Only a few years ago, business experts noted that companies that accept credit cards enjoyed higher transaction values than their competitors. Today, few consumers will even consider shopping at retailers that don't accept credit card payments. Meanwhile, companies that already accept credit cards can uncover opportunities to save money by working with specialized credit card processors.

Saving money on credit card processing not only puts profits back into company owners' pockets, it allows businesses to pass savings along to customers. Although many credit card processors make it easy for companies to accept credit cards, the pitfalls of choosing the wrong merchant account can include hefty fees and delayed deposits. According to financial experts, credit card processing companies distinguish themselves in seven key areas. Finding the right balance of features and costs is critical to finding the best deal on merchant accounts.

1. Opening Merchant Accounts with Banks or ISOs

Two different kinds of credit card processors allow business owners to accept credit card payments. Many companies choose to let their banks handle credit card payment processing. Banks often handle credit card processing as part of their overall commercial services, often extending preferred rates to long time merchant account holders. However, some banks reserve their credit card payment solutions only for large businesses. Other banks offer limited access to online payment gateways.

On the other hand, independent service organizations serve companies that fit specific business profiles or that belong to membership organizations. ISOs include smaller credit card processors, as well as credit card payment processing offered through warehouse clubs and professional associations. Securing a merchant account through an ISO allows business owners to change banks without setting up new credit card processing systems. Industry experts advise business owners to compare rates from both banks and independent service organizations before choosing a credit card processor for your business.

2. Credit Card Processors Offer varied fee structures 

Understanding credit card processing fees can confuse first-time merchants. Industry experts advise business owners to ask prospective credit card processors for written documents that break down each of these charges:

• Application Fee:This one-time fee covers the cost for a merchant account provider to run credit and background checks on a business. Applicants are liable for these non-refundable fees, regardless of whether an account is opened.
• Annual Contract Fee: Many banks and ISOs charge an annual fee to cover account security and interchange agreements.
• Servicing Fee: Also referred to as a "statement fee," credit card processing services use these charges to cover the costs of issuing statements and maintaining online transaction monitoring.
• Transaction Fee: Merchant account customers pay a flat fee for every transaction crossing a provider's network. Transaction fees apply for refunds and for declined authorizations, as well as for approved purchases.
• Discount Rate: In some ways, a company's merchant account acts as a reseller to the purchaser. Like any good wholesaler, the bank or ISO holds back a percentage of the sale for themselves. Depending on a company's volume, risk factors, or negotiation skills, this rate can range from 2 percent to 8 percent.

Some credit card payment companies  tout small monthly fees, but require larger transaction fees or higher discount rates. Business owners with established sales statistics can reliably project the monthly costs of competing merchant account providers. Entrepreneurs may have to make educated guesses about the right deal for new ventures that don't yet know their average sales ticket amount or the number of transactions they intend to process each month.

Some industries require special consideration from credit card processing services because of their unique challenges. For instance, storefront retail merchants tend to enjoy lower discount rates because cashiers can physically inspect customers' credit cards. Restaurants require specialized merchant payment solutions that can ac accommodate tips and business meal accounting. Web sites require Internet payment gateways with automatic risk profiling and other fraud prevention measures.

Unfortunately, many novice business owners seek out generic credit card processing services that don't always take the unique needs of their industries into account. Often, business owners find themselves declined for new merchant accounts by banks or ISOs that can't accommodate their risk profiles. Researching a prospective merchant account provider's industry specialties before submitting an application can result in lower pricing and faster setup.

3. Settlement Methods distinguish Credit Card Processing Systems

When evaluating credit card processing options, many business owners overlook the impact of their vendors' settlement processes. Banks and ISOs use the term "settlement" to describe the process of getting funds from a merchant account into the checking account of a business. In some cases, a settlement process that improves cash flow for a company can even justify slightly higher fees. Financial experts advise business owners to review three key areas:

• Speed of Settlement: Some merchant account providers charge higher fees in exchange for next business day settlement of credit card payments. Meanwhile, other discount merchant accounts bundle settlement deposits into weekly or monthly payments.
• Fee Deduction Process: Some credit card processing companies batch all settlements and service fees into large deposits. Other companies debit fees and deposit credits on a line-by-line basis. Companies should choose the system that best fits their accounting methods and cash flow needs.
• Chargeback Holds: Depending on the risk factor of a business, a merchant account provider may elect to withhold an additional percentage of settlement batches as a safeguard against chargebacks.

4. Equipment Requirements Vary based on Credit Card Processors

Beyond the cost of the merchant account itself, businesses must also invest in point of sale hardware before they can accept credit cards. Some companies prefer to lease a merchant terminal to take advantage of potential tax savings and to reduce the risk of replacement or repair costs. Other business owners prefer to purchase a terminal, usually for a few hundred dollars. In addition, many cash registers and other point of sale systems now include integrated hardware that can swipe credit cards, eliminating the need for external terminals.

Some credit card processing companies require their clients to use their own preferred hardware. Other vendors allow clients to provide their own equipment. Each option can impact overall discount rates and monthly fees. Connecting third party equipment sometimes injects more risk into the merchant relationship, increasing discount rates and chargeback holds. Leases may also increase a company's monthly outlay for credit card processing, but bundled monthly fees could benefit high volume users.

5. Payment Gateway Services Handle Online Sales

To accept credit cards online, companies must connect their merchant accounts to an electronic payment gateway. This secure tunnel between Web server and credit card processing center reduces the risk of fraud and shortens settlement times. Dozens of payment gateway services compete for business from e-merchants.

Some credit card merchant services bundle their offering with a specific electronic payment gateway, which can limit a company's selection of software and third-party services. Other credit card processing providers offer a range of payment gateway services, often requiring additional setup and installation charges.