Tips for Evaluating Credit Card Processing Companies
There are numerous credit card processing companies available that offer small businesses merchant account so they can accept credit cards in retail stores, over the internet, or even through mobile payments. The issue is finding the one that best fits your company, and this can be challenging. Most banks do not offer merchant accounts to small businesses directly, which means small businesses usually need to find a third party provider to secure the account. The third parties have different ways to come up with their fees and variations in their rules. Things are made even more complicated when you need to process credit card orders online because the transaction must pass through something called an online gateway system. No matter what type of shopping cart software you have chosen, it has to interface with online gateway systems. Not all shipping carts will work with all gateways, so you need to ensure the cart you plan to use works with the merchant card provider you have chosen.
Look at the Dynamics
Numerous things influence discount rates and other fees paid for the privilege of accepting a charge cards. The length of time your business has been open, the percent of online or over the phone sales made, the type of business, your credit rating, average dollar amount for each individual sales transaction, and the total amount of sales each month are all among the factors that can influence discount rates and fees. You should look at more than the discount rate, however, but look at other credit card processing fees as well. Application fees, discount rate, the upfront equipment cost, how much the fee is per transaction, any monthly minimums, voice verification charges, whether or not address verification fees apply, fees for monthly statements, and any other cost associated with processing credit cards. You should also try to avoid leasing equipment or software, because the inability to cancel lease payment could wind up costing thousands of unnecessary dollars. Also make sure that you thoroughly read all applications, contracts and any other form before signing. This includes the small fee. What the salesman tells you can differ from the application, and the printed contract is what holds during a dispute. You should also look at the conditions in which the company can terminate your account and any monthly minimum or maximums associated with the account.
Discount Rates Matter, but there is more to it
Discount rates typically go from 2.25 percent to 3 percent when talking about small or home businesses accepting mail order and/or phone orders. American Express and Discover Card usually have higher discount rates than Visa or MasterCard. There are companies out there that advertise less than 2 percent discount fees. The lower fees typically apply to swiped transactions only. A swiped transaction is a sale completed through the process of swiping a customer’s card through some type of machine. Other card processing companies will charge fees that are above average. Most people already expect to pay a higher fee if they have poor personal credit or certain types of businesses, but you should never agree to an outrageously high discount rate until you are positive there is not another company that will perform the same service at a lower rate.
There are other processing fees that should be considered when determining which company is best. You should look at the application fees, the discount rate, and the initial startup costs. The initial costs include (but are not limited to) equipment cost, fees paid on top of the discount fee for every transaction processed, any associated monthly minimums, voice verification charges, whether or not the company charges address verification fees and how much these are, and monthly statement fees. If there is a difference of ten cents on the transaction fee than this is equal to half the percent on the discount rate when considering an average sale of twenty dollars.
Where will you bank?
You may be required to maintain an account with the company’s bank in order to process credit cards. For this reason, it is important to carefully read agreements and figure out when the bank can put a hold on your account and how much they can hold. You should also learn how often you will be allowed to pull money from these account and check with your personal bank to see how long it takes checks from the merchant bank to clear.
Look at the equipment costs
You need to pay attention to the cost of equipment or software you are purchasing to process charges. This equipment and software can contain drastic differences in price simply dependent on who you are buying from. If you need to process credit cards on the road, you should find a processing company that contains a mobile option for smart phones.
Pay attention to the details
As you begin the application process and forms begin being mailed out, read each form carefully (including small print.) There are companies that will add in these papers a cancellation fee associated with ending services after two to three years. This cancellation fee isn’t found in a non-cancellable lease clause for the equipment. You should also look through the forms for any information about what percent of transactions can be processed as phone orders. Always remember, things can be added in the paper that weren’t told to you verbally, and during a dispute, if it wasn’t written down it didn’t happen. The forms and contracts are what will be used to settle a dispute.
Though the application process differs from business to business, there are some general things you can expect. One, is that the right representative will come out to your place of business and take a photo to verify your business is where you said it was. Some companies accept you sending in photos rather than them coming out. You could have to provide your business license or business certificate, statements of profit and loss, copies of take returns for x amount of previous years, and a photo of your office. All of the companies will require two-way access to your bank account upon accepting your business. This is they can deposit funds into your account and pull any charge backs.
Most importantly, talk with a company and get a feel for them. Do you feel comfortable working with them? If the answer is yes, you may have found your credit card processing company.