Make Credit Card Processing Work For Your Company
Credit card processing can be a confusing affair for small businesses unused to dealing with plastic and are unfamiliar with the services provided by merchant account providers. However, businesses that do not accept credit cards are lagging way behind the times and will suffer greatly as a result. In the United States alone, more than $2.5 trillion is charged to credit cards each year.
Why Choose Credit Cards?
When it comes to credit card processing, you will have to deal with a merchant services provider. These companies take a certain percentage of your sales as payment which is off-putting for small businesses. However, advantages of credit card processing include not having to worry about non-payment. Also, precious time that is spent dealing with late invoices can be used to generate more sales.
Invoices could take up to 90 days to be paid which is unacceptable for a small business with cash flow issues. Businesses that deal with credit cards have the money in their account within a week of it being paid. Businesses that accept credit cards attract more custom than those that don’t because customers enjoy the convenience. If your business involves selling merchandise online, you simply must utilize credit card processing.
Merchant Services Providers
Banks are the number one choice when it comes to picking a credit card processor. It is wise to use the bank you normally use when it comes to your business affairs. There is a strong possibility that the bank will have some type of service package which includes credit card processing. Yet banks do not do the processing themselves with a third party usually introduced. One big disadvantage is the fact that banks are more likely to turn you down than any other merchant provider.
An Independent Sales Organization (ISO) is a registered broker that has third party processors as its clients. This means that like banks, they do not engage in the act of credit card processing itself. It is easier to get approved by an ISO than a bank but that is because they charge greater fees. Only use an established ISO and beware small-time operations that avoid the use of contracts, preferring instead to use sign-up sheets.
Be prepared to undergo a routine background check when looking for a merchant services provider. This is standard procedure as these organizations look to protect themselves against illegal activities such as fraud. The check involves a review of your credit history with references from two or more previous suppliers of credit necessary. One of the most important aspects of this background check however is the issue of chargebacks. These are sales reversals of transactions that had been credited to your account but were recalled due to misunderstanding, errors or fraud. Businesses with a high instance of chargebacks are not looked upon favorably.
The type of business you operate is another consideration when it comes to credit card processing. A company that delivers goods and received payment immediately are deemed as safe options. Also, merchant services providers prefer companies who perform card-present transactions. This is when the cardholder presents the card in person, swipes and signs for it. Online transactions are naturally deemed to be far riskier. For your part, look for a provider that can help you with credit score problems and has previous experience working with businesses similar to the one you are running.
Fees And Charges
The discount fee is the main charge issued by the provider. This fee will be different depending on the type of business you run because it is calculated on average sales, type of transaction and level of risk involved. Credit card processing charges are much lower for card-present transactions than they are for sales performed online. Expect your business to pay a discount rate of up to 2% on each transaction where the credit card is present and up to 3% for online sales.
There will be a minimum monthly fee of up to $35. Businesses that only have a low amount of monthly transactions should find out more information on these fees. Also, you will probably have to pay $0.3 per card-present transaction and $0.5 for online sales. One final monthly bill revolves around credit card service transaction summaries which may cost up to $10.
Credit card processing start-up costs include a one time fee for a terminal. This is the credit card machine with $150 enough to buy a basic model. A terminal with a printer is likely to set your company back around $500 while a high quality wireless terminal may cost at least $800 or more. Small businesses may elect to lease the terminal instead at roughly $25 a month.
Do not forget that there may also be a fee charged merely for sending in an application which can set a business back another $200, even if the request is rejected. Certain providers have fees specific to their operation including fees for customer support, programming and credit card set up fees. Before choosing a credit card processing company, make sure you understand the fees they charge.
Tips When Negotiating
Small businesses that utilize credit card processing will find that transactions run more smoothly. This attracts more customers but these businesses need to negotiate carefully with merchant services providers. Always underestimate your monthly sales when asked and concentrate on getting monthly fees and set-up costs reduced. If you expect to perform a large amount of credit card sales, be sure to go for a company that has the lowest transaction fees. Never sign a long-term contract, especially if there is a hefty termination fee. You should have the right to switch if you are unhappy with their service. Finally, look out for companies that offer low initial rates before increasing them halfway through your contract.