A Short Guide to Restaurant Credit Card Processing - Merchant Chimp

A Short Guide to Restaurant Credit Card Processing

July 31, 2020 / Posted in Credit Cards

Around 81 percent of transactions are cashless today. If you’re in the hospitality industry and thinking about improving your business, you should learn more about restaurant credit card processing. It will better establish your business, boost sales, improve cash flow, and eliminate the risk of getting bad checks while providing affordable and acceptable rates.

Dealing with paying card processing fees is usually very expensive for restaurant owners. It might feel like you pay another utility. If you’re experiencing the same, you should ensure that you’re not overpaying for plastic payment transactions.

Who doesn’t want lower expenses and a good effective rate for credit card processing? Learning about debit cards processing for restaurants can be very helpful in running your business.

What Restaurants Need to Start Accepting Credit Cards?

When introducing cashless payment in your eatery, you need to choose the right processor. He will handle your transactions and may request previous money transfer statements or perform a financial oversight if your small business is new.

The next step would be the purchasing compatible equipment – you can get it from your processor. If you own the equipment already, it might have to be reprogrammed.

Another requirement for the merchant is to provide bank account information. With it, your processor will be able to deposit the funds from your transactions. Also, this way, they will deduct paying fees.

Think About Hidden Fees When Choosing Credit Card Processor

The processor’s service might be expensive, and hidden costs are usually part of this problem. For a complete understanding of your money flow, the crucial step is to grasp how your processor estimates your rates. Before signing the contract, ask for detailed explanations about charges, pricing models, and everything else you don’t understand clearly. Also, always carefully read the proposed contract, especially fine print. Possible expenses, like early termination fee or batch header fee, are usually stashed in that part of the document.

Ways to Avoid Hidden Fees

There are three solutions to avoid hidden charges:

  • Analyze transaction charges and track the expenses. If there are hidden costs, it’s time to review your contract and links with the processor.
  • Look out for variable fees in your contract and find a processor with a fixed fee.
  • Don’t sign contracts that stipulate that the processor can increase your merchant rate whenever it wants. Make sure you sign the contract in which it is highlighted that your charges will not increase.

Merchant Account and Processing for Restaurants

Once the merchant account is opened, it’s time to find the right processor. You’ll undoubtedly find plenty of suitable solutions in the market. Keep in mind that you should choose between several processors that offer suitable conditions before selecting the supported POS system. That’s how you’ll avoid tying yourself with a specific processor, and you’ll get the best possible terms for the provided service.

Three Possible Pricing Models

Let’s have a glimpse into pricing models available to a merchant:

  • Tiered model is used for diner services within a specific price range. This pricing varies depending on the number of people that pay you with plastic. It becomes lower with the more guests you have. It’s often confused with volume pricing, so let’s make the difference: with tiered pricing, your products or services are sold in tiers. These tiers have to be filled before moving forward to the next tier. Volume pricing means selling your products or services in bulk.
  • A Flat rate is a form of tiered pricing, but it’s more straightforward. It offers a flat rate for transactions regardless of the type of plastic payment.
  • Interchange Plus (pass-through) might be the most complicated option, but the handling is quite simple: when transferring lower payments, you pay less, and a small markup. This markup rate is fixed, but the entire cost of the transaction depends on the card type.

Choose the Best Pricing Model for Your Restaurant

Depending on the type of dining place you run, you should look for the best pricing model with the most suitable rates and fees for your small business. Let’s see how does this work:

  • Fine dining spots with full service should look for interchange-plus pricing. Why? Because the bills are higher here and with this type of pricing, you’ll have a better negotiating position, a wide choice of POS systems, and payment processing equipment.
  • Bars and pubs should also look for interchange-plus pricing due to larger average checks. There are plenty of POS systems with advantages for bars, such as managing customer tabs, setting happy hour pricing, and providing drink recipes.
  • The quick-serve can opt for interchange-plus option (if the average transaction is larger than $10 and cards processing is higher than $5,000 per month) or flat rate (if checks and monthly plastic inflow are lower)
  • Bakeries and cafes should follow the same model as the quick-serve, meaning flat rate in case of lower cash inflow, or interchange plus pricing if sums are higher
  • Franchises usually do not have a choice when it comes to payment processing, and the franchisor decides about the specific POS system or processor. If you happen to have the option of flexibility, choose the one that suits you the best, like in any other type of dining establishment.

Most Processors Support Multiple POS Systems for Food Service Industry

We already said that you should be careful when choosing the right POS system and selecting your processor. Why does it matter?

When choosing your processor first, you have a competitive advantage. Put simply, you can compare different pricing from numerous different companies.

However, it’s good to know that there are universal POS systems (NCR Silver, for example) that allow you to choose the processor to your liking. But, many systems are associated with a limited number of processors, and you will be charged more due to a lack of competition.

Processor’s Help Through Restaurant POS Is Excellent Support for Merchant

All merchants are looking for the best solutions to help them be more efficient, make more money, have enough time, and create a better overall experience. With the best credit card processing and excellent POS system offer for your business, you can get plenty of excellent services, such as mitigating the risk of fraud, faster service, valuable analytics, and customer loyalty programs.

Payment and Restaurant Credit Card Processing – FAQ

Whether you’re opening a new restaurant or updating the current system in your eatery, there are always some unspoken tips that can make your working environment more efficient.

That’s why we’ve put together the FAQ to help each merchant overcome some doubts in their day-to-day management.

Can Restaurants Deduct Credit Card Fees from Servers’ Tips?

If you’re wondering whether it’s legal for employers to deduct credit card fees from tips, the simple answer is – it’s legal. Most states allow this, but the law of some others (California, Maine, and Massachusetts) expressly state that the customer should have the right to decide who receives the money.

How to Understand Processing Fee Deductions Better?

If your restaurant is located in the state where fee deduction is legal, you should know that you can only deduct the percentage of the fee relating to the tip, for example:

  • If the bill is $100 and the customer tips $20, the total is $120 (100 + 20)
  • If your restaurant pays 3% for plastic transfers, your total transaction cost is $3.60 according to the simple calculation 120 x 0.03 = $3.60
  • So, for the $20 tips, the handling charge is $0.60 (20 x 0.03) meaning you can only take off 60 cents from your worker’s tip


It never hurts to know how much you can save.

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