Ever hear an offer that’s suspiciously too good to be true? It’s pretty standard to hear a lot of enticing promises from payment processing companies, and they will tell you a lot of misleading information to get you to sign up for their services.

Navigating what’s a good deal is a challenge in an industry where merchants are kept in the dark about what they should be paying for processing services.

Large institutions and persuasive salespeople will throw out a lot of bad ideas that could cost your business a lot of money in the long run.

So how do you know what’s a lie and what’s true?

Don’t worry, we’ve got you covered. Today we’re going to cover three types of payment processing solutions a salesperson will try to hook you with, that is not as good of a deal as they promise.

Pin debit rates

Often in a conversation about payment processing, debit card rates tend to be lumped in together with the cost of your credit card processing rates. The main problem with this is your debit card processing rates should not cost as much as your credit card rates.

Ever since the Durnin Amendment passed, processing for debit cards has decreased in cost for a payment processing company to offer as a service. The interchange rates set by the credit card companies like Visa and MasterCard charge less for a debit card swiped then a swiped credit card. That means processing a customers debit card should cost less than a credit card, right?

The true is a lot of processors have not passed on that savings to their merchants, and will often charge a business the same price as credit cards rates.

When you’re communicating with a salesperson, be sure you ask them what their rates are for debit cards vs. credit card processing and see if their debit rates are lower. A fair processor should not be charging you the same rate for both card types, as it costs slightly less to process them.

Level 3 data processing costs

Lots of processors like to quote Level 3 data processing rates as an option for a small business, but the truth is a little more complicated than that.

If you didn’t know, Level 3 data processing is referring to the specific amount of information a credit card company (like Visa or MasterCard) is going to require to verify a secured transaction. It is considered the most secure type of transaction and therefore will be a lower percentage than a non-Level 3 data transaction.

Now a lot of companies like to tout how inexpensive the rate for a transaction that qualifies as Level 3 data processing and try and promise every transaction will be charged at that rate.

The fact of the matter is very few transactions will live up to the standard of Level 3 data processing. The additional fields include things like merchant name and address, invoice number and tax amount, plus line item details such as item description, quantity and unit of measure, freight amount, and commodity and product codes.

Now a lot of processors make it seem easy to capture all that information, but to that your credit card terminals need to support Level 3 data processing in order to qualify for that low rate. Standard credit card terminals do not support Level 3. Submitting Level 3 data requires the use of specialized payment software that is accessed via a secure website application.

If you don’t already have a credit card terminal that can capture that data and have it programmed by your processor you won’t qualify for any transaction to be Level 3 data. Even if your terminal supports it, not every transaction you process is going to qualify for Level 3 data processing.

Leasing credit card terminals

Leasing equipment is a valid option in some situations. Say you don’t have the cash upfront to afford a point-of-sale system, but you still need one to run your retail store and decide to rent month-to-month until you can buy one.

That can be an okay decision to make, but you should be worried if your credit card processor is trying to have you sign a year or three-year contract for a simple credit card terminal.


Well, mathematically, renting a credit card terminal is not a wise investment. Renting a terminal may be anywhere between $20 a month, vs. $50 a month per terminal. Now that may seem cheaper than buying some terminals upfront, but the cost of renting will escalate beyond the initial start-up cost of purchasing a terminal.

For example. $50 a month for one terminal is going to be $600 by the end of the year. A credit card terminal is only $200-$300. It’s going to be even worse the more terminals you have, and most of the time you’re in a lease for at least three years

Now, a processor might make the argument that you have to lease their equipment because their processing won’t work with any other terminal, but that’s not true. You can buy a credit card terminal online and have your processor reprogram it. In fact, some processors will give you a free terminal when signing up for processing with them, without signing a lease.

Sometimes the lease contract will auto renew if you don’t cancel it, and it’s pretty to easy to forget about a contract auto-renewing every year, and you can be sure the processor isn’t going to send you any reminder.

No matter how they try and pressure you, don’t make the mistake of overpaying for a credit card terminal through a long-term leasing program.

Not sure if you’re paying a fair processing rate?

Whenever you’re finding the right option for payment processing, keep the above things in mind and be aware of what the person is promising.

If you’re unsure if you’re getting the best possible rate? Feel free to contact us and see if you’re overpaying for credit card processing.