When Selecting a Third Party Processor (TPP)
Compare Deals from Several Companies
- We recommend talking to at least three companies.
- Compare services, contract requirements, pricing and reputation.
- Select the company that represents the best deal for your business.
Decide What Services You Need
- Do you need credit, debit and EBT, or just EBT (SNAP and/or cash)?
- Some companies just provide EBT terminals, others provide EBT but only as an add-on to credit/debit card services.
- If you already have a credit/debit terminal, ask your current service provider if they can add EBT – that may be the best deal for you, but first make sure they really understand EBT operations. Do/will they:
- Support SNAP refunds?
- Understand the use of vouchers and have a process to clear them so you can get paid?
- Understand that EBT does not require Payment Card Industry (PCI) or EuroPay MasterCard VISA (EMV) compliance for terminals?
- Continue to support swiping cards to read data from the magnetic stripes?
- If you want to take credit/debit, it makes sense to use the same terminal for EBT – look for a full service provider.
- If you are only interested in accepting EBT, find out if they offer EBT-only services.
- Do you want to buy or lease equipment – if you buy you will still have to pay monthly fees for processing but it may be cheaper in the end. If you lease you may be in a better position to upgrade equipment if technology or security requirements change.
- Are you also a WIC-authorized vendor? Contact your WIC state agency regarding your current or future WIC EBT options.
Consider Contract Requirements and Services
- Length of contract – what is the minimum and maximum available – how does that affect pricing?
- Does the contract renew automatically?
- Are there penalties for early termination? If so, how much?
- How much advance notice is required for no-penalty termination?
- Who is responsible for equipment repair? You or the terminal provider?
- How are service fees paid?
- Direct debit from retailer’s bank account? Daily or monthly?
- Billed and pay by check?
- What, if any, insurance is required?
- Who pays for shipping fees to return or replace equipment?
- How soon is replacement equipment guaranteed to arrive?
- Does the company provide manual voucher forms for use during system outages and disasters? If so, what do they cost?
- Are any of the following important to you? If so ask.
- 24 X 7 customer assistance?
- Seasonal downtime – is there a reduced cost for out of season periods?
Consider Cost
Find out about all costs – some companies charge extra for certain services
- Up front and other one-time fees
For cost comparison purposes these should be averaged over the life of the proposed contract; we recommend using three years for month to month contracts
- Equipment purchase
- Application processing fee
- Initial set-up or activation fee
- Transaction fees
Most companies charge a fee for every transaction.
- Credit and debit card fees are the most expensive because the card issuers pass interchange fees back to the merchant
- EBT cards, by law, have no interchange fees and, therefore, should be much lower in cost
- Many companies offer tiered pricing – the more transactions you do, the lower the cost, for example, 15 cents for first 100 transactions, 13 cents for next 400, 10 cents for anything over 500
- Some companies do not charge EBT transaction fees but have a higher monthly rate, or require that you accept credit/debit instead
- Monthly fees
These may be combined into a single monthly fee or may be charged separately; make sure you identify the cost of each:
- Equipment lease
- Equipment maintenance
- Processing costs
- Direct deposit fees
- Monthly statement
- Customer service and technical support
- Online access to transaction data
- Other ongoing fees
Processors are not required to pass these costs onto merchants but some do; ask if these are charged
- PCI compliance fee – applies only to credit/debit and should not be charged for EBT-only terminals
- IRS reporting
- Other “hidden” fees
Compare Pricing from Different Companies
The following example applies only to EBT expenses. Commercial (non-SNAP) credit and debit card transactions also include interchange fees, which represent a percentage of the total amount charged by the customer. Those would also have to be factored in to get an accurate value.
- Determine your average monthly transaction numbers (based on past experience or estimates)
- Multiply that estimate by the transaction fee or tiered fees, e.g. using the earlier example and estimate of 650 transactions per month
- 100 transactions at 15 cents each - $15.00
- 400 transactions at 13 cents each - $52.00
- 150 transactions at 10 cents each - $15.00
- Itemize all monthly charges, e.g.:
- equipment lease and maintenance - $12.00
- processing, customer service, and direct deposit - $15.00
- monthly statement - $2.00
- Average out monthly value of all other charges, e.g.:
- set-up fee ($120 for 24 month contract) - $5.00
- annual PCI fee ($30 per year) - $2.50
- Add up total monthly cost - $118.50
- Repeat for each terminal provider and compare
Consider Company Performance and Reputation
This is often difficult to judge and requires some research on your part. Here are a number of websites that can be used – click on the link and enter the company’s name in the search box.
- Online reviews and ratings of terminal providers taking into account sales and marketing tactics, contract terms, customer service, complaints, privacy of online information and other factors:
- Consumer complaint sites (many such sites exist and can be found by online search – the following include complaints about terminal service providers):
Additional Considerations
- Do not believe any terminal provider that insists that EBT must be PCI- or EMV-compliant. These requirements only apply to commercial credit and debit, not EBT.
- Until you decide which company you want to contract with for EBT services, do not provide any of the following information:
- Your tax identification number (Employer Identification Number or Social Security Number)
- Your bank account number, including scans or photocopies of one of your checks
The above items will be required for the final contract, but you should only give them to a valid company representative who you recognize. Never provide them to unsolicited callers.
- Once you select a new terminal service provider and they install their new terminal, do not allow them to remove your existing equipment
- In most cases (unless you purchased the hardware yourself) this terminal belongs to your previous service provider
- You are still responsible for the return of the equipment to your previous provider as soon as you contract with a new company for EBT services
- Your contract with the previous provider may include financial penalties for failure to return the equipment
- They may automatically debit your account for the cost of the terminal if you do not return it to them