20 Essential Questions to Ask Before Choosing a Payment Processing Service

While choosing the right credit card processing company is an oft-overlooked decision, it is incredibly important for your bottom line. With the following questions to ask merchant credit card processors, you can determine what type of security they offer, customer support availability, and the overall fee structure.

Once you sign up with a merchant account provider, you will have to give them a portion of each transaction processed. With traditional businesses, processors often charge between 1.5% to 3.5% of the transaction amount. At high-risk providers, these fees typically vary between 1.95% to 2.4%. In some cases, they can be substantially higher.

Depending on your revenue, these fees can quickly add up. Out of every $1 million you earn at a traditional business, a processor can take between $15,000 and $35,000. Because of this, it’s essential to learn the best questions to ask credit card processing companies and learn how to reduce your overall processing costs.

TL;DR

• Processing fees can quickly add up, so remember the most important questions to ask payment processing services and keep your company’s costs down.
• While traditional processing fees are often between 1.5% to 3.5%, high-risk merchants often pay between 1.95% to 2.4%.
• For the best results, look for a provider that has experience working with your industry.
• Get all of the setup, interchange, currency exchange, and cancellation fees carefully listed in writing before you sign the contract.
• Check to see if your merchant account provider requires a rolling reserve. If they do, see how much is required and how many months the funds must be held in reserve.
• Find a provider that uses flexible underwriting, especially if you have had problems getting your account approved.
• See what the settlement speed and deposit timeline are so that you can accurately forecast your cash flow.
• If you can’t get approved with a traditional provider, reach out to a high-risk merchant account for help.

20 Essential Questions to Ask Before Choosing a Payment Processing Service

Finding the best payment processing provider can be challenging. To help you navigate this important decision, we’ve compiled a list of the top 20 questions to ask merchant credit card processors.

1. Which Industries Have You Worked With? Have You Worked With My Industry? 

When a payment processor has experience working in your industry, it makes the entire process easier. They understand the type of fraud protection, fee structure, and international support you need. Additionally, the credit card processor will know how to assess your unique risk profile.

2. Are There Specific Industries That You Consider High Risk?

Some payment processing services refuse to work with certain industries. Before you spend time and effort applying for a merchant account, review the credit card processing company’s list of restricted and prohibited businesses. If you have questions, you can always reach out to the payment processor for extra help.

3. What Type of Rates Do You Charge? 

Typically, merchant credit card processors charge interchange-plus or flat rates. With a flat rate, you pay a set amount for every transaction. Typically, this consists of a set fee and a percentage of the transaction. 

Meanwhile, interchange plus involves paying the interchange fees charged by companies like Visa and Mastercard. The “plus” amount is the fee charged by the processor. Often, the processor’s amount includes a flat rate and a percentage of the transaction.

While flat rates are more predictable, they are also less transparent. High-volume businesses generally end up paying less for interchange-plus pricing. In comparison, small businesses may prefer the higher price and increased convenience of flat-rate pricing.

4. Do You Require a Rolling Reserve? 

One of the most important questions to ask credit card processing companies is whether they require a rolling reserve. This typically happens with high-risk accounts where the account provider expects a higher proportion of refunds and chargebacks to happen. 

If the answer to this question is affirmative, you also need to ask how much the rolling reserve will be and how long it must last. In most cases, the rolling reserve is around 5% to 10% of the transaction total. Once the funds are withheld, they are held in reserve for 90 to 180 days.

5. Are There Any Cancellation Fees? 

While many long-term contracts charge cancellation or early termination fees, it’s important to be wary of these hidden costs. Make sure to get any termination costs in writing. Additionally, you may want to consider signing up for a month-to-month account, so you don’t have to worry about cancellation fees.

6. Do You Use Flexible or Credit-Based Underwriting?

Many traditional providers use credit-based underwriting. This means that the underwriting process revolves heavily around your credit score. If you have bad credit, your business might not be approved.

In comparison, high-risk merchant account providers use flexible underwriting. With this type of approach, the underwriter reviews your business history, overall industry risk, processing history, and other factors to determine if your company should have a merchant account or not.

7. What Types of Tools Do You Use To Prevent Chargebacks and Fraud?

From AI-driven fraud filters to address verification services (AVS), the best high-risk merchant service providers (MSPs) have advanced fraud detection and chargeback prevention tools. High-risk accounts are more likely to face these kinds of transactions, so these tools are especially important. Check to see if the provider offers the following security options.

• Chargeback alerts
• Automatic dispute management
• Advanced analytics
• AVS
• Velocity checks
• Fraud filters 
• 3D Secure 2.0
• Real-time risk scoring

8. Do You Offer Chargeback Alerts?

With a chargeback alert, you can potentially stop a chargeback from happening. Chargeback alerts are sent as soon as a chargeback request is sent. Before the chargeback request goes through, you have 24 to 48 hours to resolve the dispute or provide a refund. If you are in an industry that has frequent chargebacks, this type of tool can significantly reduce the amount you have to spend on them.

9. What Chargeback Ratio Will Automatically Trigger an Account Review or Termination? 

Chargebacks are an added expense for processors, which is why processors try to prevent them from happening. While each processor has different policies, most processors will automatically review your account if your chargeback ratio goes over 1%. If the chargeback ratio tops 2%, then most providers will terminate your account. 

10. Do You Charge Set-Up Fees?

Another one of the important questions to ask a payment processing service is if they charge set-up fees. These fees can be especially high if the merchant provides individualized reviews instead of using an aggregate model. In many cases, they can add up to around $100 to $500. 

However, you can lower your set-up fee by shopping around. In an effort to get more customers, many payment providers will waive set-up fees or offer special promotions.

11. Can You Process Payments in Multiple Currencies? 

If you are running a business that has international clients, your customers will likely want to pay in their own currency. Besides being able to process the currency, the provider must also ensure international compliance. There are many rules involved with cross-border transactions, so you need a reputable provider that understands major financial regulations. 

Additionally, you should ask about the type of foreign currency exchange fees you will have to pay. In many cases, these fees add up to around 1% to 3% over the mid-market rate. 

12. Does Your Payment Gateway Offer Easy Integrations?

Whether you use Shopify or WooCommerce, you need a payment gateway that easily integrates into the platform. Evaluate the APIs and integrations available before you apply for a merchant account. 

It’s also important to find a payment processor that integrates with other e-commerce platforms as well. You may want to switch platforms in the future, and the change will be much easier to accomplish if you don’t have to change payment processors at the same time.

13. What Is the Minimum Contract Length?

While many high-risk payment processors offer contracts that last for one or more years, you can also find payment processors that offer month-to-month contracts as well. Ideally, you should avoid any contract that requires a long term length as well as a high cancellation fee.

14. Do I Have To Meet a Transaction Quota Each Month? 

This is another one of the best questions to ask credit card processing companies. At some providers, there are transaction quotas in place. This means if you don’t earn a set amount, you’ll be charged for it. 

15. How Often Are Deposits Made Into My Bank Account?

To run your business, you need to know when money will arrive in your bank account. Depending on the provider, it can often take days or weeks for money to be deposited into your bank account. If you have a rolling reserve requirement, it can even take months for some of your earnings to appear. For consistent cash flow, you need to be aware of the deposit timeline.

16. Do You Use a Dedicated Account Manager?

When you run a business, you can’t afford to experience downtime. By working with a dedicated account manager, you can get fast, personalized help as soon as a problem appears. This dedicated account manager is responsible for overseeing your underwriting process and handling your chargeback response. Instead of chatting with a different customer service representative each time, you get tailored support.

17. What Do You Charge for Interchange, Chargeback, and International Fees? 

When writing down questions to ask a payment processing service, make sure to inquire about fees. Interchange, chargeback, and international fees are just a few of the most frequent charges. 

While chargeback fees are the cost charged after a customer reports fraud, faulty goods, or other problems to their financial institution, interchange fees are the costs that an issuing bank charges. Meanwhile, international fees are frequently charged if a non-U.S. card is used to pay for a transaction in the U.S.

Here are a few examples of common fees and what they look like in practice.

Fee	Description	Typical Cost	Why It’s Important
Rolling Reserve	The rolling reserve is the percentage of each transaction that is held to protect the payment processor.	5% to 10% of your transaction totals	This kind of fee is designed to protect the provider if there is a high chargeback rate.
Transaction Fee	This is the cost for each transaction you process.	2.9% + $0.30	Each time you swipe a card digitally or in real life, it hurts your profit margins.
Chargeback Fee	A chargeback fee is charged if a customer disputes one of their transactions.	$15 to $45	This fee increases payment processing costs for your business.
Cross-Border Fee	This charge is applied to international payments.	0.5% to 2%	Cross-border fees have a major revenue impact for international sellers.
Currency Conversion Fee	If the transaction’s currency must be converted, this fee is charged.	1% to 3% over the mid-market rate	International sales might help to grow your gross revenue, but currency conversion fees will limit your net revenue.

18. Do You Have Your Own Payment Gateway? Which Payment Gateways Do You Support?

Some providers operate their own payment gateway. For example, Corepay offers its own gateway. Other providers partner with payment gateways, such as Stripe and PayKings. If the provider doesn’t offer their own payment gateway, you need to make sure they have the integrations available so that you can use your existing gateway.

19. How Do You Manage Large Transaction Volumes? 

When transaction volumes spike, it can lead to fraud issues. Overwhelmed fraud prevention tools may not catch instances of fraud, leading to higher chargeback rates. 

Before you sign on with a specific provider, check to see if they offer load balancing and redundant gateways to help deal with large transaction volumes. You should also make sure their fraud prevention systems can automatically scale when transaction volumes suddenly change.

20. What Is Your Approval Process Like for High-Risk Merchants?

With low-risk accounts, payment providers often aggregate the risk across the entire pool. New accounts can join the pool automatically if they have a good enough credit score or meet other requirements.
High-risk merchant accounts involve more underwriting scrutiny, which is why the approval process takes longer. There may be additional documentation requirements or a longer investigation because the payment processor must consider a broader range of factors. Then, the processor uses this information to determine whether or not to offer credit.

Factors To Consider When Choosing a Payment Processing Provider

Finding a payment processing provider can be challenging. Besides looking for the right fee structure, you have to check their compliance support, high-risk account options, and customer support. To ensure a steady cash flow at your company, remember the following important factors.

• Flexible Contracts: Long-lasting contracts can lock you into expensive fees. High cancellation fees can make multi-year contracts especially onerous and costly to terminate. Look for contracts that have some flexibility or that offer month-to-month terms.
• Transparent Prices: You should never feel surprised by how much you pay your payment processor.
• Experience: Each industry is different, so it’s essential to find a provider that has experience working with your industry.
• Security: For the security of your revenue and your financial information, your provider should meet PCI DSS compliance standards and use data encryption.
• Settlement Speed: To maintain your company’s cash flow, you need to know what the settlement speed is and when you can expect your funds to arrive.
• Customer Support: When you have a problem, you can’t afford to wait for help. You need 24/7 customer support from your provider.

Why PayCompass Can Help With High-Risk Payment Processing Services

At PayCompass, we have years of experience in working with high-risk merchant accounts. We have processed more than $5 billion in transactions. Plus, our team of 600+ agents handles more than 6,000 customer accounts. 

Because of this, we understand what each industry needs to process payments quickly and safely. We carefully review each account individually, so you get the exact services and fee structure you need. Additionally, our advanced chargeback and fraud detection help you save money and avoid costly fees. 

Final Thoughts

By choosing the right payment processor, you can protect your company’s revenue and ensure a consistent cash flow. From researching integrations to finding the right chargeback prevention measures, there are a few common factors you should look for in a provider.

To help you get started, we’ve compiled some of the best questions to ask merchant credit card processors. By discussing rolling reserves, international fees, currency exchange fees, and rates, you can make sure your company is working with the right partner.

Learn more about choosing a payment processing service by reaching out to our team of professional account managers today.