“Merchant services” is a term that usually describes the equipment and accounts a business requires for it to be able to accept credit card payments. Almost all types of businesses that make use of credit and debit cards need a merchant account. A merchant account is essentially an unsecured credit line.
When the credit card is used for a sale, customers are given a certain amount of time to pay off their cards. It would hurt businesses to have to wait for a long time so funds from these transactions come out through a merchant account. The total of the daily sales is gathered for settlement and processing. The funds from your merchant account are deposited into your business’s checking account which usually takes two days. You need a Merchant Service Provider (MSP) to acquire a merchant account.
You cannot just walk into a bank to get an account. Your service provider will be the one who will set the rates and fees of your merchant account. Almost all MSP’s cover the same cost but rates monthly and per-item have different fee structures. You may be charged with varying fees such as cancellation fee, annual fee, application fee and a monthly minimum fee. These fees accumulate throughout the month and are withdrawn lump sum.
Your provider will also be in-charge of the equipment needed for transactions involving the use of credit and debit cards. There are instances where customers will require a mobile device or credit card terminal for their payments to be processed. A good merchant will recommend the best equipment for your business. They will also program it for you and allow it to be tested. A representative should also be available to train you with its use.
A payment gateway is needed to make transactions online. This captures data in the credit card for encryption and sends it to the network for payment. Your MSP should also set this service up for you. Merchant services are not really that complex. However, their pricing schemes can make it a little confusing.
Hidden Fees and Overpayment
There are a lot of additional fees that can be charged to your account. These fees include annual fees, set up fees, statement fee, PCI compliance fee, application fee, batch fee, IRS fees and monthly minimums.
Although these fees may seem necessary for a merchant service, they are not. You should be informed about these charges before agreeing upon anything. If by the end of the month, there are unexpected fees charged to you then it would be best to use a different processor for your credit card. Be sure that your new processor will be entirely transparent about service fees that will be charged to you.
Always ensure that you completely know the pricing plans before signing up with a merchant. Remember that everyone is required payment for interchange. An interchange is your credit cards direct cost from credit card establishments. It doesn’t matter who your provider is, interchange will be the same for everyone across the board.
When establishing the prices to process payments, merchants tend to be deeply concerned. The cost is probably the most important factor in deciding which processor to choose. Most of the time merchants do not get the price promised to them. This can be frustrating for a lot of them. It is important that the merchant has an understanding of the different pricing in the industry.
There may be moments when a sales person is not trustworthy. An email or verbal quotation should never be accepted. It is also critical to read and understand the contract to ensure that the right pricing is received.
Competition
You can use the information and rates of different merchants to negotiate your price while shopping. You can use to your advantage the knowledge of the different services offered by different merchants. There are a lot of previous cases where clients come with quotes which were below interchange. These inexpensive offers sometimes are too good to be true.
Knowledge of the industry and interchange is going to help you detect techniques which are shady. Most processors’ documents for application are strictly confidential and must not be shared with anyone. Just be careful in discussing rates and quotes verbally with a merchant. However, walking away with the best offer and value you could get must still be a priority.
Unaware of Contract Terms
It is critical to ensure that before you sign a deal, you fully understand the contract terms. You need to be aware of the different processes for termination and cancellation of fees. It is also important to know if your contract is automatically renewed. Most contracts by merchants include a clause that auto renews for a few more years. There are also services offered that operates monthly. This allows you to cancel a subscription without the hassle and fees.
Whenever an agreement is processed, a bond is formed between a processor and merchant. This duration is known as a contract term. A contract should always exist between a merchant and processor. One of the reasons is because of its cost.
A start-up company should give importance to early cancellation fees. No matter how much effort you put in into a business, it still does not guarantee your success. There are incidents when a business closes down because it is unsuccessful. When you are financially vulnerable, you must make sure that your business is secured. This is where the importance of cancelling fees before an agreement comes in.
There are processors that are quite good for start-ups because they offer flexible services catered to these types of businesses. Always ask about the penalty for the cancellation before considering any processor. Processor’s with a good reputation tries their best to understand people with these concerns.
Different types of processors will offer different solutions. It is important that you find the most practical solution to the said problem. If you’re sensing that your processor is unable to address the problem, then you need to move on to a new processor that can help you.
Volume Commitments
A merchant may need to satisfy certain processing agreements that come with volume commitments. Once a month, a merchant is required to process a certain amount. If a merchant is unable to satisfy the required volume commitment, there will be an increase of discount rates. There are even cases that penalties will be applied.
Other countries do not practice this. It is usually prevalent in credit card processors based in the US. These commitments are considered to be unfair by mid-sized and small businesses and will considerably hurt start-ups. You have to make sure that no volume commitment is going to exist on your agreement.
There are a lot of pricing tricks in this industry. It will really matter if you understand how rules are applied. You don’t wish to see yourself signing an agreement with a merchant that has a clause you were completely unaware of. This mistake will surely have an impact on your brand.
However, you should not confuse volume commitments with monthly minimum fees. A monthly minimum fee is a requirement to help processors cover the costs on inactive or dormant accounts. As long as the fee is disclosed clearly and reasonable, a minimum monthly charge is fair.
Although it is important that you be aware of these existing negativities, there are still processors who are hardworking and honest. You need to keep in mind that your processor also makes a few amounts for every sale that is processed.
The best merchant services provider will see to it that they support you in reaching your goals. It is not easy to find a good processor that will assist you in setting up your account. It is also important that you know some of the most prominent red flags. Discuss with your processor any questions and concerns regarding your agreement. Whenever you try to seek advice from them, they should be able to provide you with a knowledgeable and direct response.
Your internal radar can also be trusted. When you receive an offer that appears a bit shady then you should just trust your instincts and find a new processor to solve your problems. Being informed and educated, you will be able to establish your business in the virtual world.
Almost all businesses today accept credit cards as payment. Credit cards are a must nowadays to achieve easier ecommerce transaction for businesses online. This allows consumers to enjoy the convenience of buying with a card as well as the security it offers. Transactions through credit card can be convenient especially in emergency situations. All you need is one swipe for a payment to be processed.
It can be costly to accept credit cards if you are not educated with the several charges put on merchants by different service providers.
Do you want to hire a company that offers the best provider for merchant services? Go to CrowdReviews.com and read their reviews of merchant services.
Keith Moore
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