While it may seem like common sense for every business to provide the option for its customers to pay via credit card, this is not always the case. However, an increasing amount of businesses – mainly small businesses – are recognizing the buying power of the demographic being turned away. Larger businesses are usually set up for credit card processing already, whether it's because the business is part of a chain, or because of the high volume of customers the business sees. However, retail businesses will pay the lowest rates, and Internet vendors and mail-order businesses will pay more. Credit card companies (Visa, MasterCard, Discover, etc) see retail businesses as representing the lowest risk because the customer is present to sign the receipt.
Tips for setting up credit card processing
- In theory, you could get a card processing account set up in 2-3 business days. But you don't want to rush such an important decision, especially if you have to sign a contract and find out afterwards that you could have gotten a cheaper deal elsewhere. Plan ahead so that you and any other necessary employees have plenty of time to become comfortable with the system.
- Make sure you properly estimate how much processing you will actually do in a month. Take the time to think about how much your average sale amounts to, and how much you will transact in a month through the credit card processor will be. If you have to, overestimate because that way you won't end up with a slower machine than you need and you won't raise red flags with the credit card processor's risk assessment department. The risk assessment department keeps an eye on merchants and calculates each month's sales volume. Businesses that see fluctuations in sales have been shown to have fraudulent business practices, therefore your account may be suspended until issues are cleared up.
- Be aware of credit card processing companies that charge an application fee. Most credit card companies don't charge people for applying for a card, and neither should you have to pay a fee to a company to apply to use their services. However, some valid companies do charge a transaction fee that is refunded if the application is approved.
- As with any major decision, you will want to price shop before signing any contracts or accepting equipment. Most credit card processing companies don't bill in a lump sum amount (for example, 100 transactions per month for a lump sum, and a per-transaction fee after that). Instead, companies charge a percentage per transaction or a per-transaction fee.
What all the different fees mean
- Per transaction fee: The amount charged to process each transaction. 20 to 60 cents per transaction.
- Daily batch fee: Batch fees are charged for closing out the credit card account each day. 10 to 40 cents each time.
- Monthly statement fee: Charged for issuing monthly customer transaction statements. About $10 per month.
- Monthly minimum fee: Basically, if you don't meet a certain quota of transactions, you will be charged the monthly minimum that's equal to the transactions. $25-35 per month.
- Chargeback fee: Covers the cost of customer returns, misorders, etc. About $25 per month.
- Annual renewal: Some companies charge an annual account renewal fee but not all do. About $50-100 per year.
By Virginia Zignego