It can be incredibly daunting to negotiate a credit card processing deal for your business. Negotiating likely isn’t a part of your everyday life, but sales representatives at merchant service providers do it every single day. You’re immediately put at a disadvantage when working out your deal, setting your confidence at a huge low.

It’s important to have a robust understanding of what you need, so sales agents don’t try to fit you into a deal that doesn’t have your business’s best interest in mind. There are several tips and procedures you can follow that can help maintain your confidence in settling your contract terms.

What Does Your Business Need?

Take inventory of what your business specifically necessitates, by analyzing either simple day-to-day transactions or other aspects.  Like your percentage of online vs in-person payments, top-used payment types, or any data that can help you eliminate potential features you don’t need, and specify the exact accommodations your business does need.

An overlooked aspect of choosing a processor is the need for security or liability. It’s important to understand your business’s risk level if you’re going to be accepted by the processor of your choice. You don’t want to settle on a service provider that won’t even accept businesses in your risk category.

Understanding these aspects in relation to what your business needs in a processor, is the first key step in a successful negotiation.

Compare Processors

Now that you know what to look for, the most productive thing you can do is compare your potential options. Possessing exact numbers on multiple processors’ fees and rates provides incredible support in securing your terms.

However, comparing these providers is not always as simple as choosing the affordable option. Consider the value the processor may provide; the extra money could be worth it if they feature accommodations or services vital to your business. You want to be able to pay the lowest rates all while retaining the essential services you need.

One common trap processors exploit is the promise of a rate review and renegotiation. In the process, they bait unsuspecting businesses by teasing the potential of lower fees and rates after a determined amount of time. Only ending up either stuck in the same deal as before or deceived by hidden fees that make any discount negligible.

You’re not looking for hypothetical deals in the future, your priority as a business should be securing the best possible deal right now.

Look Out For These Sales Tactics

Salesmen make money on commission, so whoever is negotiating your processing deal is going to be using every trick in the book to close the sale. Often, they’ll talk as if you’re already a client, excitedly inquiring about your future together to obscure non-ideal terms of the contract. If you start to feel intimated emotionally, take a step back from the conversation and refamiliarize yourself with your business’s credit card processing priorities.

The following are more salesman tactics to look out for when negotiating your deal.

• Cold calling during busy hours to catch you off guard

• Free hardware offers

• No obligation trial period

• Immediate cash offers if they’re unable to beat your rate

• Limited-time special deals

Request a Pricing Quote

It’s important to negotiate based on actual prices and not estimations. So, you’ll need to obtain your potential processors’ specific quotes and compare them. It’s not as simple as a one-to-one assessment, however, as processors don’t all offer the same pricing models. So, to choose between your options properly and accurately, you need to familiarize yourself with the different pricing models processors will offer. You’ll be able to determine which model is best for you, and which processor provides the best deal for said model.

THE PRICING MODELS

The cost of your merchant account is determined through a sum of rates you pay per transaction, plus an annual or monthly fee. This basic idea is modified into different schemes that can fit a multitude of businesses.

• Interchange Plus

Here, the markup and wholesale transaction costs are kept separate, providing you with a simple format you can compare with other providers, (Interchange + 0.2% + $0.34). Interchange is the required cut the issuing bank earns from the transaction.

• Tiered Pricing

The costs and fees are consolidated into one transaction rate with Tiered pricing, concealing what goes to the banks and credit card brands and what goes to the processor. This method is typically split between three different tiers, qualified (e.g., 4.8% + $0.25), mid-qualified (e.g., 4.9% + $0.35), and non-qualified (e.g., 5.0% + $0.45). You don’t know what tier transactions fall into until they occur, so budgeting your business can be very unpredictable when utilizing this method.

• Flat-Rate Pricing

Effectively tried pricing minus the tiers, flat-rate pricing plans will either offer just a percentage, (e.g., 1.6%) or a percentage plus a per-transaction fee (e.g., 1.4% + $0.20). While providing more insight and predictability in sales, it can turn out to be more expensive if you’re a high-volume business. However, some low-volume businesses can thrive with this model, especially if they aren’t charged a monthly processing fee.

• Subscription/Membership Pricing

This method substitutes processors’ percentage markup, with a more familiar monthly subscription fee, plus the flat per-transaction charge, (e.g., $70/month + interchange + $1.2 per transaction). This subscription method offers the transparency interchange plus also provides. However, it’s not suited well for low-volume businesses that aren’t used to such high monthly fees.

What you choose all depends on applying the knowledge you’ve gained about your business’s status financially.  From utilizing data on your total monthly volume to client payment preferences, all of this can be used to determine the pricing method that fits you.

Avoid Leasing Your Equipment- BUY IT

Processors might entice customers into a deal by offering leasable payment processing equipment, framing it as a great deal to integrate essential tech into your business. However, this ends up causing more harm than good, over-complicating something as simple as owning an essential piece of equipment. A provider is most likely not lending out the product themselves but is working with a leasing company that will throw unexpected costs and problems into the mix. These leases are also incredibly difficult to break, and overall, just end up being more expensive than simply buying the equipment yourself.

More tempting are the offers for free hardware, but often these contain the same hidden caveats that make taking the equipment not worth it at all. You’ll be stuck in a long-term contract with abnormally high rates. Or feverishly attempting to return the equipment at the end of the agreement to avoid expensive late fees.

Buying your own equipment avoids any of these potential traps, keeping your equipment under your control.  It also makes switching between different processors essentially seamless, avoiding the hassle of sending back your old equipment and waiting for the new model to arrive.

Month to Month Agreement Inquires

Providers thrive off their busy clients inadvertently missing their opportunity to renegotiate or leave their contract before auto-renewal, especially when their contracts are typically set on a three-year agreement.

Working on a month-to-month agreement allows for greater flexibility and overall, a heightened urgency on the out-of-sight aspects of your business. Being in a three-year contract is like working with blinders on, having a key focus on your main business operations while your payment provider is draining money from you behind the scenes. Working on a month-to-month contract allows you to constantly and efficiently assess if your processor is providing you exactly what you need.

Additionally, if you’re working in an industry with an unpredictable nature, month-to-month contracts provide the opportunity to react to any changes in your industry when need be. If from one month to the next you suddenly need to change processors, you can do so.

Compromise is the key takeaway in negotiating your credit card processing deal. Advocate for the accommodations and features you need, while understanding what a provider can realistically offer your business based on your research.

If you feel you’re ready to start negotiating, contact us at RevitPay. Were a merchant service provider that prioritizes your business needs above all else, to fit you with the best credit card processing deal possible.