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10 Questions to Ask Before Choosing a New Merchant Services Provider

Your merchant services provider affects a host of things, from cash flow and customer service to the fees you pay on every credit and debit card transaction. Learn more about this important decision.

Most small businesses today accept credit and debit cards; a business that didn’t take plastic probably wouldn't last long. And certain types of businesses, like online and mail order/telephone order businesses, must accept credit and debit cards in order to get paid.


Choosing the right merchant services provider is critical for any small businesses. But contrary to what some business owners think, all merchant services providers are not the same.


“Different providers offer different levels of service, pricing structures, and technology and equipment options,” says Cadence Bank Personal Banker Jonathan Santos. “So it’s important to do your homework and choose a merchant services provider that’s a good fit for your small business.”


Santos recommends that small business owners ask potential new merchant services providers a number of questions before deciding which provider to use. Here are his top 10 questions to ask before choosing a new merchant services provider for your small business:


1. How are your equipment costs structured?


According to Santos, point-of-sale (POS) terminals and other equipment can usually be purchased or leased. “There are pros and cons to each option,” he says.


One of the biggest factors in your decision should be how much flexibility you need. “Leasing generally provides more flexibility for changing and upgrading equipment later if this is necessary,” says Santos. A good example is when POS terminals needed to be upgraded in 2015 to accommodate the new EMV chip cards.


2. What are your processing costs?


Pricing for merchant card processing can be complex, with lots of moving parts. “Make sure you understand the pricing models of the different merchant services providers you talk to,” says Santos.


The two main pricing models for merchant card processing are tiered pricing and interchange-plus pricing. Many different variables exist within each of these models. For example, there are often different rates for different card types, which in turn are driven by fees charged by the card associations.

3. Are there any other costs or fees?


Santos says there is a wide range of different miscellaneous fees that merchant services providers may charge. “These may include statement, compliance monitoring and refund processing fees, for example,” he says. “So be sure to ask about this.”


4. What kind of contract is required?


All providers will require that you sign a contract for merchant services. Some of the key variables you should ask about are the contract length and the penalties for early termination.


In general, the longer the contract, the better the pricing will be. But Santos says that some small businesses might prefer a shorter-term contact so they have more flexibility, particularly if the early termination penalties are substantial. “This is especially true if yours is a relatively new business,” he says.


5. What kind of reporting and statements are offered?


This also varies considerably from one merchant services provider to the next. “For example, you should ask about a provider’s online platform, as well as what reports you’ll have access to and what kind of information is contained in monthly statements,” says Santos.


6. Is all of your equipment PCI DSS-compliant?


PCI DSS stands for the Payment Card Industry Data Security Standard, which establishes basic security procedures for credit and debit card processing to safeguard customer payment information. If your business processes, stores or transmits credit and debit card information, you must demonstrate that you do so in a way that meets the PCI DSS security requirements.


“You depend on your merchant services provider to help ensure that you remain PCI DSS-compliant,” says Santos. “Be especially vigilant with smaller independent sales organizations or ISOs — make sure you ask them about this.”

7. Do you provide next-day funding?


This question is important because the answer could have a big impact on your cash flow. Some merchant services providers offer next-day funding while others don’t fund merchant accounts for two or three days. “So you might not see cash in your business account until Thursday or Friday for sales made on Tuesday,” Santos explains. 


To learn more about boosting cash flow, download our free ebook, "A Guide to Strengthening Cash Flow for Small Business Owners."

8. What kind of customer support do you offer?


This is another critical factor, because you need to be able to reach customer support when you have questions or if you encounter difficulties with processing or with your equipment.


For example, is live human customer support available or will you have to get email support or use online chat? And is support available 24/7 or just between 9 and 5? “If you own a restaurant, you might need to reach customer support outside of normal business hours,” Santos notes.


9. Is your equipment compatible with my existing system?

Ideally, the equipment offered by your merchant services provider will work with your online shopping cart and other payment system components. “If it doesn’t, you may have to spend time and money trying to make the systems compatible, or maybe even revamp your existing system altogether,” says Santos.


10. Can you adapt to my business’ changing needs?

Finally, it’s critical that your merchant services provider be able to offer technology and equipment that grows along with your business. “Your provider needs to remain on the cutting edge of merchant services technology when it comes to the latest equipment and processing,” says Santos.


Cadence Bank offers merchant services by working with TSYS,one of the nation's leading card payment processors. Together, we offer small business owners a wide selection of secure and dependable web-based processing.


You can also request more information about our small business banking products and services.


This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.

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