Very few people still carry around cash in their wallet; some are even using their phones as a way to settle payment at a cash register. It must seem utterly impossible to run a business without being able to accept some kind of plastic or electronic payment.
So start processing credit cards! Sounds easy, right? Many businesses, large and small, learn that it is most often not as easy as 1, 2, 3. There are many important steps along the way and plenty of challenges to face. While credit card processing companies have been around for years, there are a few things that business owners just don’t seem to understand about credit card processing.
- Read the Terms & Conditions
When deciding to partner with a credit card processor, a business owner may talk to sales people along the way. During the application process, every applicant must read and agree to the Terms & Conditions. Very often most users tend to skip to the bottom of a T&C agreement and simply click through. It is important not to skip over that part of the application. Use the Terms & Condition to your benefit to look for red flags. Make sure there is nothing in the terms about fluctuating pricing or fees that can be applied later on and avoid future frustration. Having a full understanding of the company with which you are going into a serious financial agreement will save you many headaches down the road.
- The Terminology
Even though you may be itching to plug in a credit card reader and start accepting payments, it is a good idea to know a bit about the role assigned to each entity during a transaction.
Merchant – The merchant or business that engages in the exchange of goods or services for payment.
Acquiring Bank or Merchant Bank – The bank that contracts with the merchant, provides the merchant with the needed equipment and deposits the money into the merchant’s bank account.
Issuing Bank –The financial institution that issued the credit card to the consumer.
Customer – An individual who wishes to pay for items or services.
These are merely the basic terms you will find in agreements and payment processing but there are many others with which to familiarize yourself.
- Meeting Revenue Requirements
There are many credit card processing companies on the market. However, meeting a monthly revenue requirement (sometimes as much as $10,000) is often a necessity for larger processing companies. If your company doesn’t meet those requirements, there is a good chance that your application is turned down from the get go. Have no fear; there are a handful of processors that cater to business of all sizes.
- The Processing Fees
There are a number of fees that are all compiled into the transaction including gateway fees, a monthly statement fee, average discount rates, the transaction fee, the address verification fee, etc. It is important to know that both the merchant bank and the issuing bank must pay something for the transaction service and therefore the merchant doesn’t receive the full amount the customer paid for the product.
There is also the problem with chargebacks. As soon as there is a request from the issuing bank to the acquiring bank for a disputed charge, the merchant account is marked. When too many chargebacks have occurred at one place of business the company is marked as an “excessive chargeback merchant” and eventually becomes liable for lost fees if they go out of business.
The cheapest option is not always the best. There are reasons why credit card processing companies charge the fees that they do. When you choose a low-cost processor, take the time to find out how strong their security system is. Your processor should have proper security standards and compliance requirements for small and large businesses alike.
- Finding the Right Credit Card Processor
It doesn’t matter if your business is large or small; you are not limited to only one option. There are many things to be considered when deciding and many of them depend on you and your business. Where is your business conducted? What kind of business is it? When you run a mobile business it’s important that your payment system be mobile and flexible as well. If you are running an online store, it may be important to consolidate online and offline sales data. Be prepared with all of this information and seek out a credit card processor that seems to have your best interest at heart. If you’re feeling lost or have too many questions about shifting your electronic payment providers, contact E·Pro Consultants for a free consultation on your business’ payment systems today.