What Should the Service Cost?
The cost involved with credit card merchant account services is an important consideration. After all, not only do you need to retain a service to process the payments and pay what their applicable fees may be, but you also need the equipment with which to do the actual credit card processing.
Equipment: The credit card terminal itself is the biggest up-front investment you will make. This is the machine that you and I use when we swipe our credit or debit card at check out. For the most basic models, you can expect to pay between $150-$700. Wireless terminals may run from $500-$1000, and in some instances even higher, depending on how sophisticated the machine is. Many businesses simply lease a machine, which can cost as little as $20 a month. The cost depends on how elaborate the machine is and how the different features work. If you plan to incorporate credit card processing into your business long-term, you may want to go ahead and make the initial investment in a machine. If you are simply going to try it out and see how it goes, then lease a machine at first and once you determine you want to accept credit cards permanently, then go ahead and make the purchase.
In some instances, you can get a terminal as part of your package when setting up a merchant account. Purchasing the terminal as part of a package may save you money versus buying a separate machine. However, you also may use your computer to conduct credit card processing online and verify transactions with a virtual terminal program and a sound Internet credit card processing company.
You also can verify information over the phone with your customer and process the card manually, though this tends to take more time than an electronic terminal. In addition, you run the risk of verifying the funds at the moment of the sale, but when you actually have your company process the charge, those same funds are no longer available.
The other major price you will pay for using a merchant account provider is the discount fee. This is the percentage of money that each provider may charge you for every customer transaction. The card associations (Visa MasterCard Discover and American Express) determine the majority of the fees that you will incur and the processors will determine what your total costs based on the risk they are taking with your company. They will consider your credit history and the amount of the charge and the type of transaction you are processing. In addition, many credit card processors have two rates: one for transactions in which the card is absent (think Internet purchases) and one where the card is present and the transaction is immediate.
This is where the process gets tricky, because some providers will charge fees in addition to the discount fee. There can sometimes be a non-refundable application fee, which can be in excess of $200-$300. Other companies charge an activation fee of some sort and still others charge a set-up fee.
Get all fees and charges in writing and be wary of agreements that requires a bunch of exorbitant fees up front. Everything from customer service fees to programming costs and more can be slipped into your contract. Instead, keep shopping around until you find a reputable company that is willing to work with you at a price you feel is fair.
Finding and signing with a reputable merchant account provider should be a priority. You may have to agree to a higher transaction fee, but it’s worth it to go with a company you can trust.
Most merchant account providers charge a discount rate between 1.5 and 2 percent for transactions in which the credit card is present. For those transactions where the card is not physically present (credit cards used online),the discount rate can fall between 2.2 and 3 percent Some companies require a monthly minimum, usually around $20.