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Buying Guide for Credit Card Processing
The first charge card was issued in 1914 by Western Union. At the time, most folks viewed the concept as a promotional gimmick - certainly nothing to be taken too seriously. Fast forward to 2011, and it would seem the gimmick is here to stay, with nearly $2 trillion in credit card-based transactions logged to date!
While initially larger businesses were more inclined to opt in for credit card-based transactions, today customers simply expect to be able to charge anything they want to purchase - even a $1 cup of coffee! This means credit card processing is no longer a luxury but has become an industry standard - required for all businesses who wish to stay competitive and in business in today's cashless society.
If you are new to credit card processing, there is definitely a learning curve to master. This Buyer's Guide will help you sift through your credit card processing options to find the perfect fit for your company.
Credit Card Processor Types
Precisely because credit card-based transactions are so popular today, you will quickly learn you have a wealth of options to choose from.
Here are some of the most common options businesses select:
You can apply to accept credit cards at the same bank where you do your business banking. Many banks today even have package services that include options for credit card processing. However, the application process can be lengthy and intense, especially for new or smaller businesses.
A third-party credit card processor.
You can also sign on with a third-party credit card processor that is not affiliated with a specific bank. These services also offer packages that may include assistance with invoicing, collections, settlements, reporting and other functions.
Independent Sales Organizations, or ISOs, is a brokerage-type service with one or several third-party credit card processors they work with. For small or start-up companies, the application process tends to be easier. In exchange, the fees tend to be higher.
Financial Services Provider (FSP).
You can often sign up for credit card processing services through your business credit card provider (Visa, Mastercard, et al).
If you are a member of a business or trade association or organization, you can check to see if credit card processing services are on the menu.
Offshore merchant accounts.
These international-based services are a last-resort option for businesses with unique circumstances that make obtaining processing services through more traditional channels difficult or unlikely.
Credit Card Processor Pricing
You will pay a small transaction fee (called a "discount") on each transaction. This fee may differ depending on whether the card was processed online or in-store. As well, your fee will depend in part on your company size, status and sales volume.
In general, you can expect to pay anywhere from 0.35 percent to 3 percent ($15 to $35) per month in discount fees. Then you may also pay another "per transaction" fee (from $0.10 to 0.50). You will also likely pay additional fees to receive monthly sales summary reports (typically around $10 per report).
Aside from these fees, you will also be presented with a menu of additional fees, some of which may be optional and some of which will be required.
Card Processing Equipment
In addition to your menu of fees, you will need to make an initial investment in the equipment and machinery you will need to accept credit cards. This may require an application fee which can run you as much as $200, so be sure to shop around for the best price.
Here is what you can expect to spend for equipment:
- Credit card processing terminals: $150 to $300 per unit.
- Terminal + printer: $250 to $500 per unit.
- Terminal leases: $25/month per unit.
- Virtual terminals: $150 per unit.
- Supplies: tape, paper, ink, et al (varies).
Choosing a Credit Card Processor
While the price you must pay is certainly going to be an important part of your decision-making process, it should not be the only consideration. In fact, the level and quality of customer service you receive can make all the difference in whether your decision to add credit card processing works for or against you.
First things first - there are many legitimate card processing services in business today. There are also many that are not-so-legitimate or even outright scammers. So do your research to find out whether a company is legitimate (look for BBB rating, customer testimonials, a website with an address and phone number listed, et al).
Next, evaluate what others say about the service's customer service. Is it professional and timely? Is the set-up seamless and fast? How do they handle protecting you from fraud and do they use SSL(secure sockets layer) encryption? Is their equipment reliable and robust? What if there is an error on your monthly sales report? You want to know you can reach out anytime to get quick resolution for your issues and those of your customers.
Credit Card Processor Buying Tips
Once you have researched your options, decided on what your needs are and set your monthly budget, it is time to go shopping!
Here are buying tips that can help you make your final choice:
- Find out how long you must wait to get sales funds transferred to your account.
- Ask how variable fees are assessed and negotiate wherever possible.
- For any company you are seriously considering, write out a complete picture of how that company works (fees, transactions, etc) and compare it side-by-side with the others.
- Review the contract with a magnifying glass to make sure you understand every word.
- Do one last comprehensive online check to be sure the company is legitimate, reliable and well- liked by other customers.
- Make your choice!