Before a company opens its doors, either physical or virtual, for business, they need a merchant account. These types of accounts may be available through the same bank where they have their business checking or through a dedicated provider. Although it won’t be hard to find a provider, getting the best rates may take some concentrated effort. Small business owners should start by learning all they can about how merchant accounts work so they know which fees they should pay and which ones they should negotiate.
These types of fees are paid every month. They typically represent the credit card processor’s overhead. Some processors charge merchants a fee to get their monthly statement in the mail. They may also charge a fee to businesses that fail to reach a minimum amount in sales. These fees vary by provider and may be negotiable. Small business owners who are in the market for a merchant account should compare these monthly fees among providers.
Part of these fees are negotiable while the other part will be the same regardless of the credit card processor. The interchange fee is charged by the credit card association or issuing bank. The processing provider must pay that fee so it is passed on to the merchant. The charge above the interchange rate is the markup. The markup quoted may vary based on the credit rating of the business or their relationship with the bank or dedicated credit card processing company.
These fees on merchant accounts are not quoted as a percentage of the charge. They include things like PCI compliance or noncompliance, terminal leasing and payment gateway fees. Savvy business owners avoid some of these fees by purchasing a terminal instead of leasing one and using a provider that has its own payment gateway. Companies that must pay the compliance fees should be sure their provider is performing the service.
The question on many business owners’ minds after learning the basics is How to find merchant accounts. Many banks that offer business services offer them. There are also services like Paypal and others that process payments online. Once the company finds and contacts a few companies, the next task is to compare their rates and sign a contract with the service that offers the most affordable fees.
Small business owners must remember that they pay these fees after the customer completes the transaction so the charges come out of their profits. While credit card processing might be necessary business expenses, entrepreneurs who don’t understand the pricing structure could find that the prices they charge their customers simply aren’t high enough to cover their costs.
Taking the time to learn what to look for in a good merchant account contract and how to negotiate for the lowest fees can help a young company make the most of their ability to process credit card payments. Having a reliable and affordable provider can make owning a business a very rewarding experience for a new entrepreneur.