The number one issue for business owners regarding credit card processing is COSTS! In fact, depending on the business, credit card processing fees can add up to hundreds of dollars each month, if not thousands. In all honesty, if you believe you’re paying too much, you probably are.
Smart business owners will review the 8 essential tips below to optimize their payment processing strategy.
Tip #1: Gain an understanding of payment terms and processes
Every industry has its lingo, including payment processing. Learning common words and processes used by payment professionals will help business owners get good rates and avoid pitfalls. Learn the players involved in credit card processing, including issuing banks and merchant banks. Look into interchange rates and other potential transactional fees before speaking with a payment provider. Dive into security issues as your business has a liability stake in this game.
Tip #2: “Free” merchant accounts do not exist
It’s tempting! We’ve all seen ads on Google flashing “free merchant account”… “free terminal and set up” … “same day approval.” This sounds too good to be true, and frankly it is.
Advertisements referencing free merchant accounts are typically referring to application fees. All businesses will pay three transactional fees: 1] an interchange fee to the card-issuing bank; 2] fees to the card brands (e.g., MasterCard, VISA, etc.); and 3] a fee to the credit card processing company. It’s a waste of time to seek a free merchant account. Instead, spend your time looking for a processing company that offers transparency in their rates.
Tip #3: “Free” credit card machines do not exist
Similarly, ads for free credit card processing machines are abundant on Google. And likewise, this is too good to be true. If a credit card processing company offers “free machines,” they will surely make up for the cost elsewhere through higher rates. In the end, a business will pay far less by getting a competitive price on a machine and then receiving competitive interchange pass through rates.
Tip #4: Great processing services may be cheaper than Square
Square has name recognition but it certainly isn’t the only legitimate service that can turn a smartphone into a credit card processing device. Alternate services can be not only reliable and secure, but much more affordable.
Tip #5: Tiered pricing is bad… always get interchange plus rates
Tiered pricing (also called “bundled pricing”) is offered by some credit card processing companies. They may quote three rates: 1] qualified, 2] mid-qualified, and 3] non-qualified rates. This type of pricing structure is not only expensive, but typically riddled with hidden fees and pricey surcharges.
Instead, businesses should seek out a pricing structure known as interchange plus pricing (aka interchange pass through). Interchange is basically wholesale pricing, and interchange plus simply involves the wholesale rate plus a processing fee. This is typically the most transparent and least expensive credit card processing model.
Tip #6: Quickbooks credit card processing is pricey
Quickbooks is a popular accounting solution for small businesses. However, using it for credit card processing services will most definitely involve premium rates. It may provide a needed convenience factor for some, but the higher fees are generally not worth the price.
Tip #7: Never sign a contract
There is simply nothing good about contracts with respect to merchant accounts. They typically offer no guarantees that rates won’t increase, and they often include cancellation fees.
Tip #8: Compliance is serious business
Every business MUST take credit card security seriously as they are liable for a breach. PCI DSS (Payment Card Industry Data Security Standard) are requirements set by the PCI Security Standards Council to ensure that all companies that process, store, or transmit credit card information maintain a secure environment. Any loss of cardholder data can result in huge fines if a company experiences a breach when not PCI compliant.
Successful small businesses use digital payment processing systems because of the ease of acceptance as well as the convenience both for themselves and for their customers.
Be cautious when selecting a digital payment processing partner, first because it’s critical to understand all costs and fees involved. Good partners make their fee structures simple and transparent. Second, a reliable payment processor will be able to confirm details and statistics regarding their system capabilities and network security.