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Buying Payments

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Launching soon? Here's the short answer

If you're opening a new business or online store and just need to accept cards next month: sign up with an aggregator - Stripe or Square for most businesses, Shopify Payments if you're on Shopify. Expect to pay about 2.9% + 30¢ per online transaction (in-person runs lower, around 2.6-2.7% plus a few cents), with no monthly fee and no contract. At your starting volume, nobody will beat that enough to matter, and you can switch later once you have real numbers.

Then set it up right in your first week: Stripe first week · Square first week · Shopify first week

The rest of this section is for when you have volume worth negotiating over - roughly $50k/month and up.

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​

Just picked a processor?

  1. Stripe first week → Day-by-day setup checklist
  2. Square first week → Day-by-day setup checklist
  3. Shopify first week → Day-by-day setup checklist

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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