How to Evaluate Credit Card Processing Companies
How do you determine which credit card processing company it is that you should get a merchant account from? Processing fees, fees per transaction, in addition to statement fees – they all can vary substantially. So, here we provide some details on how you can compare account providers, after which, you should be able to avoid paying any more than necessary when accepting credit card payments.
Rates and fees
There are numerous factors that will influence the rate of discount and other fees that you pay to gain the privilege of being able to accept credit cards. Those factors include:
- The amount of time already in business.
- Percentage of sales made online or over the phone.
- Type of business.
- Your own personal credit rating.
- Average amount of each sales transaction.
- Total sales each month.
Typically, discount rates range between 2.25 and 3 percent with respect to small businesses that will accept orders over the phone and mail orders. For Discover Card and American Express, the discount rate is normally higher than with MasterCard and Visa.
Various companies do advertise a discount fee that is less than 2 percent, and normally lower fees like this are charged for swiped transactions.
Higher fees will normally be charged for those who have a poor personal credit rating or for certain types of businesses, but you should not agree to pay higher fees, at least until you have determined that there are no other processing companies that offer lower rates.
Nevertheless, the discount rate is not the only processing fee to consider. You should compare the application fee, together with the cost of the equipment, the per-transaction fee, charges for voice verification, charges for address verification, fees for monthly statement, in addition to any other costs you may incur.
There are some companies that demand that you maintain an account at their bank for them to process credit card transactions. You should read through these agreements very closely so as to determine the circumstances that the bank can retain your account, and just how much it can hold back.
Further, assess how frequently you are able to withdraw money, and check to see how long it would take for a check to clear with your own local bank.
Do also appraise the cost of software and/ or equipment for processing these charges. Comparable software and hardware greatly varies in price depending on the vendor. If you require credit card processing facilities while on the road, ask if your chosen card processing company offers a mobile option that will work together with your smartphone.
Try to avoid leasing software or equipment. Instead, buy it outright at the beginning. If you go the leasing route, you could find that you are roped in for a period of three to four years of leasing payments, which means that you will likely pay thousands of dollars extra.
Have a close look at all the applications and contracts that you receive. You may find that some companies will charge if you prefer to stop using them within a period of less than two years. This fee is independent of the lease clauses for any equipment.
Keep in mind that if there ever is a dispute between yourself and your chosen credit card processing company, everything is in writing on the printed contract, and that’s not necessarily the same thing that the salesman said before you signed the contract.
This in mind, check to ascertain under what conditions the company is able to terminate your account.
What to Expect During the Application Process
Some credit card processors will insist that a representative visits your place of business. This provides verification that you are indeed conducting business at the location you’ve stated. Others will happily accept a photograph of your business premises instead.
Dependent on the particular company you wish to work with, you may be asked to provide the following:
- Statements of profit and loss.
- A copy of your business licensure or a certificate of doing business – also referred to as a dba.
- Photographs of your business premises.
- Copies of tax returns for the previous number of years.
If your application is accepted, you will need to proffer two-way access to your business bank account. This will permit the credit card processor to deposit funds within your account and then make any necessary withdrawals for chargebacks which inevitably do occur.
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