considerations, according to Wilson, include your monthly transaction volume and whether there are minimum fees. Your volume will dictate whether it makes sense to go with a flat-rate model with higher per-transaction costs or pay for a subscription-based one with lower transaction fees.

Depending on the credit card processor, sometimes you will have to do some number crunching. “Simple rates looks more consumable, like a flat rate. However, the more complicated rates are actually lower,” says Kevin Jones, president and chairman of the Electronic Transactions Association, a trade association for the payments industry, and CEO of Celero Commerce. That’s because there are multiple levels of interchange fees, and processors that lump them all together typically create a higher overall rate.

“I recommend having the potential processor do a pricing model,” says Jones. Flat rates could still be the best deal depending on volume. “For small merchants, be sure that any fixed monthly fees are carefully considered as part of the net rate,” he adds.

No matter what you end up paying your processor, it’s likely that accepting additional payment methods will have a positive impact on your business overall. “Statistically, people spend more and spend at places that accept such payments because of the convenience, rewards and trackability of spending,” Jones says. “From a convenience perspective and to encourage spending, having a nice variance of spending options is critical to business growth.”

How Does Credit Card Processing Work?

Credit card processing is a complex system whereby card data is routed back and forth behind the scenes while providing customers a seamless checkout experience. How it all happens involves many moving parts and complex back-end technology. Before we break down the process, you should first understand all of the parties involved:

The credit card processing journey begins when a customer decides to make a card payment to a merchant either in person or online.

Step 1: The merchant takes the cardholder’s payment information, either at an in-store card terminal or online.

Step 2: The credit card processor routes the customer’s card information to the credit card payment network. This requires an internet connection.

Step 3: The payment network sends the transaction data to the issuing bank to request authorization.

Step 4: Once the bank validates the payment information, it authorizes the transaction amount, and the authorization is sent back to the merchant via the payment processor. If there aren’t adequate funds or if there is a suspicion of fraud, the transaction will be denied.

Step 5: After the transaction is authorized, a hold is placed at the issuing bank for the amount.

Step 6: The merchant then must settle their batch of transactions, which is usually done once per business day. That function is facilitated by the payment processor and follows the same route as before: merchant to payment network to issuing bank, and then back.

Step 7: The issuing bank releases the funds to the acquiring bank.

Step 8: Funds are deposited into the merchant’s bank account, minus any interchange and processor fees.

In general, it takes less than a minute for a transaction to be authorized. Once transactions are settled, it takes an average of two business days for the payment to be deposited into the merchant’s bank account. Some processors offer same-day or next-day deposits, while some situations might require a longer payout time period.

How to Choose a Credit Card Processing Company

One of the first things you should decide when selecting a payment processing company is whether to choose a third-party processor or merchant account provider.

Third-party Processors

Sometimes called payment aggregators, third-party processors let merchants bypass setting up a merchant account. For smaller businesses with low transaction volumes, third-party processors like Square or PayPal may offer the simplicity and affordability they are seeking. Usually, you only pay third-party processing companies when you make a sale. Third parties take on the burden of PCI-DSS compliance, since transactions take place outside of your platform and network. The downside is that third-party processors are more inclined to put a hold on payments or even terminate accounts if businesses don’t follow the terms of service.

Merchant Account Providers

Merchant account providers tend to be a better fit for larger or growing businesses. They typically offer more options for customization and provide a more stable solution, and the entire transaction takes place within the merchant’s network. Fattmerchant, Helcim, and Dharma are examples of merchant account providers. Per-transaction costs are typically lower with this type of processor, and merchants have greater access to in-house customer service.

However, there is an underwriting process to be approved for a merchant account, which could be a roadblock for some businesses. “You need to look at your business’ credit health,” says Walt Levengood, vice president of business development at Nav, a business credit and financing education company. To be approved for a merchant account, you’ll need to fill out an application similar to those required for financing or credit.

Beyond the type of credit card processing company, it’s also important to think about your business goals. “Evaluate the types of transactions that your business takes (face-to-face, mobile, online), as many processors are specifically designed to serve a particular format,” says Levengood.

Once you have a good idea of where you stand and your needs, there are some other general attributes you should investigate for each credit card processing company. These include pricing transparency, customer service, features and integrations and PCI compliance.

Pricing Transparency

Working with a company that prioritizes transparent pricing and doesn’t tack on unexpected fees is crucial.

Getting access to all of the pricing options is just the start. You also need to figure out the right pricing model for your business needs.

“Cost is always going to be a part of this equation, but there is tremendous variance between the performance of different product sets in different verticals (or) environments,” says Jones. He recommends considering product bundles. “Having lines that move quickly, consistent and secure processing performance, and added benefits such as big data reporting and customer rewards can deliver a great customer experience and cultivate growth.”

Other than reviewing price listings on a credit card processing company’s website, compile a list of questions and gauge how forthcoming the company is in answering them, Wilson says. “Getting the chance to speak to that company is a very good note on them. You know going in that they will be transparent and honest and helpful,” he says.

Customer Service

Poor service and technical difficulties can cause you to lose business, so it’s important to choose a company that offers ample support. The last thing you want if you’re having trouble sending your batch of transactions through at the end of your business day is to not have someone get back to you in a timely manner, Wilson says.

The more complex your credit card processing needs are, the higher the level of service should be. Find out if the companies on your shortlist have an in-house technical help desk or if it’s outsourced. Is it available 24/7 or just during set business hours? Is there a comprehensive knowledge base online to help you figure out issues on your own? “Many issues can happen, and having an experienced, committed support team will minimize any pain,” Jones says.

Features and Integrations

Some processing companies offer a lot more than just processing. Merchants may have access to customer insights and data, inventory management, the ability to send invoices and bill for recurring payments, and more.

Some payment processors are better suited for either POS, mobile or e-commerce, while others offer omnichannel solutions. “It’s intelligent to package with one processor because there are cost advantages to doing so, but more importantly, consistency of the processing and reporting makes it a much cleaner partnership,” Jones says.

As for integration, Wilson says the main question is whether the credit card processing system talks to the other systems you’re going to be using. If you’re using other vendors for your POS system, accounting, or other business functions, such as customer relationship management, it’s helpful if your processor allows your transaction data to integrate with those platforms.

Finally, businesses should also consider a platform’s reliability. “At times, less sophisticated gateways can slow down transaction speed, which is a source of major frustration,” Jones says. He recommends doing an internet search for the software you’re considering to see what customers are saying. “You want to ensure that it has solid uptime and good connectivity speed to make sure your business runs efficiently,” he says.

PCI Compliance

PCI DSS is a set of security standards to which merchants are held to ensure that cardholder data is protected. There are different levels of PCI compliance.

For any business that accepts, transmits or stores cardholder information, it’s important to work with a processing partner that understands and can help you with PCI compliance. “The pace of payment services is moving at a tremendous clip, and organizations need to stay current with PCI DSS requirements and security solutions,” says Troy Leach, PCI Security Standards Council’s chief technology officer.

Statements by marketing and sales departments about PCI compliance might not tell the whole story, Leach warns. “The organization itself might be PCI compliant in that they protect payments on their processing channels, but not for their client’s channels,” he says. In other words, it’s important to confirm how they are protecting your payment data.

Businesses relying on a third-party processor have less of a PCI-compliance burden, but they still should look for some type of verification that they are staying compliant, according to Leach. “Ask how do they protect payment data and have they gone through their annual assessment?” he says. If you go with a merchant account service provider, ask if it offers assistance with the annual PCI DSS self-assessment that your business must perform.

Also verify if the card readers and POS terminals you’ll be using have point-to-point encryption, Leach says. In a retail environment, using devices that have high-end encryption allows the merchant to remove most PCI responsibility once the encrypted data is sent to the payment processor.

The PCI Security Standards Council’s website has free resources for businesses to help verify whether the software and hardware they are considering have been independently tested for protecting payments, as well as common questions to ask your provider.

How to Process Credit Card Payments Online

Payment Gateway vs. Credit Card Processing Company

These terms are often confused or used interchangeably, but they are two different things. Credit card processing companies are the facilitators of the transaction. They provide the equipment and platforms to accept payment.

A payment gateway transmits and authorizes online (or “card not present”) payments. It’s essentially the delivery mechanism that helps approve or deny an e-commerce transaction.

Put another way, a payment gateway authenticates a customer’s digital payment information. In-person transactions don’t need to use a payment gateway because a physical card is swiped or dipped at a POS terminal.

Some credit card processing companies offer their own payment gateway as part of their bundled services. Dealing with a single provider means that if you have any technical issues, you know exactly who to contact. There are also reliable third-party payment gateways that offer exceptional service; so as long as your payment processor uses a reliable partner, you should be covered. In some cases, using an outside payment gateway might incur an additional fee.

Credit Card Processing Companies

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Still looking for more information about credit card processing or trying to find the best credit card processing company for you? Explore the directory below to learn more.

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How U.S. News Evaluated Credit Card Processing Companies

We explain what matters most when it comes to credit card processing companies by sourcing opinions from business consumers, experts, and professional reviewers. Then we provide an unbiased evaluation of the credit card processing products. Our goal is to empower business consumers with the information and tools they need to make informed decisions. More information about our 360 Reviews methodology for evaluating credit card processing companies is here.