Nowadays it’s critical to look beyond the fees and costs associated with your merchant account as there are so many other factors that are important to your business. It’s also important to remember the following key pieces when you’re trying to determine if you should set up a merchant account. Businesses that don’t accept credit and debit cards are likely to make less money than those who offer additional options aside from cash. After all, studies show that consumers spend more with plastic than when paying with cash. But whether you're looking to accept plastic for the first time or just revisiting your current arrangement, the move can be daunting, and it's vital to do your homework.
Tip 1: Understanding the Fees
Understanding the amount of money you’ll be charged for the transactions and overall servicing of your account is important to making the decision on which provider you’ll choose. However, as mentioned before it’s important that this is not the only factor which is considered. So take your time and review a number of different provider options because some offer services that others don’t for the same or even lower overall costs.
Many businesspeople primarily look at the merchant account's discount rate -- the percentage a bank charges for each transaction, which can range quite greatly depending on your business type, volume of transactions and overall risk assessment of your business. Beyond the discount rate you should also review “other” fees that are associated with the agreement. Here are some additional fees to watch out for:
- Fixed fees per transactions above and beyond the discount fee Monthly Service fees
- Statement Fees
- Early cancellation fees
- Account set up fee
- Downgrade fees
- i.e. a fee increase due to specific criteria not being met
- Chargeback fee
- Refund Fee
Looking at the whole picture gives you a much better perspective of how much the account will cost you in the long run, and your ability to change providers. Fee’s should be fair for the type of business that is being supported by the payment provider. The higher risk the business the higher the fee’s the merchant will be required to pay. Online businesses, weight loss, adult and get risk quick schemes cost more than point of sale transactions due to the increased risk involved.
Note: Don’t be afraid to ask for full disclosure of the fees from the sales person. If they are not willing to be transparent then it's best not to work with them.
Tip 2: Get the Right Equipment
There's more to think about than just fees. You'll likely need hardware and software to match your company's needs, and you can acquire them through merchant account providers, though you'll need to know which is right for you.
If you run a brick-and-mortar business, you'll need a point-of-sale terminal to swipe the cards. There are two options: one that transmits data across telephone lines, or a wireless terminal, which is becoming increasingly common at restaurants where waiters can swipe cards tableside. You can lease a terminal or buy it outright, buying outright may in most cases be the best option since the costs have come down substantially in recent years.
If you have an e-Commerce division of your business you’ll want to review the other pages we have available under e-Commerce 101 for more entry level information on breaking into and better managing your e-Commerce business.
Tip 3: Think Customer Service… you being their customer
Remember, the processor wants your business. Make sure that your needs are met and questions answered. It’s critical that you understand how your merchant accounts functions and that it will work the way you need it to. Don’t be afraid to ask question after question and make sure that you have the direct contact information for someone who will be able to support both your technical and functional needs should additional questions arise.
A few good questions to ask:
- Can you help me run a test transaction so I’m familiar with the way the system should function?
- What should I do in case the primary system fails, do I have back up options to process payments?
- Do you have 24/7 support, if so how do I contact them.
- Who will be my point of contact for any questions that I may have?
Tip 4: Ask for Recommendations from other Clients
Asking for recommendations;
- By asking a prospecting merchant account provider to provide recommendations of clients who they currently work with that are of a like business to you.
- By finding businesses that are within your same vertical and ask the owners which processor they use and if they would recommend them… and why.
ISO’s/MSP and MLS are all over the place and always looking for business. If one is not willing or capable of providing what you’re asking for it’s probably best that you look to another resource for your merchant account. The BBB (Better Business Bureau) is also a good place to vette a company you’re looking to work with.
Tip 5: Compare, Compare…and Compare
Using the research components that are available to your advantage, something as simple as doing a search for “payment processors” will yield a slew of results that you can use to begin comparing different options. It’s worth the time and energy spent up front to get the right payment processor because when it comes down to it…they control your ability to make money. All processors are not created equal so due diligence is the key to making sure you’re partnered with a compatible processor.