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Merchant Services Primer
06/09/2008 - By Charles Di Bartolo
Why should my business accept credit cards?
Most shoppers prefer to pay by credit card, especially for large ticket items.
Consumers that use credit cards spend twice as much as they do with cash on average.
Accepting credit cards increases impulseMerchant Services Primer
Why should my business accept credit cards?
Most shoppers prefer to pay by credit card, especially for large ticket items.
Consumers that use credit cards spend twice as much as they do with cash on average.
Accepting credit cards increases impulse buying by consumers.
What do I need to accept credit cards?
You should have a Credit Card Terminal, A computer with a virtual terminal (software or online processing) or a website with a real time shopping cart. All of these items can be supplied by your merchant services provider but terminals and real time shopping carts can be bought separately. Check with your provider for compatibility.
You must apply with a merchant services provider to accept credit cards. You must have a tax ID number, a business checking account for a corporation or LLC. You must have a business or personal checking account as a sole proprietor. You or the signer should also have an acceptable credit score.
What should I know about pricing?
Try to avoid a single credit card processing rate. There really is no such thing. What it normally is a three or four tier rate and the salesperson is quoting you the lowest rate. Get all prices on a contract in writing. Make sure there are no blank spaces on the document you sign. A tiered rat is usually quoted as debit card rate, credit card rate, mid qualification rate and non qualification rate. When you are quoted a low rate with these other tiers you will usually pay substantially more for the other tiers. Try to avoid this tiered pricing. There is too much room for deception in it.
Request interchange and assessments-plus pricing instead. Interchange-plus pricing turns Visa and MasterCard’s rates into the pricing that they charge the processors, plus an addition fee. You pay the additional fees. There is a different rate for every credit card but the margin between the cost and your rate remains the same. For instance you might pay interchange and assessments plus 20 basis points and 20 cents. Visa and MasterCard may have 30 different rates, but you will pay only the 20 basis point and twenty cents above their rate. Never pay more than 20 basis points and twenty cents above interchange. The lower you can get below this point the better.
Most processors charge a monthly fee for service. Never pay more than $10.00 per month. Some processors charge a minimum processing fee. Search for a processor that doesn’t charge a minimum processing fee. This can hurt your business in the beginning. If the processor charges an annual fee, what do you get for it? Some annual fees provide for terminal replacement. Some give you nothing. Look into what you get. American Express charge different rates than Visa and MasterCard. American Express is higher and Discover is close to Visa and MasterCard as of this writing. Decide whether or not your business needs them.
When accepting other cards you will usually be charged an additional 15 cents per transaction. Don’t pay more than that. There is usually also a batch fee at the end of each day which totals your payments and gets the transactions to your bank account that fee should be no more than 25 cents per batch. We have enclosed a page that shows interchange plus pricing plus 20 Basis Points and 20 Cents per transaction. The amount you pay shows in the right hand columns of the form on the next page.
What should I know about equipment?
Regular retail point of sale terminals should cost no more than $450.00. Don’t lease terminals they will cost you substantially more and you will sign a personal guarantee for their payment which could last longer than the business that you are starting. If you don’t have the money for equipment sees if your provider offers a three month pay program with no interest or a no obligation rental program. Do Not Lease A Terminal. Virtual equipment for your PC Should have no more than a $150 set up, and no more than a $10.00 per month fee.
Be leery of additional services that require more expensive equipment. Do you really need the additional services? These additional services can usually be added on later. Don’t buy an expensive terminal if you don’t have to.
Choose Your Provider
Some of the major Merchant Services Processors are:
First Data, Nova (Elevon), TransFirst, Fifth Third, Bank of America and many more. Many of these processors have local sales forces to provide sales and service which is fine. Make sure you have a national processor with local onsite support so that you can get local service when you need it.
Try to get your merchant services from a referral from someone with experience in business. When someone comes recommended because of their quality in service or price you will be much better off. You are not obligated to process with your local bank and package deals are not always in you best interest. Read the fine print and make sure each offer is looked at separately on its own merit.
Once You Up and Running
Enjoy the freedom of accepting credit cards ad having the cash deposited in your bank account in 48 hours. Know that you have made it easier for you customer to spend money in your place of business. Do however follow all Visa and MasterCard Rules to help prevent fraud and theft. Ask your local provider how to keep your processing safe and secure. Good Luck on your new endeavor.
© National e-Pay Services, LLC all rights reserved.
63 Beaver Brook Road
Lincoln Park NJ 07305
973-390-4719
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