Payment processing is sold the way gym memberships are sold: an attractive headline number, a long contract, and fees that appear later. The good news is that the industry is competitive and switching is normal. The bad news is what people sign on the way in.
📐 The three pricing models
Every offer you receive is one of these, whatever it is called:
| Model | How it works | Good for | Watch out for |
| Flat rate | One published percentage for everything, sometimes plus a fixed amount per sale | Low volume, and anyone who values a predictable number over the lowest number | You subsidise cheap debit transactions to get simplicity |
| Interchange plus | Interchange at cost, plus a stated markup you can see | Most established restaurants. The only model you can actually audit | A statement that takes ten minutes to read the first time |
| Tiered | Sales sorted into qualified, mid-qualified and non-qualified buckets | Almost nobody | They decide which bucket each sale lands in. The headline rate applies to few of them |
If you are being quoted tiers, ask for the same offer as interchange plus. If they will not, that is the answer to a different question.
🪤 The clauses that cost people money
Read these before you sign anything, and reread them at renewal:
- The equipment lease. The single most expensive mistake in this industry. It is often a separate contract with a different company, non-cancellable, and it survives you leaving the processor. Buy the terminal, or rent it month to month from the processor itself. Never sign a multi-year lease for a card reader.
- The term and the early termination fee. Three years with a penalty is common. One year, or month to month, is available if you ask.
- Rate creep. Many contracts allow the markup to rise with notice on your statement, which nobody reads. Diary a rate check every six months.
- The PCI fee, and the PCI non-compliance fee. The second one is charged monthly until you complete a questionnaire that takes an afternoon. See topic 5.
- Monthly minimums, statement fees, batch fees, "regulatory" fees. Individually small, collectively a percentage point.
- A reserve or holdback. Legitimate for some businesses, but you should know before, not when a deposit is short.
- Who owns the terminal, and does it work anywhere else? Some equipment is locked to one processor, which quietly makes leaving expensive.
🎯 How to run the search
Half a day of work, once every two or three years:
- Know your number first. The effective rate from topic 1. Without it you cannot tell an improvement from a story.
- Get three quotes on your own statements. Include your current processor — the cheapest win available is often a call asking them to match.
- Ask everything in writing. Term, termination fee, all monthly fees, whether hardware is bought or leased, and what happens to your rate after twelve months.
- Check it works with your POS. From the previous course: if your POS ties you to its processor, you may have no decision to make here. Find out before you shop, not after.
- Ask about support and deposits. Who answers on a Saturday, and how fast the money lands. Topic 3 is about the second one.
Then, if you switch, do it on a slow week, keep the old terminal until the first deposit from the new one has landed, and confirm in writing that the old account is closed. An account you think you cancelled can keep charging monthly fees for a year.
🚩 The sales tactics worth recognizing
- "Free terminal." Free with a lease, or with a higher rate, or with a longer term. Ask which.
- The rate that is not the rate. A headline figure that applies only to qualified debit; your real cost is the effective rate.
- The statement audit. A useful exercise that is also a sales call. Take the analysis, verify it yourself.
- Signing today for a discount. A price that only exists for the next hour tells you what the relationship will be like.
- Someone calling to "update your account details". Verify independently, with a number you already have. This one comes back in topic 5.