How to Choose a Payment Processor: 7 Questions to Ask Before You Sign

What pricing model do you use, and what is my specific markup?

There are three main pricing models: interchange-plus, flat-rate, and tiered. Interchange-plus is the most transparent — the processor passes through the exact interchange rate and adds a disclosed, fixed markup. Ask for your markup in writing: "X% + $Y per transaction over interchange."

Avoid processors who give vague answers like "our rate is as low as 1.5%" without explaining what the floor applies to. That figure typically applies only to the cheapest debit transactions. Your effective rate — what you actually pay across all card types — will be higher.

What are the contract terms and early termination fee?

Merchant account contracts range from month-to-month to three-year agreements. Some auto-renew unless you cancel within a specific window — and missing that window can lock you in for another full term.

Early termination fees (ETFs) vary widely. A flat $300 fee is manageable. A "liquidated damages" clause — which charges the equivalent of your remaining monthly fees for every month left on the contract — can cost thousands.

How quickly do my deposits hit my bank account?

Standard funding is next business day for most retail (card-present) transactions. For card-not-present and e-commerce transactions, expect one to two business days. Some processors offer same-day funding for an additional fee.

Ask specifically about holds. Many processors place a hold on large transactions or new accounts — sometimes without notice — which can create serious cash flow problems. Find out the threshold and the hold duration before you sign.

Who do I call when something goes wrong — and how fast do they respond?

This is the question that separates processors. Most will say "24/7 support" and mean a call center with no knowledge of your account. Ask for the name of the person who will own your account. Ask for their direct phone number. Then call it before you sign.

A processor who assigns you a named representative — someone who knows your business type, your volume, and your history — is worth more than a slightly lower rate from a processor who routes you through a ticket system.

What equipment is included, and do I own it or lease it?

Never lease a terminal. Terminal leases are one of the most criticized practices in the industry — you typically pay more over the lease term than the equipment is worth, and you may owe lease payments even after you close your merchant account. A modern countertop terminal costs $150–$500 to purchase outright.

Ask whether any included equipment comes as part of a lease agreement or a purchase. Get it in writing. Also confirm your terminal is compatible with your POS software and supports tap-to-pay — contactless has become table stakes.

Do you have experience approving and supporting businesses in my industry?

Some business types — restaurants, healthcare providers, nonprofits, subscription services, businesses that have been declined before — benefit from a processor with specific experience in their category. Ask directly: "Have you approved businesses in [my industry]? What does the underwriting process typically look like for them?"

If you've been declined before, or if your business is in any way outside the norm, this question is especially important. A processor without high-risk experience will often decline first and ask questions later. One with relevant experience knows what documentation to pull together and which acquiring banks to approach.

What happens if I get a chargeback?

Ask three things: What is your chargeback fee? What is your chargeback threshold? And what tools do you provide to help me fight disputes?

Chargeback fees typically run $15–$35 per incident. The threshold before your account is flagged or reviewed is typically 1% of transactions in a given month. Above that level, you risk account suspension or placement on the MATCH list — which affects your ability to get a merchant account anywhere for five years.

A good processor proactively monitors your chargeback ratio, gives you access to a dispute management portal, and helps you build processes to prevent chargebacks in the first place — not just reacts after the damage is done.