How The Right Credit Card Processor Can Help You Save Money
Understanding the costs and fees can help you and your business save money.
When your business starts accepting credit cards, you will find that you are required to pay fees from the application and setup process to the actual processing itself. No two merchant providers charge the same amounts, so doing your research is key to finding a unique solution. Keep in mind that while one may advertise a low percentage rate and more costs for service charges, another may charge for setup costs but waive fees on other services. This is why it is so important to find the right merchant service account and provider for your business.
Remember these tips when looking for a merchant provider:
1. – Don’t be fooled by bargain pricing. A low rate is not worth poor service and an unreliable system.
2. – Choose an integrated solution that can save you both time and money. Instead of duplicating data and other entries associated with your customer’s credit card payments, allow the new service to automatically record transactions.
3. – Read and understand all of the fees associated with your merchant account before submitting any applications or signing any contracts.
4. – Learn about different processing account types (ie domestic, international, high risk) and what their typical rates are. Not all industry types are covered under one umbrella-type payment processor.
5. – Choose a company that is willing to work with you to help grow your business.
6. – Find out whether the provider charges for terminating a contract.
Get the right merchant account
The first step in accepting credit cards is to apply for your merchant account. A good merchant will walk you through the process and ask you several questions about your business. They will ultimately help you choose the account that is most appropriate for your industry type and volume of business. Each merchant account type has it’s own set of rates and qualification requirements.
Before you agree to an account type, do your research and ask your merchant processing representative the right questions about fees and costs associated with your solution. This could save you thousands later on.
Great questions to ask providers:
1. – What are the non qualified rates?
2. – Do you have any monthly fees, and if so what are they?
3. – What are the monthly minimums associated with my solution?
4. – Are there contract or cancellation fees, and if so what are they?
Some of the largest upfront costs are the terminal setup, equipment and software. A variety of equipment is available depending on your budget and connection type. Give some serious consideration to the number of terminals you will need. Paying extra for terminals that are not needed can be a costly investment.
If you currently have a credit card terminal, ask your new merchant provider if they can reprogram the one that you currently own.
Lastly, if you are considering leasing your terminal, double check the terms and cancelation rates as these may be very high in the end. Compare and contrast the cost of ownership versus the lease.
Processing Fees And Rates
Interchange Fee: An interchange fee is a percentage of each transaction that covers authorization costs, fraudulent activity and losses. Most merchants bundle this fee in with their rates, so be sure to ask about the interchange amount is when talking about the cost of your specific solution.
Chargeback Fees: A chargeback happens when the cardholder disputes a transaction that occurred while their card was used to do business with you. These can be very costly as a chargeback fee is assessed and the funds from the cardholder can be returned to their bank if action on your part is not taken to indicate a non fraudulent charge. It is very important to know what the exact amount is for the chargeback fee so that you are prepared for what the cost is if something were to happen in the future. Some merchant processing companies offer chargeback dispute departments that will handle these disputes for their customers.
Most of what you will be billed for will be processing fees. Your percentage rate per transaction is determined by your business risk (credit score and industry type), number of card not present transactions, the average amount per sale and the total dollar amount of monthly sales. Simply put; the lower risk you are, the lower your rate will be.
A qualified rate is the percentage that is charged whenever a credit card is accepted and processed using an approved solution, for example, swiping or accepting e-commerce transactions. This is usually the lowest rate you can receive, and it is often what you’ll be quoted when you initially inquire about rates.
A mid-qualified rate is the percentage that is charged if you “key in” your credit cards instead of swiping through a terminal. Accepting rewards cards and business cards would also fall under the mid-qualified rates. It is a slightly higher rate than the qualified rate that we discussed above because of the risk level.
A non-qualified rate is an even higher percentage rate charged if a card is keyed in, an address verification isn’t performed for the cardholder, there is information missing or the authorization doesn’t settle within 48 hours (usually the allotted time frame for average settlements).
Knowledge Is Power
Now that you understand what fees are associated with credit card processing and how merchant companies structure them, you can have an educated conversation before signing a lengthy contract. The best credit card processing companies will make sure that you have the right account for your business type and business volume, and will be forthcoming when you ask questions about rates and fees.
Still looking for a quality merchant processor? We are the solution. Take a look at our credit card processing page and see if we have an account type that fits your needs. Our merchant agents are the best in the business and will help you and your business save money!