Credit Card Processing

Total System Services, Inc.

Guide to Credit Card Processing Contracts

Understand and negotiate fees and terms set by banks and credit card processing companies.
By Greg Brown

	Credit Card Processing Basics The rule on merchant card services: If low fees mean high per-transaction costs, high fees should mean low transaction costs. Bargain down set-up fees and equipment, especially if the merchant card services broker wants a long-term contract. Be suspicious of fine print. Credit card processing companies are lightly regulated and prone to fast-moving, fast-talking sales agents.

You got the shop set up, the goods on the shelves and customers coming in. But, if you accept credit cards, are you losing money every time a buyer flashes some plastic?

The answer has a lot to do with exactly what terms you agreed to when you signed on for a credit card merchant account in order to accept credit cards. Taking plastic can mean a lot more money: Checks are becoming a quaint memory, and credit card companies have effectively declared war on cash with billions of dollars in marketing messages to the consumer.

So, take that card. But understand what it will cost and make sure you get the best possible deal on merchant card services for your size business. In this guide, you'll learn:

1. How to get equipment and a merchant card services account for cheap -- and why that's risky
2. Balancing credit card merchant account fees with per-transaction charges
3. Watching out for fine print with merchant card services
4. Speeding up payment with online credit card processing and mobile credit card processing

Action Steps for Best Credit Card Processing Terms

The best contacts and resources to help you get it done

Who's who in credit card processing companies It can be tricky at first, but a credit card transaction has basically four stops along the way. The customer's card is from a bank. It is issued and backed (think customer service)by a card company, like Visa or MasterCard. There's an often a third party clearing the deal (although it might be the customer's bank), and then your bank has to get the money.

I recommend:  Forbes has a great, detailed analysis of credit card processing basics. See the gamut of merchant card services at Business.com.

Set up costs for credit card processing companies The upfront costs of credit card processing -- equipment to accept credit cards, set-up fees, putting money into a kind of escrow called a reserve account -- all this is sunk cost, anywhere from $500 to triple that.

I recommend:  Many vendors will eat set-up fees and even discount credit card processing equipment to get a sale, but watch out. They have to make money somewhere, right? If you want to accept credit cards, better to get into the basic terminology at the MerchantSeek glossary on credit card processing or try their exhaustive frequently asked questions page.

Accept credit cards, but price the volume right A credit card merchant account is vital to many small businesses, but get the right mix of fees. Some contracts favor businesses that processes thousands of small transactions, like fast-food vendors. Others will be better for lower volume, high priced goods, like an antique shop.

I recommend:  Bottom line: If your per transaction rate is high -- 5% is punitive, 2% is about right -- make sure fees are low or zero. If you agree to a low transaction rate, fees you might not even notice for meaningless things (statement fees, instance) could be piled on. Allbusiness.com has a good checklist for this. Merchant card services company VantageCard has detailed explanations. Also, run the actual fees you are quoted through the handy calculator at the Merchant Account blog.

Beware fine print in credit card merchant account contracts Would you agree to eat lunch at the same coffee shop for three years? Buy toilet paper at the same store? Of course not. But if you're not careful, that can happen when you sign on with credit card processing companies.

I recommend:  Read up on all the fine print tips at Business Know-How and at Web Marketing Today. See the Business.com directory page, too, for more on setting up a credit card merchant account.

Speed up the money using online credit card processing companies Using a point-of-sale device, the card swiper we've all seen, is not instantaneous. In most cases, a cumbersome clearinghouse process means your money is days away, and the card might come back bad.

I recommend:  Online credit card processing uses the Web to accept credit cards and charge while your customer is still there. (Wireless mobile credit card processing is similar.) This kind of credit card merchant account is particularly useful for automated sales on Web sites or, in the case of mobile credit card processing, for collecting on sales or service calls. Network Solutions, Verisign and Thawte have detailed solutions. There's more on online credit card processing and mobile credit card processing at Business.com.

Tips & Tactics for Fees on Your Credit Card Merchant Account

Helpful advice for making the most of this Guide

• Terminology matters: 'Qualifed' charges means your employee at some point had the card in her hand and swiped it. 'Non-qualifed' charges are taken over the phone. Card processors usually try to charge a lot more for non-qualified charges.
• If you can handle the (slight) delay of not swiping, drive down costs by using online credit card processing. Open a screen, type in the numbers and it's payday.
• Chargebacks -- when customers turn back a charge because of some dispute -- can be expensive. If you deal with a lot of returns, make sure your choices in credit card processing companies won't penalize you for this.