1. Your rep should be reputable.
Credit card merchant services advisors are frequently referred to as used car salespeople of the financial services sector, and for good reason. The reputation arises from decades of slick sales personnel duping businesses. As such, do be certain to find a rep that you can fully trust, and one that has a good level of knowledge and is able to explain jargon to you in layman’s terminology.
2. Understand the more common models for pricing.
With respect to credit card processing there are three base pricing models: Tiered pricing, flat rate, and interchange plus (sometimes referred to as cost-plus pricing).
Tiered pricing, in general, features three levels, or occasionally more. The three levels are known as qualified, mid-qualified, as well as non-qualified tiers. The rates that it costs the processor to process the transactions are bundled, and, as is the case for flat-rate pricing, it will likely cost more but it is easy to understand.
Well-known processors like PayPal and Square were responsible for making flat-rate pricing famous. Flat-rate pricing is best for those merchant who process small monthly volumes. You pay more per transaction, but it’s easily understood and frequently, there are no ancillary fees.
And then there’s interchange plus which is arguably best for processing sums of around $2,000 or above per month. As an example of how interchange plus works, a swiped Visa rewards card is 1.76 percent in addition to 10 cents on interchange. If you have a mark-up of 0.5 percent for all transactions with 10 cents per transaction, that equates to 2.26 percent in addition to 20 cents for each transaction. This can be somewhat confusing, but at the same time, it can save you money.
So, is your rep familiar with the variations between the pricing structures, and can they provide a valid explanation as to why they are selecting the particular one for you?
3. Ask appropriate questions.
There are frequently many additional fees attached to merchant accounts, so you should ask the appropriate questions when assessing for a provider. Below are a number of the most frequent fees:
- You may be charged an annual fee. Find out if so as this should be waived.
- Is there a monthly minimum penalty? Again, it should be waived.
- Do you need to sign a contract term and is there an early termination fee? There should be no early termination fee other than when you are offered free software or free equipment as part of an exchange and the contract should be month to month.
- How much is the monthly service fee? This should not exceed $10 per month.
- Is there a statement fee? Again, should be waived.
- Is there a batch fee? This should not be in excess of 10 cents.
- What’s the transaction fee for American Express? Should not be any higher than 15 cents.
- Is there a fee for setup? It should be waived other than when you’re investing in software or equipment.
- Is there a fee with the application? It should be waived.
- The PCI compliance fee shouldn’t exceed $100 per annum.
- What are the funding times? Depending on your method of payments transaction, funding times should be 24 to 48 hours.
4. Understand the customer service that is available to you.
Customer service and tech support is available 24/7 from all reputable processors and at no additional charge. Also, your rep should be available to help you out as and when needed.
5. Know your software and equipment.
If you do use a credit card terminal for swiped credit card transactions, you will already be up to date with the chip technology used for EMV (EuroPay MasterCard Visa).
However, if you wish to have it installed, find out about the cost, and if there is an option for free equipment as an exchange for a modest contract term. Do not be tempted to lease as it is too expensive. And be sure that your payment gateway or terminal offers all the functions you require if you process in a card-not-present fashion.
As an example, is it going to save time by having your customers’ credit cards charged monthly rather than having a person who will charge it on a manual basis each month? There’s no need for this additional labor as you can use an inexpensive virtual terminal solution like PayHub.com which costs less than $10 per month.