Credit Card Processing Fees
It is important to consider the many different rates and common fees involved in credit card processing. If a processor offers you one flat rate you should look deeper into the actual contract to make sure that you fully understand what the processor is charging. Make sure that you have clear communication with your merchant account processor about fees and ongoing costs, such as those listed below.
Different Types of Fees
All of the following fees should be disclosed in writing at your request. Once you have a basic understanding of all the associated fees with credit card processing, you will have the knowledge necessary to obtain the best deal possible. Unfortunately, business owners often research only the difference in percentage rates. This is meaningless if the savings disappear in higher fees hidden elsewhere. Every account is different, and you need to speak with a knowledgeable sales person who can set your business up with the proper processing solution.
- Set up Fee: This is a one time fee for starting a merchant account. You should always avoid paying this amount if possible.
- Statement Fee: This is a fixed, monthly fee that virtually all processors charge for your monthly statement. This is a display of how much processing you did in the previous month. This is typically $10 per month.
- Transaction Fee: This is a fee that the merchant has to pay per transaction.
- Discount Rate: This is a flat percentage charged for every transaction.
- Pin Based Debit: This is a transaction in which the customer uses a debit card and enters in their PIN number. This functions essentially as an ATM transaction and the merchant pays a per item fee and PIN Network Fees for each transaction.
Different Ways to Process Credit Cards
There are several processing solutions, and it is important to pick the right one for your business. You can choose from the following:
- For most retail businesses, including stores, hotels, restaurants, etc. the most suitable option for credit card processing is a simple landline terminal. The traditional point of sale system is set up via phone line or IP. For face-to-face transactions, this is the best option for your business.
- For mobile businesses in which being tied to a storefront or landline is not an option, wireless solutions may be appropriate. The wireless terminal can process debit and credit cards wherever there is an available cell phone signal.
- For online transactions, you should consider Internet solutions. There are many different types of online gateways that will help your business begin accepting credit cards via the Internet. Through web access and a secure website, you will be able to manually process credit card transactions from orders received offline, issue credits, void transactions, and view your online list of transactions, from any internet connection in the world. Typically, the merchant processor will offer you several gateway solutions.
Lastly, you should consider the terms of agreement. Every merchant account provider is going to require some type of contract. This is going to be a very important factor in choosing a merchant account provider. You want to make sure you read the entire contract including all of the fine print to make sure you understand the entire offer.
Ask for the offer in writing. You need to have a copy of the agreement before you start a merchant account. If you speak to someone on the phone, ask them to email or fax you the application to make sure you have all the information.
Ask for a guarantee (in writing) that the processor will never raise your rates. Many processors will offer low rates in order to beat the competition, when in fact there are teaser rates that will go up in the future. The only way to avoid such a tactic, is to request a letter from the processor that they will never raise your agreed upon rates.
Make sure all of the rates are disclosed in the contract. Be very cautious when the rates are not listed, because you may run into some hidden fees.
Ask your sales representative to explain the contract. You want to make sure that you are dealing with an experienced representative or someone in a position of power within the organization, as this alone can save you money. Ask relevant questions to make sure they are helpful and can set your account up properly.
Keep all of these factors in mind and you’ll be ready to take your business to a whole new level!
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