When shopping around for member management software, doing your research and due diligence is important. But are you properly scrutinizing potential payment processors too? Member management and payment processing go hand-in-hand, so you should be equally particular about what company you select to handle your money. In a world where there’s an increasing number of payment processors both big and small, you’re likely to run into some questionable sales tactics. Some of the things you see and hear might seem shiny and appealing on the surface, but be wary of things that sound too good to be true. Below we’ve listed 4 payment processor red flags to look out for during your search.
Immediate approval
“Get approved instantly!” “Get up and running in less than 10 minutes!” These are the types of prompts you’ll frequently see from payment processors trying to hook you into doing business with them. At first glance, it seems like a no-brainer, right? You can start processing payments without waiting! So what’s the problem?
When a payment processor approves you immediately, it means they are avoiding an important step called underwriting. During underwriting, a payment processor gets to know your business, asking you questions to understand it better. This allows a processor to get a bigger picture view of your financial situation and future. While the underwriting process can take a little bit longer, it also means that the processor is putting full faith into you and your business. You’ll not only get your money faster, but you’ll also be far less likely to have money unexpectedly held and kept from you.
The opposite is true with payment processors who approve you instantly. No underwriting process means they don’t know you or your business. If they detect even the slightest sense of risk in a transaction, they will potentially hold your money for an undetermined length of time. And in some instances, they may even shut down your account. Do you really want to entrust your money with a company that doesn’t even bother to get to know you or understand your business goals?
Unbelievably low processing fees
Like the old adage says, if it sounds too good to be true, it probably is. This rings especially true when comparison shopping on the internet, and payment processing is no different. You might stumble onto companies that advertise payment processing rates that are FAR below competitors and feel compelled to jump on to take advantage.
But we would encourage you to dig deeper to get the actual story behind these advertised rates. While we could write a separate (and lengthy) blog post about processing fees and what goes into them, here’s a basic primer.
At the root of processing fees are interchange fees, which are included on every debit and credit card transaction in order to compensate issuing banks, pay for consumer rewards, and ensure anti-fraud measures. While the fee percentage is variable based on the type of card, type of transaction, how the payment is processed, etc., interchange fees are non-negotiable. They MUST be accounted for with every card transaction.
If you see payment processing rates under 2% being promoted, be wary. What is most likely being pitched is a tiered pricing structure. Those extremely low rates only apply to a select few types of transactions and certain types of cards. And if you do the majority of your processing with stored credit cards or recurring billings, you may never qualify for that lowest tier rate.
Don’t fall for a bait and switch – if you see a company with processing fees that are disproportionately lower than everyone else, there’s probably more to it than meets the eye. Ask questions to see what you’ll REALLY be paying, and determine what’s truly best for your business.
No fees listed at all
Transparency is key when it comes to money. At Kicksite, we’ve always been proud to have the most transparent pricing in the industry. You won’t find any hidden charges here – from our monthly software and website services costs to our payment processing fees, we are open and honest about what you can expect.
Unfortunately, there’s an increasing number of companies that take the opposite approach. There’s a complete lack of transparency and pricing isn’t easily accessible. They might force you to fill out a form or call them to get information instead of just having their fees listed out plain, simple and easy to find. But why? If they’ve got nothing to hide, then why are they hiding it?
Whether it’s software, payment processing, or another product entirely, we will always be proponents of being upfront and straightforward about finances. As customers, we would want a company to be honest and forthcoming about what we can expect to spend, so why shouldn’t businesses extend that courtesy?
Very little business information available
If you’re trying to avoid the big behemoth payment processors and instead checking out smaller companies, we totally get it! We’re big proponents of supporting small, local businesses – it’s one of the main reasons we’re proud to partner with our hometown company BASYS Processing.
But unfortunately, small and local doesn’t always equal trustworthy and established. When exploring these smaller payment processing businesses, make sure to do your research into their history and reputation. Some good places to start include:
- Better Business Bureau website
- Google reviews
- Review sites like Card Payment Options
- Local business journal/business news websites
- Glassdoor
While this practice can take some time, it will give you valuable perspective and insight into who these companies are. And if you are barely able to find any information at all? Well, it’s probably a solid sign that you should avoid that company. It once again boils down to trust – if you can’t find any third party confirmation of a payment processor’s trustworthiness or longevity, do you really want them handling your money?
Properly vetting who you partner with can save you a lot of future headaches. And knowing these payment processing red flags should empower you to make an educated decision on which businesses can make YOUR business better.
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