If you are serious about your business and wish to succeed, then you need to set up a merchant account for credit card processing. As soon as you start your search for a merchant account, you're sure to be bombarded with offers and the process can be overwhelming. But, before you are persuaded by seemingly implausible low rates – bear in mind that there are many factors you should consider before choosing a merchant account for your credit card processing needs.
Beware any merchant account provider that sounds “too good to be true”. All merchant acquiring banks and Independent Sales Organizations (ISOs) have the same basic costs as they pertain to discount rates and transaction fees being charged. Offers of suspiciously low rates and fees are almost always offset by hidden fees. When considering a merchant account provider, you should consider the following:
- Application or Setup Fees – While there can be a hard cost involved with setting up and activating your new merchant account, most providers absorb this cost and do not charge setup fees for the merchant account itself.
- Equipment Costs – When being quoted equipment or software cost, do your research. Know what the fair market price is for the type of equipment you require and make certain that if you are being quoted a “new” price that you will be receiving “new” equipment and not refurbished.
- Lease Options – As a rule of thumb; if you are being offered a lease, beware. Many merchant account providers generate absurd profits charging 5-20 times the actual cost of the product being leased. Even with a fair lease contract you will pay 2 times the actual purchase price of the product.
- Lengthy Contract Terms and Early Termination Fees (ETF) – Most merchant account providers require their customers to sign a contract for a specific period of time with a penalty for cancelling the account prior to that term. When considering a provider, be wary of any offer that requires a term longer than three years with a termination fee of more than two or three hundred dollars.
- Introductory Offers – A common tactic used by some providers is a version of the “bait & switch” where an extremely low rate is offered to the customer (usually accompanied by a lengthy contract term and absurd ETF fee.) The acquirer then gradually raises the rate on a regular basis and before long the customer is paying extremely high rates and is locked in to a long contract.
- Proprietary Equipment – Many providers will sell or lease their customer equipment that has either been manufactured or manipulated to only work with their processing accounts. Proprietary equipment can be used by the provider as leverage against their customer should they try and convert to a competing provider.
Look for other "hidden fees" that may be lurking in the fine print of your agreement. The acceptable merchant account fees that you can expect include:
- Statement fee – an ongoing monthly charge to cover credit card processing costs each month, typically this fee will range between $5.00 and $10.00
- Discount rate – this is the percent of each sale that is given to the merchant account provider. If possible, request and “interchange-plus” rate which is transparent and is a direct pass-through of Visa and MasterCard interchange plus a small surcharge. Depending on your businesses volume, an ideal IC+ rate will fall somewhere between 0.10% and 0.35%.
- Transaction fee – a set charge for each credit card transaction that is separate to the discount rate and is not dependant on the value of the sale. Typically this fee should not exceed $0.25 for tiered pricing models and $0.10 for IC+ rate structures.
- Wireless or Internet Gateway Fees – This is the cost for using a gateway service required for processing via a website, virtual terminal or wireless device. Gateway fees typically range between $5.00 and $30.00 per month. There typically is a transaction fee also associated as well.
Make sure you check for other additional fees such as the charge for refunds. Good rates are important, but they are only a part of the merchant account selection process.
Low rates mean nothing if they restrict the growth of your business. You need to choose a merchant account provider based on your anticipated sales volume, and make sure there is room for flexibility to process more sales in the event of a promotion or dramatic increase in product demand. Make sure your merchant account fees are not tied to inflexible policies linked with low monthly limits or lock-in agreements. Also look at the hidden costs of exceeding your monthly limits and find out how flexible your merchant account provider is if you need to increase your credit card processing capabilities to meet new business growth.
Customer service is one of the most important elements to consider when choosing a merchant account. Completing the sales transaction is at the core of your business – so you want to make sure that if any hiccups occur in this process, you can reach your merchant account provider. It's not helpful to have low fees if something goes wrong and you can't get hold of someone for immediate resolution. Your revenue is dependent on credit card processing, so make sure that you can reach someone when your needs change or something happens that is hampering your ability to accept credit card payments. Many wireless and Internet-based solution providers have limited support on weekends which is often the busiest time for these types of businesses. Make certain your support options are in line with the way conduct business.
Look at how easy it is to set-up the merchant account and make sure it can be seamlessly integrated with your existing equipment or software. Does your merchant account provider offer integration with QuickBooks, Oracle or other programs to make accounting easier? Can they support multiple users and credit card transactions at the same time? Review the methods of credit card processing and make sure it is flexible to meet your requirements – from individual real-time complete automation to end of day batch credit card processing. Also consider any additional merchant account features that you may need such as international capabilities or the ability to store customer information when you accept credit card payments.
Reputation and Guarantee
Choose a merchant account provider that has a proven track record and can demonstrate competence and reliability. How long have they been in business? Are they a registered MSP/ISO with Visa and MasterCard? How many complaints have they received? Make sure you investigate the reliability of service and guarantee for 24/7credit card processing. Ask how they monitor and respond to complaints and choose a merchant account provider whose credit card processing service package (and not just low rates) fits your business' needs.
Remember – your merchant account provider will be a long-term partner for your business' success. When choosing a merchant account, you will keep cost to a minimum if you find a provider that can integrate with your existing equipment and software. This merchant account provider should also provide strong customer service, a solid and proven reputation and competitive rates. Ensuring long-term service that meets demand is more valuable than a few weeks at a highly discounted rate.