Starting a new retail business, whether online or traditional or both, can be a truly daunting task, filled with a multitude of decisions that can pull you away from your primary goal of growing your new and fledgling enterprise. Providing convenient ways to pay for your customers, however, is a key area that demands time and effort up front, before you ever register your first sale.
Choosing a Provider – Don’t be Distracted!
The process starts with finding an appropriate merchant processor that can support your business model, both now and in the future, in a dependable and cost effective manner. Helping you acquire this new business partner is our mission at MerchantSeek.com, and we take that commitment very seriously. In that regard, knowledge is power, especially when you begin a critical decision-making process. After reading this checklist of things to know on the front end, you will want to read many of the articles and information pieces on our website to familiarize yourself with the merchant payment industry.
Yes, accepting a simple payment device from your customer can appear complex at first, but the entire process has developed considerably over the past forty years, such that the service has become a commodity. There are many suppliers and agents in the market that will compete for your business, many using slick marketing tricks to attract your attention. Try not to be distracted. Do comparison shop! Our staff will help you find a highly qualified group of options to pick from, since we are involved “24X7” in this business and have already done most of the work for you.
Here you can compare some of the most popular and trusted providers>>
So, What is the All-in Average Cost You Should Expect?
The Merchant Discount Rate, the amount your processor will deduct from each sales slip, whether for credit, debit, or other payment instrument, tends to be the early focal point when evaluating service proposals. Some firms may offer rates below one percent, but be wary. The average all-in cost for merchant services is roughly three percent, a combination of the discount fee and a variety of other monthly recurring charges.
If you anticipate $500,000 in annual revenues from payment cards, processing costs can be as much as $15,000 or more a year, depending on your individual business model. If the card is present and a terminal reads the information on the magnetic stripe, then your costs may be lower, but if you are online, or take telephone orders, or deal in a high-risk business like electronics or jewelry, then your rates may be much higher. Organized crime preys on the unwary in the payments industry, and banks have had to be extra cautious, the reason for many of the rules that must be followed.
Why do They Need All This Information?
Applying for a merchant servicing contract is essentially the same as applying for a loan. The bank that stands behind the processor will demand a great deal of information in order to make their underwriting decision. Fraud is the key issue, and one way that banks protect themselves is by requiring a reserve account, basically a deposit of your money to cover the risk of chargebacks or fraud on your merchant account. Terms are always negotiable, but these reserves tend to come out of your initial deposits over your first few months of service.
Here Are The Questions YOU Want to Ask Them!
Initially, however, sales representatives will ask for a brief description of your business model in order to prepare a proposal for your review. Here are the questions that you will want answered in their written proposal:
- What is the discount fee? How often can it change?
- Are there any other monthly or recurring charges?
- What kind of equipment will suit my needs? What are the installation and operating costs per month?
- How many days before I will see good funds in my merchant account?
- Are there any special one-time-only set-up fees?
- Is there a minimum period before termination charges may apply if I decide to switch? Can the processor terminate my account at will or is there a notification period?
- Who is responsible for fraudulent transactions? Can I buy protection?
- What are chargebacks? Who pays and what fees apply?
- Will a reserve account be required? How much and how will it be collected?
- Besides Visa and MasterCard, what other payment types do you support? What will these cost?
- What happens when something goes wrong? Do you have a “24X7” customer service hot line that I can call for immediate service?
Read your Service Agreement Carefully
Some firms will present their proposal in an explanatory letter but also include a detailed service agreement with the applicable information inserted in the appropriate place in their contract. If you do not get a sample of your intended service agreement, request one. You will want to read every line of it since you may find a surprise or two. There may be restrictions that will not work for you. There may be termination rules that you do not like. There may also be minimum monthly volumes or transaction limits that could affect your costs, as well. Read the contract carefully and ask questions.
Know Your Business and Financial Situation
Once you have made your choice from at least three proposals, the detailed paperwork begins. Details of your type of business, average transaction size, weekly deposit rate, whether the card will be present or not, how many return items do you experience, your merchant category code for fraud purposes, and a wealth of information about your personal credit and work background must be included in your merchant account application. You are basically applying for an unsecured business loan, a risky proposition for the bank, even without the potential for fraud. Accept it, and move on.
If all goes well and you sign on the dotted line, a merchant account will be opened for your business and the appropriate Point-of-Sale equipment will be delivered and installed in due course. We at MerchantSeek.com deal with these issues on a daily basis. We know the right questions to ask and what answers to expect from the best in the business. We have already done much of the hard work for you, and look forward to matching you up with the best merchant processing solution available today and for the long term.
Below is a list of recommended providers. Here, you can find a more detailed comparison.