How to Choose a Merchant Processor


This is not a sexy article, but reading it could have a noticeable impact on your bottom line in 2017. Changing your credit card/merchant processor could save you hundreds — or maybe even thousands — of extra dollars each month. Got your attention? It got mine.

What is merchant processing? Well, it’s the processing or settling or accepting of credit card transactions, like recurring monthly memberships or one-time protein powder purchases or even personal training sales. It’s you trying to get paid electronically by collecting funds from the bank that issued your member’s credit card and sending payment to your bank. There are a lot of details which determine the price you pay to have this process completed for you, and I’ll try to explain three of the most common programs, as well as some other key points to consider.

First and foremost, make sure you’re in what’s called a Cost/Interchange Plus Pricing program, rather than a Tiered/Category Pricing or Blended Pricing structure. The Tiered/Category Pricing structure is the most common because it’s the easiest to understand, but it’s the least transparent and secretly charges you more. It typically processes rates in three to five categories, like qualified, mid-qualified and non-qualified. These criteria include things like “card-present” versus “card-not-present” transactions, depending on whether the transaction was processed on the same day it occurred, and whether the transaction falls into a category like one-time retail or recurring monthly membership charge. This simplicity sounds great until you realize that most of your transactions aren’t qualified and will process at a rate much higher than originally promised to you.

MINDBODY, a popular member management system, appears to use a Tiered/Category Pricing model through a set of approved vendors. That’s good and bad news. Bad because the Tiered/Category structure is an expensive model for you as an owner, but it’s good that you can shop around and look for your best rates.

In Cost/Interchange Plus, you have a markup over whatever the interchange rate is for that particular credit card. Rates are usually shown as the interchange rate plus a markup, which can be a percentage, a flat per-transaction fee or both. So, a retail transaction might cost 0.18 percent plus $0.08 per transaction.

This is a more transparent model, but it can be confusing because of the different rates. For example, there are two different interchange rates on debit cards, depending on the size of the bank that issued the card. If the bank has $10 billion or more in assets, it falls into “regulated debit,” meaning its interchange rate is 0.05 percent. If the bank has less than $10 billion in assets, it falls into “unregulated debit,” and that interchange rate is around 0.75 percent.

The interchange rate on a card can also vary based on whether it’s swiped or key-entered. Rates are risk-based and if a card is swiped, it’s considered a face-to-face transaction where the customer theoretically signs a copy of the receipt and you verify the ID and signature at the time of transaction. If a transaction is key-entered, it’s typically a non-face-to-face transaction where you’re not obtaining a signature, which makes the transaction riskier to the processor, so it uses a higher rate. See how confusing it can be? But, it’s easily the best one for saving you money.

Wodify, another popular member management system, uses a Cost/Interchange Plus model, but at rates much higher than typical. They also don’t seem to allow you to change providers, meaning you must stick with the higher rates arranged through their processor, GoEmerchant. I can’t confirm this, as we’re not a Wodify gym, but I’d imagine you can speak to a contact at GoEmerchant and negotiate some better rates for yourself.

Square is a mobile-friendly credit card swipe system used in many small businesses, like restaurants, but hopefully not in Boxes because it uses a model called Blended Pricing, similar to Tiered/Category Pricing, but worse. In this model, the tiers are blended together into a single rate, meaning you pay a higher overall rate for the wide majority of your transactions. This model is only worth considering because it doesn’t include a base monthly fee, so if you have very few monthly transactions, your total monthly bill could be reasonably low. But, if you’re processing a hundred transactions each month, then Square is not the way to go.

A few other things to consider are:

  1. Customer Support: Most merchant service companies are eliminating local reps and handling customer service over the phone via call centers. Make sure you sign with a company that has local rep in addition to 24/7 customer support.
  1. Contracts/Equipment Leases: Eighty to 90 percent of companies will require you to sign an initial contract that varies from two to four years with an early termination penalty anywhere from $200 to $500. They’ll conveniently skip over the fact that there’s a cancellation policy by telling you that you can terminate your contract at any time. Don’t be fooled. In addition to processing contracts, many companies are now having merchants lease their terminal/equipment rather than purchase it. The lease term is 48 months and a typical lease payment is $40 to $80 per month, meaning you pay for the equipment 10 times over and still don’t own it. Plus in today’s age, you don’t need special equipment; you just need a processor to interface with your member management software via the “interwebz.” If forced to use equipment, make sure you purchase it outright upfront.
  1. Security: Many popular mobile options on the market today are not PCI compliant, meaning you assume all liability for every transaction you run. If there’s ever a breach of credit card numbers, you’re personally responsible for repaying everyone who was ripped off, instead of the credit card processor.

Special thanks go to Don Massey, at BancCard, for his help with research for this article. He can be reached at with questions. BancCard has support staff in all 50 states, so Don can put you in contact with a local rep if you’re interested in learning more.

Slater Coe has been involved in CrossFit since 2008, and has watched as his own perspective on coaching has evolved due to a myriad of influences. He tries to make human movement understandable for all levels of athletes and believes mentality can have a great effect on performance. Coe is the head Coach at and a co-owner of Derby City CrossFit in Louisville, Kentucky.