Merchant Services Basics
In order for a business to accept credit cards they need a Merchant Account (excluding business accounts for payment systems like PayPal, Moneybookers, AlertPay, etc.).
Although there are several options for opening a merchant account, your bank is most likely your best bet. There are independent service providers but many of them are fly-by-night types with questionable customer services. If you are just getting into the merchant services arena and don’t have the experience to know what you need and what’s standard, a bank with a good reputation and steady people would work better for your needs.
Be aware that there are several different pricing structures and fees involved and the total may surprise and dismay you. However, if you consider merchant services fees as a part of overhead like utility bills it may be easier to accept. It’s also an oft quoted statistic that accepting credit cards often increases your business about 30%. Such an increase in monthly revenue can easily pay for the merchant services fees and still add a nice bump to your bottom line.
The several fees for merchant services include (but are not limited to) a fee for the services, a fee for the machine (purchase or lease) and a ‘per transaction’ fee. Part of your merchant services account is an agreement of a minimum amount of fees per month. Should you not do enough business in a given month to reach that minimum amount, the bank will charge the agreed upon minimum amount instead of the lower amount of accumulated fees.
An example is an agreement to a minimum monthly fee total of $50. Say you had a very slow month and all your fees only add up to $43.75. Your bank will still charge you the full $50 instead of the lower amount of $43.75 since the $50 was the minimum threshold fee total agreed upon.
Different cards have different fees and payment structures. That is why some places only accept MasterCard and Visa but don’t’ accept American Express. Also, the substantial varieties of rewards cards and specialty cards available each have their own category of fees. Mostly banks will quote you the lowest fee for the lowest category while acknowledging that it is not a one size fits all amount. The change in fee percentage is usually small and while all different, are not substantially so.
There is a minimum percentage fee that is industry wide, like a wholesale price. This number can be found at the websites for the Wall Street Journal, Visa or MasterCard and the new number is published every April and September. If a merchant services representative tells you the percentage you will pay is t or below this ‘wholesale’ amount, then you know that there are hidden fees worked into your contract. It’s the only way their company can make a profit and the salesperson can get their commission.
It may take some time to find a reputable sales person but it is worth the effort because it will save you a lot of money down the line. Become knowledgeable about your statement and the various line items and how they are billed to ensure that you won’t be taken advantage of by the next sweet talking salesperson.
