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Buying Payments

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Prerequisites

Before selecting a processor, understand:

TL;DR
  • Overpaying is the default: 30-50 basis points separate a good deal from a bad one, costing $1,500-$2,500/year on $500k volume
  • All-in cost is the only real number: a clean 2.5% all-in beats a quoted 2.2% plus seven junk fees
  • Volume dictates your stack: under $100k/mo use aggregators, $100k-$1M/mo negotiate direct, over $1M/mo require custom pricing and token portability
  • Contract terms beat pricing: early termination fees, reserves, and auto-renewals cost more than basis points
  • If you're paying over 2.9% all-in above $50k/mo, pull 3 months of statements and get one competitive bid

Most SMBs overpay for payments because they don't know what questions to ask. The difference between a good processor deal and a bad one is 30-50 basis points. On $500k/year, that's $1,500-$2,500 walking out the door.

What Matters​

  1. All-in cost, not quoted rate. The rate they advertise is not the rate you pay.
  2. Contract terms, not just pricing. Early termination fees, reserves, and auto-renewals hurt more than basis points.
  3. Volume-appropriate stack. What works at $20k/mo is wrong at $200k/mo.
  4. Exit strategy. Can you leave with your tokens? If not, you're locked in.
  5. Support quality. When money stops moving, response time matters.

Buying Payments Topics​

Recommended Reading Order

If you're choosing a processor for the first time, read these in order:

  1. Selection - How to evaluate and choose a processor
  2. Contracts - What to look for (and watch out for) in processor agreements
  3. Underwriting - What processors check and how to get approved
  4. Integration - Technical setup options and PCI scope
🏢
Processor Profiles
Stripe vs Square vs PayPal vs Adyen - when to use which one
🎯
Processor Selection
The 3-bid method, volume-based recommendations, PayFac vs direct
📝
Contracts
Fee breakdown, contract gotchas, negotiation tactics
🔍
Underwriting
Approval process, documents needed, limits, and ongoing monitoring
🔧
Integration & Exit
API vs hosted, token portability, card-present, Level 2/3

Quick Reference: Volume Recommendations​

VolumeRecommendationFocus
Under $100k/moUse aggregators (Stripe, Square)Simplicity over optimization
$100k-$1M/moShop for rates, consider directNegotiate reserves and terms
Over $1M/moCustom pricing, redundancyToken portability required

Quick Reference: Legitimate vs Junk Fees​

LegitimateJunk (Negotiate Away)
Interchange (1.5-3.5%)PCI compliance fee
Network assessments (0.13-0.15%)Batch fee
Processor markup (0.1-0.5%)Statement fee
Annual fee
Minimum monthly fee

Reality check: A processor with a clean 2.5% all-in is often cheaper than one quoting 2.2% plus seven line-item fees.

The $50k/mo Exit Test​

Every 6 months, ask yourself:

  1. What's my all-in effective rate?
  2. Is my current processor still the best fit for my volume?
  3. Have I outgrown my current contract terms?
  4. Could I leave if I wanted to? (Token portability)

If you're paying more than 2.9% all-in above $50k/mo, you're likely overpaying.

Test to Run​

2-week exercise:

  1. Pull your last 3 months of statements
  2. Calculate your true all-in rate: (Total fees / Total volume)
  3. Get one competitive bid
  4. Compare

Success criteria: You either confirm you're well-priced, or you find savings worth pursuing.

Next Steps​

Shopping for a processor?

  1. Use the 3-bid method → Get three competitive quotes
  2. Calculate your all-in effective rate → Compare apples to apples
  3. Review contract terms before pricing → Termination fees matter more than basis points

Already have a processor?

  1. Audit your current effective rate → Are you paying what you expected?
  2. Review your contract terms → When does it renew? ETF clause?
  3. Check processor management → Ongoing optimization

See Also​

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