Credit Card Processing Contracts
Understand and negotiate fees and terms set by banks and credit card processing companies.
You have 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 cost 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:
- How to get equipment and a merchant card services account for cheap -- and why that's risky.
- Balancing credit card merchant account fees with per-transaction charges.
- Watching out for fine print with merchant card services.
- Speeding up payment with online credit card processing and mobile credit card processing.
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.
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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 -- is sunk cost, anywhere from $500 to triple that amount.
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.
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.
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.
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.
- 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.
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