Both your business and your customers need your credit card processing service to be reliable, versatile, and secure. People typically buy more when paying with a credit card than with cash, so you should encourage their spending by accepting their card.
Many banks won't offer merchant accounts directly to your small business. Instead, you have to go through third-party credit card processing providers. Each provider have different fee structures and rules, so follow these tips to protect your business and find yourself the best deals.
Make Fees Work for You
The fee structure involved with credit card merchant services is complex, as it involves charges that go to the bank that holds your customer's card, the bank that holds your business account, and the processing provider that moves money from one to the other.
- The interchange and assessment fees are composed of a flat rate plus a percentage of the transaction amount that goes to the bank that issues the card for each transaction; this fee is non-negotiable.
- The processor markup is the fee for your business's merchant account and IS negotiable -- the amount depends on transaction amount, type, and your company's risk profile. This fee will vary amongst different providers, so shop around for the best rate.
You may also be responsible for application, per-transaction, monthly minimum, and monthly statement fees. Read your contract carefully to find out which fees will apply to you.
Avoid Extra Expenses
Fees and expenses for credit card processing can quickly snowball. You should not only shop around for the best fee rate, but should also avoid additional costs related to equipment and account limits.
- Do not lease equipment or software; machines often come as part of point-of-sale systems and can cost between $300 and $800 apiece. Leasing equipment binds you into a contract with a provider and can cost you thousands more in lease payments and non-negotiable fees.
- Check to see under what conditions your bank or provider can terminate your account and whether there are monthly account minimums or maximums that you may be charged for.
Having the best rate for your credit card processing isn't helpful if you can't access your money or if you're at risk of fraud.
- Make sure your provider will deposit funds into your account in a timely manner -- the lag can be from 1 to 5 days. Checking for fraud on your transactions does take time, but some banks try to keep funds in limbo as long as they can to eke out more interest.
- If you make sales on your website, be sure that your online transaction interface features adequate fraud protection. It should use CW2 verification and SSL options on the transaction page.
- Always compare your daily point-of-sale report with your credit card processing system total to verify that everything matches.
Third-party merchant services can be the only way for your small business to process customer credit cards, but they don't have to be any more expensive than processing done by banks. Encourage your customers to spend more by accepting credit cards, and make sure your sales are secure and profitable for your business.
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