5 Important Questions for Your Credit Card Processor.
If you are in the midst of setting up a new business or just researching for a new credit card processor, you must consider these 5 important questions. Every business needs to accept credit or debit cards and other forms of electronic payments. That means you will need a merchant account where you can process credit card and other electronic payments including mobile payments. You will have to use third party merchant account providers, like Access Payment Systems, that work with Visa, MasterCard, Amex, and other card issuers.
There are different card issuers and they have different rules, costs, rates and contract terms. Things can get very confusing when you don’t deal with them on a daily basis. Fee structures get very complex and you may not be able to get what’s best for you off the bat.
To make sure that you know what you need, here are 5 questions to ask your credit card merchant account provider.
1. Cancellation or early termination fee?
Of course the ideal situation is to not pay any cancellation or early termination fees. But often times, because of a long term contract with your credit card processor, you are given discounted rates or a discount on equipment. So, if you cancel early, the provider is incurring a loss. So, in order to make sure that it’s a good deal for both parties, there may be a cancellation charge. But it’s ok to pay a cancellation charge of less than $400 or so. It should be mentioned and agreed upon before signing up for the long term contract.
You should mostly avoid a “liquidated damages” termination fee. That means you will be charged for the estimated fees or monthly charges for the entire contract term if you cancel before it expires. Unless of course you know that you will not be cancelling and your rate structure is very well discounted.
2. Compatible with your online shopping cart?
Many credit card processors have their own shopping cart systems that they will want you to either use exclusively OR integrate with your current shopping cart somehow. Some will help you integrate and others will need you to get your own web developer to do it. Either way, it’s an easy fix with current technology. With the great leaps in eCommerce and electronic payment technology, this part has become pretty easy to get done. But do find out exactly what is required before committing.
3. Any other fees on top of transaction fees?
Most credit card processors add on monthly or annual fees like statement fees, compliance fees, or others. You need to make sure you know upfront of all fees chargeable on top of your transaction costs. If you are an eCommerce business you may need to pay some fees associated with using the processor’s API or shopping cart.
Some fees can be waived if you ask about them. For example, PCI compliance fees can be waived by doing a yearly online questionnaire about your business, IT and security policies and procedures. Some statement fees can also be waived if you opt for email statements instead of paper statements.
4. 24-7-365 customer support?
Credit card and Point of Sale terminals are machines, and they will have issues, and at times they may need firmware upgrades. You will need some form of help from your credit card processor’s tech support team. Find out if they have 24-7-365 phone support, live chat online, or email only support. For a brick and mortar retailer, 24-7-365 phone support is what they need. For an online only business, email support may be more than enough. Go with what will be best for your business.
Related: Point of Sale (POS) is Evolving.
5. Is interchange plus pricing an option?
If NO, then you should most probably find another credit card processor.
All pricing for credit card processing comes from the interchange cost indexes. Processors sell pricing in three different ways. Fixed fee, tiered pricing or interchange plus. Depending on your business type and the number of cards you accept on a periodic basis, any one of these could work for you.
The Fixed Fee option uses an amount that is designed to allow some averaging of costs from the interchange to cover all potential card transaction types, whether standard or reward cards. If the fixed fee is 4% and all the actual interchange costs came to an average of maybe 2.20%, you would pay 4% and the processor would make the difference in profit between the 4% and the 2.20% cost. Simple and straightforward.
A Tiered Pricing structure is very similar to the fixed price above but with some lower cost. Typically for a card not present or an eCommerce merchant account you could get a base rate of 2.20% plus maybe $.25 per transaction for standard cards. Interchange cost in this scenario would probably be about 2.70%. The processor takes these fees charged you minus their interchange actual cost and they make the difference for their profit. Again, pretty simple and straightforward and with different tiers, the rates go up or down depending on the scenario and contract.
The Interchange Plus pricing option gives the exact cost of all transaction types to the merchant plus a markup of typically 0.30% to 0.50% on top of the interchange cost plus $0.15. So for retail they typically will come in with an average total rate of around 2%. Usually small transaction amounts around $5 will have a higher average rate then the higher transaction amounts around $500. Why? $0.15 makes a big difference on a $5 transaction but doesn’t mean anything on a $500 transaction. The discount or percentage(lets say 2%) charges don’t amount to much on a $5 transaction but are important on a $500 transaction.
When it is all said and done the interchange plus pricing will always be cheaper. This is especially important for merchants that receive a lot of debit cards from their customers. That interchange cost is a 0.05% plus $0.22. Add a markup of 0.50% plus $0.15 to that and you have a total rate of 0.55% plus $0.37. If that was a $500 transaction on a fixed rate plan of 4%, it would have cost you $20. The interchange plus pricing option would have cost you $3.12. Big, huge, difference!
Talk to a few different merchant account providers and find out which credit card processors they work with. Find out exactly what you need and plan a little for future increase in your payments transactions. Also, read my post titled, “EMV Capable Terminal – To Lease or Buy? Don’t Get Scammed!” BEFORE you get a new EMV capable credit card or POS terminal. Chances are you may get scammed into paying for something that may not work for some time.
Don’t lease an EMV credit card terminal. Buy it for about $200.
Contact Us for more information on Identity Verification, Real-Time Check Verification, Credit Card Processing, or eChecks and ACH Transactions. Or take us up on our FREE Merchant Account Analysis offer. We’ll analyze your merchant account rates and let you know how to Save! If you are ready, you may be able to Switch and Save!