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The 4 Biggest Red Flags in Credit Card Processing

Updated Jul 10, 2023

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Every small business owner knows it’s important to avoid unnecessary expenses, but that’s often easier said than done. One area where you can limit these costs is in credit card processing, where many businesses often encounter unexpected charges for fees and equipment. When you’re choosing a credit card processor, make sure to look out for these common credit card sales traps.

Credit card processing sales traps to avoid

For the average small business owner, being aware of how credit card processors operate can save you a lot of money and prevent headaches down the road. Here are four credit card processing sales traps to avoid. 

1. They quote a ‘qualified’ rate.

Be careful with any processor that uses “qualified” rates, which suggest a pricing model called bundled, or tiered, pricing. 

This model can be extremely opaque. With tiered pricing, processors quote a very low rate. What they don’t tell you is that only some of your transactions qualify for that rate and that they’ll charge you more for everything else. The quoted rate often has an asterisk or a footnote that says it applies only to qualified transactions.

Another problem with “qualified” rates is that they can change at any time, for any reason. Processors don’t always disclose the criteria for qualified transactions when you sign up, and even if they did, they can change it later on a whim.

The good news is that your rate is often negotiable. Negotiating is one way to lower your credit card processing fees.

2. They’ll ‘match’ your rates.

Credit card processors sometimes dangle a tempting offer, usually a guarantee of matching your current rates or paying you $500 (or some other amount of money).

The processing company will claim that they can “beat” your rates. What they don’t mention is that they can quote you a lower number for one part of the processing cost but you won’t necessarily see any savings. In fact, some businesses end up paying much more when they switch based on “low rates.”

You could end up with more expensive processing, while the processing company doesn’t pay out the $500 because they “beat” your rates – not exactly a great deal. 

FYIDid you know

You typically pay two sets of fees for a credit card transaction – an an interchange fee and a processing fee. It is important to understand all of the credit card processing fees before you commit to a provider.

3. They suggest leasing equipment.

The problem with leasing equipment is that you are often locked into expensive contracts. Leases usually go through a third party and include a contract that’s separate from your credit card processing agreement. These contracts are often 48 months and ironclad. Some leasing companies aggressively pursue small businesses that try to end their lease or close their bank account.

Oftentimes, it is more expensive to lease a machine than to purchase it outright. Processing companies regularly claim that leasing is comparable to a cell phone plan or that it’s more tax efficient to lease than to own. While this may be true in the very short term, you will find that the math doesn’t work out over several years. 

4. They offer ‘free’ equipment.

When a processing company offers you “free” equipment, they’re making up for it somewhere, usually in the form of higher rates and credit card transaction fees for merchants. 

TipBottom line

Read the fine print and do the math to ensure you aren’t being taken for a ride. Popular equipment providers, such as Clover, don’t give away their hardware for free.

Why businesses need credit card processing services

A credit card processor acts as the middleman between your business and the customer’s credit card company. The process involves transferring funds from the cardholder’s account into your account whenever a customer uses a credit or debit card to make a purchase. 

According to the Federal Reserve Bank of San Francisco, 80% of Americans use cards for payment, and credit and debit cards account for 55% of all payments. With consumers increasingly going cashless, identifying the right credit card processor for your small business is more important than ever. 

The best credit card processing services

To save you time, we researched the best credit card processing services for small businesses. Here are a few examples of our top picks. 


Clover is widely used, with its proprietary point-of-sale (POS) software and hardware offered by many resellers within the payments industry. Clover doesn’t require a long-term contract; it charges a monthly fee instead. Although its hardware comes at a relatively high price, business owners who want a fully integrated POS system and credit card processor will find that and more with Clover. Learn more in our full review of Clover.


In addition to credit card processing, Helcim offers POS services, customer and inventory management, and employee tracking tools. Helcim also provides a wide range of tools for recurring payments, invoicing and subscriptions. The company has no monthly fees, and its interchange-plus rates are relatively low. Learn more in our comprehensive review of Helcim.

Merchant One

Merchant One offers a wide variety of pricing plans based on industry, business size and risk profile. Rates range from 0.29% to 1.99% for transactions, plus interchange rates and monthly or annual membership fees. The company also resells Clover hardware. Although a three-year contract is required, customers can exit the agreement by paying a termination fee. Learn more in our review of Merchant One.

Ellen Cunningham contributed to the writing and reporting in this article.

Mike Berner
Mike Berner
Staff Writer at
Mike Berner is a staff writer at and Business News Daily, where he specializes in finance topics including business loans, accounting, and credit card processing. Mike has a deep background in the financial world, having written hundreds of articles and blog posts on financial markets, business and investing. He holds a B.A. in economics and a B.B.A. in finance, both from the University of Massachusetts, Amherst. Prior to his writing career, he performed financial analysis and research as an economic analyst.
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