Starting to accept credit cards at your business can be a challenging task. The Credit Card Processing Industry is highly competitive, with many companies offering a broad range of services it is important for any business considering Merchant Services to understand these important factors; Benefits, Equipment Costs, Rates, Types of Processing and Terms of the Agreement.
What is a merchant account?
A merchant account is an account that enables merchants to accept credit card payments. Any merchant who wants to take credit card orders must establish a merchant account. A merchant account is typically obtained through a credit card company. Keep in mind that banks are not merchant providers; they use third parties to set up merchant accounts. Once you are set up with a merchant account you will have the ability to accept all forms of payments including credit cards, debit cards and electronic checks.
1. A MERCHANT ACCOUNT WILL BENEFIT YOUR BUSINESS.
Boost Sales
Today, most transactions are executed with credit or debit cards. Modern consumers expect to be able to pay via credit
cards instead of cash. If you make it easy for your customers to pay they will appreciate it. Most businesses find an immediate
increase in sales after they start accepting credit cards.
Receive Immediate Payment
Rather than waiting for several weeks to receive payment, funds will be deposited directly into your account in a matter of days. Money goes directly into the checking account of your choice.
Reduce Staff Overhead
Receiving payment via credit card allows your business to forgo excessive time spent sending overdue notices and making phone calls to request payment.
Avoid Non-Payment
Many business owners are reluctant to pay a small percentage of profits to credit card processing companies, however, most find that the service quickly pays for itself in avoiding loss from non-payment.
Go Virtual
Global business has moved online. With the Internet, small and large businesses alike can have a global customer base. However, credit card processing is a requirement for effective ecommerce.
Auto Charge Your Clients
For customers or clients on a revolving payment schedule it is typically easier for them and for your business to simply auto charge their credit cards each cycle.
2. EQUIPMENT COSTS
Buy
The cost of equipment to process credit cards had decreased significantly in recent years. You want to choose a company that will sell you a credit card processing terminal for a reasonable cost that is under $500.
Training
You want to make sure that training of some form is included with your purchase. A quick introduction to using the advanced features of your terminal can help you get your money’s worth.
Keeping Up With Technology
You don’t want to get stuck with an out-dated machine, make sure the equipment is new and not an outdated, refurbished model. Technology is constantly changing and you want to keep up-to- date with the changes. You want to make sure the machine is compliant and can be used with the processor of your choice.
Lease
A lease payment will often cost you far more than purchasing your equipment outright. You could be paying more than the machine is worth and usually you have to enter into some sort of contract. Make sure to read the entire contract.
Hidden Fees
You should be especially aware of agreements that give the lease company authority to debit your account for additional fees for insurance at their discretion.
New Equipment
With a quality processor you will have the most up-to-date equipment and they will make sure that it is compliant with of the latest upgrades. This can save time and money in the long run.
3. RATES & COMMON FEES
There are many different rates to consider when you are talking about credit card processing. If a processor offers you one flat rate you should look deeper into the actual contract to make sure you fully understand what the processor is charging, as this is usually a way to confuse the merchant. Make sure you have clear communication with your merchant account processor about fees and ongoing costs. Some typical fees include the following.
Set up Fee:
A onetime fee for starting a merchant account. You should always avoid paying this amount if possible.
Statement Fee:
A fixed monthly fee that virtually all processors charge for your monthly statement – provided to show how much processing you did in the previous month. This is typically $10 per month.
Transaction Fees:
Fee the merchant has to pay per transaction.
Discount Rate:
Flat percentage charged for every transaction
Pin Based Debit:
PIN Debit 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.
Get it in Writing
All of the above fees should be disclosed in writing at your request. Once you have a basic understanding of all the associated fees, 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.
4. FIND THE RIGHT PROCESSING SOLUTION FOR YOUR BUSINESS
Retail Solutions:
For most retail businesses, including stores, hotels, restaurants, etc., the most suitable option for credit card processing is a simple landline terminal. This traditional point of sale system is set up phone line or IP. For face to face transactions, this is the best option for your business.
Wireless Solutions:
If your business is mobile, and being tied to a storefront or landline is not an option, then wireless solutions may be appropriate. The wireless terminal can process credit and debit cards wherever there is an available cell phone signal.
Internet Solutions:
The fastest growing segment within the credit card processing industry is in online transactions. 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.
5. 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. 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 that the processor will never raise your rates in writing
Many processors will offer low rates in order to beat the competition, when in fact these 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.
Rate Disclosure
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.
Sales Representative
Can your sales representative explain the contract? You want to make sure 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.
Conclusion
When you are ready to accept credit cards and you are researching merchant account providers, make sure you keep all of the following factors in mind.
- Benefits
- Equipment Costs
- Rates
- Types of Processing
- Terms of the Agreement
