Are you in the process of finding a merchant account provider and setting up credit card processing services for your new business? Congratulations! You’re one step closer to success.
If this is your first business, you’ve likely learned a lot as you progressed through the monotonous series of steps and procedures required to get a business up and running.
You’ve probably asked a ton of questions and your brain may be overflowing with information. But now that you’re so close to your first sales, don’t stop asking questions. There are still things to know, especially about important pieces in the equation, such as setting up merchant accounts for small businesses.
Even if you have credit card processing history with your business or a previous business, you may still have some questions. Here is some general information that may answer some basic questions:
What is a merchant account?
Okay, it may be obvious to some, but it’s a fair question. A merchant account is an agreement between a business (merchant) and a merchant acquiring bank (or processor) that enables a business to accept and process customer debit and credit cards for sales.
Do I need a merchant account to take credit cards?
Whether a business takes credit cards in a brick and mortar store by swiping cards through a traditional credit card terminal or at checkout in an online store, a merchant account is necessary to process those transactions.
Depending on the type of business and transactions, a traditional merchant account may not be necessary. Low volume merchants with fewer credit card transactions can get away with a smartphone credit card processing solution. Be aware, however, that these basic solutions are less expensive at lower volumes, but will actually cost more as volume increases.
Any business that plans to grow to a moderate transaction volume should consider a traditional merchant account, as it will certainly be beneficial and more economical in the long run.
What does a merchant account cost?
Unfortunately, credit card processing is not free. As far as what the merchant account costs, the only answer is “that depends.”
In addition to a low monthly merchant account fee, the business pays a percentage for each transaction. Rates may vary between different merchant account providers, but will be relatively competitive. It’s rarely a matter of comparing apples to apples, and understanding rates is a challenge. Providers sometimes make it confusing on purpose. However, providers with much higher rates stand less of a chance of earning the merchant’s business and holding on to it for long-term.
When processing a moderate to high volume of transactions, the bulk of the merchant account cost will be transactions costs. Obviously, the more transactions, the more sales and the higher the total costs.
When discussing rates with a provider, they may quote several rates, which can be confusing. Ranging from 2-5%, rates vary based on several factors, including the type of card used. Business credit cards and rewards cards typically have higher rates.
Aside from the monthly fee, it’s important to ask a processor about additional fees that will be charged. A common complaint among merchants is the hidden fees that show up on monthly statements. Sometimes providers fail to mention fees such as equipment rental, security compliance and customer support. And make sure to ask about any early termination fees.
Is credit card processing secure?
The short answer is yes. Major credit card associations go out of their way to ensure that credit card processing is as secure as possible. Merchants are required to adhere to strict guidelines and be in compliance at all times.
And new measures, such as the EMV liability shift, are in place to encourage merchants with customer-facing sales to adopt and implement EMV chip terminals. While antiquated magnetic strips transmitted data statically, leaving data susceptible to thieves, EMV chips in credit cards encrypt data before transmitting.
As long as a merchant stays in compliance and keeps the interests of both the business and customers at the forefront, credit card processing security should be nothing to worry about.
I think I’m being overcharged. Can I cancel and sign up with a new merchant account provider?
It’s not uncommon for a business that has been processing for several months or even several years to feel that they are being overcharged. Credit card companies can have rate adjustments on average of 1-2 times per year. These changes can increase the merchant’s rates and fees and make it seem that the provider is overcharging.
Can a merchant cancel services with a provider and find a new one? Again, this depends. The agreement between the merchant and the merchant account provider is a detailed contract. Typically, the contract will have a specified term of up to 36 months.
The contract may include an early termination clause. Should a merchant decide to end the contract, it may come with an early termination fee that must be paid. This amount can be significant, so it will take some careful consideration on the part of the merchant before deciding to cancel.
How can I find a merchant account provider with better rates?
Shopping around to find better rates is easy with any online search. It’s important to remember, however, that comparing rates from different companies is very difficult. A merchant account from a provider that seemed to have the lowest rates, can end up costing more in hidden fees.
At Bevel, we offer a FREE rate analysis. We’ll spend time dissecting your existing merchant account statements and determine how we can save your business as much as 60% of your existing fees.
How do I save money on my merchant account?
At Bevel, we’ve been assisting businesses with merchant account services needs since 1998. Our knowledgeable staff are experts in all areas of credit card processing. If you are looking to save money or have additional questions about merchant accounts, we’d love to help!