By Thomas Morva
Credit card payment is one of the most popular payment options on the Internet. If you own a small business and do not have a merchant account, you might find it difficult to accept credit cards. However, it is advisable to find a means to accept credit cards on your website because it is the best way to expand your customer base. Moreover, the money transaction will take place within a week.
Small businesses can accept credit cards through 3rd party processors, who will handle the entire processing. For the small business community where cash flow is less or sometimes tight, this is a most welcome alternative. Credit card processing is not very cheap. A standard fee schedule for a small-volume account with less than 1,000 monthly transactions would be a start up fee of around $200, and monthly processing fees of $20.
If you have your own website, secure and encrypted connections are the foremost requirement you need for safe credit card processing. You should also have fraud prevention tools to prevent credit card scams.
Credit card processors whom small business owners can rely on are of several types; banks are the most dependable though. Third party credit card processing companies, independent sales organizations, financial service providers, etc. act as credit card processors. While there are several credit card processing companies, the two important factors that one should look at before setting up an agreement would be "price" and "customer service potentiality" of the credit card processors.
The merchant account provider you sign up with, might require an assurance that you have a thorough knowledge of your business environment, can identify the possible risks, know how to prevent or reduce fraud etc.
Saturday, July 11, 2009
Friday, July 3, 2009
Credit Card Processing - Beware The "Bill Back Statement"
By T. L. Lindemood
When credit card processing companies use bill back statements, their discount rates and fees are broken up and charged over a period of a couple of months, rather than appearing clearly on one single monthly statement. To illustrate: statements for the month of April will contain basic fees and a portion of the discount charges for transactions run in March, but all of the downgraded charges won't show up until May's statements. (April's statement will have February's downgrades).
To confuse matters even further, the downgraded transactions are not linked to an exact sales volume. Instead, the statements simply show the number of transactions being downgraded and a downgrade fee. Think about it: If a business owner can't compare the downgrade charges against an exact dollar volume, how can he or she tell what discount rate is being charged? Further, if that merchant was already charged a partial discount rate on that same volume in the prior month, what is the likelihood that he or she would know (or remember) to add that amount to this downgrade charge? With this billing option, there is no easy way to determine how much is being charged for each type of transaction without doing a significant amount of legwork and research.
Recently, I conducted a rate review for a local business owner who was set up with this type of billing statement. After going back through several months of transactions, it became evident that she was being charged as much as 4% on certain transactions and was averaging around 3% on all transactions. She had no idea she was paying that much because her sales agent had quoted a very low rate (that applied only to her "swiped" debit card transactions). Of course, she thought that rate applied to all of her transactions and her statements made it difficult to tell exactly how much she was paying. Imagine her surprise when she learned she had been significantly overpaying throughout the duration of her current contract.
In my opinion, the only reason a processing company would use this billing technique is to keep their customers in the dark about how much they are charging. If your current provider is utilizing this type of billing structure, you might want to ask yourself what else are they hiding from you?
When credit card processing companies use bill back statements, their discount rates and fees are broken up and charged over a period of a couple of months, rather than appearing clearly on one single monthly statement. To illustrate: statements for the month of April will contain basic fees and a portion of the discount charges for transactions run in March, but all of the downgraded charges won't show up until May's statements. (April's statement will have February's downgrades).
To confuse matters even further, the downgraded transactions are not linked to an exact sales volume. Instead, the statements simply show the number of transactions being downgraded and a downgrade fee. Think about it: If a business owner can't compare the downgrade charges against an exact dollar volume, how can he or she tell what discount rate is being charged? Further, if that merchant was already charged a partial discount rate on that same volume in the prior month, what is the likelihood that he or she would know (or remember) to add that amount to this downgrade charge? With this billing option, there is no easy way to determine how much is being charged for each type of transaction without doing a significant amount of legwork and research.
Recently, I conducted a rate review for a local business owner who was set up with this type of billing statement. After going back through several months of transactions, it became evident that she was being charged as much as 4% on certain transactions and was averaging around 3% on all transactions. She had no idea she was paying that much because her sales agent had quoted a very low rate (that applied only to her "swiped" debit card transactions). Of course, she thought that rate applied to all of her transactions and her statements made it difficult to tell exactly how much she was paying. Imagine her surprise when she learned she had been significantly overpaying throughout the duration of her current contract.
In my opinion, the only reason a processing company would use this billing technique is to keep their customers in the dark about how much they are charging. If your current provider is utilizing this type of billing structure, you might want to ask yourself what else are they hiding from you?
Tuesday, June 23, 2009
Credit Card Processing - 7 Tips to Save Money on Your Merchant Account
By T. L. Lindemood
If your business accepts credit cards, there are a number of ways you can reduce the amount you pay in fees for your merchant account. This article will help you identify any 'leaks' in your current merchant account and explain how to best handle transactions at the point of sale.
Here are 7 effective ways to save money on your merchant account:
1.) Double check the customer's signature against the signature on the back of his or her credit card. Make sure they match. If the card is not signed, get another form of ID to verify this information.
This one sounds simple, but think of how rarely this happens when you buy something with a credit card. This can be tricky as sometimes the last names will match up, but not the first. You'll have to make a judgment call here, but keep in mind that situations like divorce or a child using a parent's card without permission do occur. Making sure both first and last names match will help prevent charge backs and disputes, which typically result in fees to merchants of $25 to $40.
2.) Make sure you 'batch out' every day you accept sales. Transactions left sitting for longer than 24 hours will downgrade - and cost you more in processing fees.
3.) Swipe the card whenever possible vs. keying in the transaction. Try running it through the reverse direction if it doesn't 'take' on the original swipe. Transactions tied to a 'swiped" card are normally passed through at the lowest possible discount rates. The reason for this is that the risk is lower if a card is physically swiped.
4.) If the magnetic strip isn't working or you find you have to key enter a transaction - make sure you obtain the zip code of the customer that matches his or her billing information. This is important, because if the zip code isn't provided (or doesn't match) - you will end up paying a higher rate on that transaction.
5.) Make sure your merchant account is set up so that your business name and phone number appear on the customer's receipts. Also, you'll want to have it set up so that your phone number appears on the description line of your customers' credit card bill. The reason for this is that you want to provide open lines of communication between your customers and yourself. That way, if there are looking at their receipt or monthly credit card statement and have a question, they will call you vs. their credit card provider. (If they can't easily figure out where a charge originated from and call their credit card company, it can end up costing you anywhere from $10 to $40 in retrieval or charge back fees).
6.) If the terminal is prompting for corporate card data (i.e. the tax amount on a sale) - do NOT bypass that prompt. Providing that information will also help you qualify for lower rates than if you don't go that extra step.
7.) Ask your processor for a lower discount rate if you accept a significant amount of debit/ check cards. Generally, merchants with a smaller ticket size will see a large amount of these cards and the discount rate is always lower than on credit cards.
There you have it - 7 easy ways to save money on your Merchant Account.
These tips are all fairly easy to start implementing immediately - and you should start seeing significant savings as soon as your next billing cycle. However, make sure your current processing company will allow you to take advantage of these cost-saving efforts. Not all will, simply because they make more money on your downgraded transactions than on your swiped, or qualified, transactions.
If your business accepts credit cards, there are a number of ways you can reduce the amount you pay in fees for your merchant account. This article will help you identify any 'leaks' in your current merchant account and explain how to best handle transactions at the point of sale.
Here are 7 effective ways to save money on your merchant account:
1.) Double check the customer's signature against the signature on the back of his or her credit card. Make sure they match. If the card is not signed, get another form of ID to verify this information.
This one sounds simple, but think of how rarely this happens when you buy something with a credit card. This can be tricky as sometimes the last names will match up, but not the first. You'll have to make a judgment call here, but keep in mind that situations like divorce or a child using a parent's card without permission do occur. Making sure both first and last names match will help prevent charge backs and disputes, which typically result in fees to merchants of $25 to $40.
2.) Make sure you 'batch out' every day you accept sales. Transactions left sitting for longer than 24 hours will downgrade - and cost you more in processing fees.
3.) Swipe the card whenever possible vs. keying in the transaction. Try running it through the reverse direction if it doesn't 'take' on the original swipe. Transactions tied to a 'swiped" card are normally passed through at the lowest possible discount rates. The reason for this is that the risk is lower if a card is physically swiped.
4.) If the magnetic strip isn't working or you find you have to key enter a transaction - make sure you obtain the zip code of the customer that matches his or her billing information. This is important, because if the zip code isn't provided (or doesn't match) - you will end up paying a higher rate on that transaction.
5.) Make sure your merchant account is set up so that your business name and phone number appear on the customer's receipts. Also, you'll want to have it set up so that your phone number appears on the description line of your customers' credit card bill. The reason for this is that you want to provide open lines of communication between your customers and yourself. That way, if there are looking at their receipt or monthly credit card statement and have a question, they will call you vs. their credit card provider. (If they can't easily figure out where a charge originated from and call their credit card company, it can end up costing you anywhere from $10 to $40 in retrieval or charge back fees).
6.) If the terminal is prompting for corporate card data (i.e. the tax amount on a sale) - do NOT bypass that prompt. Providing that information will also help you qualify for lower rates than if you don't go that extra step.
7.) Ask your processor for a lower discount rate if you accept a significant amount of debit/ check cards. Generally, merchants with a smaller ticket size will see a large amount of these cards and the discount rate is always lower than on credit cards.
There you have it - 7 easy ways to save money on your Merchant Account.
These tips are all fairly easy to start implementing immediately - and you should start seeing significant savings as soon as your next billing cycle. However, make sure your current processing company will allow you to take advantage of these cost-saving efforts. Not all will, simply because they make more money on your downgraded transactions than on your swiped, or qualified, transactions.
Tuesday, June 16, 2009
Credit Card Processing - Discount Rates and Transaction Fees
By Michael Rupkalvis
In the competitive business environment that exists today, it is critical you give your customers many options to pay you for your products and or services.
Setting up a merchant account so you can accept credit cards from your customers is one of the most, if not the most, important initial decisions you'll make when you start a new business. The following article will explain discount rates and transaction fees so you are better prepared when it comes time to pick a company for credit card processing services.
Discount rates and transaction fees go hand in hand. These are the fees you pay to process a credit card transaction. The discount rate is a percentage that is deducted from the total amount of the sale. For example: If your qualified discount rate is 2.20% and you charge a customer's credit card $100, then you would pay $2.20 to process that transaction. But that is not all - you also pay a transaction fee as well. If you have a transaction fee of 25 cents, then your total cost to process that $100 dollar credit card transaction would be $2.45.
What do you mean by qualified discount rate? The discount rate you pay will not always be the same percentage. It will change based on a number of factors, such as card type and how you actually process the card. Most personal debit and credit cards will fall into the qualified rate category. However, if you take a corporate, business, government, international, or personal rewards card, you will pay a higher discount rate on these types of cards. The discount rate on these types of cards can range from 1% to 2% over the qualified rate. This means that if your qualified rate is 2.20% and you accept an international card, your rate could be as high as 4.20%. Over time this can add up, so it is very important you factor this into your pricing when deciding how much you are going to charge for your product or service, especially if your plans include doing a lot of business to business transactions or selling internationally.
Another factor that influences the discount rate you pay when credit card processing is how you process the credit card. Merchants that swipe credit cards usually pay a lower discount rate than merchants that key in credit cards using an internet merchant account. The qualified rate for a merchant that swipes credit cards will usually be close to 1.80% but a merchant that keys in their transactions will pay a qualified rate of 2.40%. The reason for this is risk. Visa/MasterCard feel there is less risk of the transaction being fraudulent or disputed if the customer is present during the transaction and the merchant is able to swipe their card through credit card processing hardware or software.
Most credit card processing companies will only refer to their qualified rate when they advertise or try to sell you over the phone - so it is important you ask about qualified, mid qualified, and non qualified rates too when choosing a company for credit card processing services.
Michael Rupkalvis manages The Transaction Group website. The site offers information about credit card processing and provides merchants with cheap credit card processing rates, along with excellent customer service.
In the competitive business environment that exists today, it is critical you give your customers many options to pay you for your products and or services.
Setting up a merchant account so you can accept credit cards from your customers is one of the most, if not the most, important initial decisions you'll make when you start a new business. The following article will explain discount rates and transaction fees so you are better prepared when it comes time to pick a company for credit card processing services.
Discount rates and transaction fees go hand in hand. These are the fees you pay to process a credit card transaction. The discount rate is a percentage that is deducted from the total amount of the sale. For example: If your qualified discount rate is 2.20% and you charge a customer's credit card $100, then you would pay $2.20 to process that transaction. But that is not all - you also pay a transaction fee as well. If you have a transaction fee of 25 cents, then your total cost to process that $100 dollar credit card transaction would be $2.45.
What do you mean by qualified discount rate? The discount rate you pay will not always be the same percentage. It will change based on a number of factors, such as card type and how you actually process the card. Most personal debit and credit cards will fall into the qualified rate category. However, if you take a corporate, business, government, international, or personal rewards card, you will pay a higher discount rate on these types of cards. The discount rate on these types of cards can range from 1% to 2% over the qualified rate. This means that if your qualified rate is 2.20% and you accept an international card, your rate could be as high as 4.20%. Over time this can add up, so it is very important you factor this into your pricing when deciding how much you are going to charge for your product or service, especially if your plans include doing a lot of business to business transactions or selling internationally.
Another factor that influences the discount rate you pay when credit card processing is how you process the credit card. Merchants that swipe credit cards usually pay a lower discount rate than merchants that key in credit cards using an internet merchant account. The qualified rate for a merchant that swipes credit cards will usually be close to 1.80% but a merchant that keys in their transactions will pay a qualified rate of 2.40%. The reason for this is risk. Visa/MasterCard feel there is less risk of the transaction being fraudulent or disputed if the customer is present during the transaction and the merchant is able to swipe their card through credit card processing hardware or software.
Most credit card processing companies will only refer to their qualified rate when they advertise or try to sell you over the phone - so it is important you ask about qualified, mid qualified, and non qualified rates too when choosing a company for credit card processing services.
Michael Rupkalvis manages The Transaction Group website. The site offers information about credit card processing and provides merchants with cheap credit card processing rates, along with excellent customer service.
Sunday, June 14, 2009
5 Things to Think About When Comparing Credit Card Processors
By Erik Heyl
If you are a beginner to doing business online, you'd be forgiven for being very excited and wanting to try many different things. After all, there are literally a million ways you can make money online. But the key is to focus on JUST ONE way when you are first starting out. Given that, let's assume for the moment that you have gone through and decided that you want to sell your own product. You done your marketing plan, got a good domain name, got solid hosting and have set your website up. But have you given thought to what credit card processor you will use?
This may seem like a daunting task if you're doing it for the first time. There are many different choices and just like online business, it can seem to be overwhelming, with different rates, terms of service, incentives and so forth. Here, however are 5 things you should think about before you pick your merchant account provider.
1. Consider the type of business you are in and look for a credit card processor that has a history of servicing that type. For example, if you are in retail, you certainly wouldn't want a company who has been doing online transactions for years and yet has only started doing retail transactions in the last 6 months.
2. Cast an eye to your budget and figure out how much you can afford in transaction fees,still make a profit, and stick to that number, especially if you're just starting out. After all, there's no point in making a ton of sales if half your revenue is eaten up by transaction fees and other ancillary costs.
3. Take into account how communicative each company is. This is very important as you will be dealing with them for the length of your contract. How long does it take for each company to respond to your queries? Do they respond at all? This can be a good measurement of how the company may do business with its clients.
4. Ensure that you read the terms of use, privacy and other legal documents over thoroughly. If need be, take them to your lawyer for review. You need to be absolutely sure you understand what you are getting into. Never skip the fine print.
5. Make sure that each provider can scale up as your business increases and be sure you understand the various charges that may be associated with this, as there is nothing worse than suddenly doing $20,000 in business and being hit with a hefty bill you were not expecting.
If you keep these five things in mind when you compare merchant account providers you will be able to find one that suits your business needs.
If you are a beginner to doing business online, you'd be forgiven for being very excited and wanting to try many different things. After all, there are literally a million ways you can make money online. But the key is to focus on JUST ONE way when you are first starting out. Given that, let's assume for the moment that you have gone through and decided that you want to sell your own product. You done your marketing plan, got a good domain name, got solid hosting and have set your website up. But have you given thought to what credit card processor you will use?
This may seem like a daunting task if you're doing it for the first time. There are many different choices and just like online business, it can seem to be overwhelming, with different rates, terms of service, incentives and so forth. Here, however are 5 things you should think about before you pick your merchant account provider.
1. Consider the type of business you are in and look for a credit card processor that has a history of servicing that type. For example, if you are in retail, you certainly wouldn't want a company who has been doing online transactions for years and yet has only started doing retail transactions in the last 6 months.
2. Cast an eye to your budget and figure out how much you can afford in transaction fees,still make a profit, and stick to that number, especially if you're just starting out. After all, there's no point in making a ton of sales if half your revenue is eaten up by transaction fees and other ancillary costs.
3. Take into account how communicative each company is. This is very important as you will be dealing with them for the length of your contract. How long does it take for each company to respond to your queries? Do they respond at all? This can be a good measurement of how the company may do business with its clients.
4. Ensure that you read the terms of use, privacy and other legal documents over thoroughly. If need be, take them to your lawyer for review. You need to be absolutely sure you understand what you are getting into. Never skip the fine print.
5. Make sure that each provider can scale up as your business increases and be sure you understand the various charges that may be associated with this, as there is nothing worse than suddenly doing $20,000 in business and being hit with a hefty bill you were not expecting.
If you keep these five things in mind when you compare merchant account providers you will be able to find one that suits your business needs.
Friday, June 12, 2009
Do Credit Card Processing Calculators Really Work?
By Reid Wilson
It seems like credit card processing calculators are becoming more and more popular everyday. At first glance, the idea of these calculators seems great. They are often presented as a tool that will allow business owners to see how much they should/could be paying for their monthly credit card processing fees. But how accurate are these calculators?
Being in the industry as long as I have, I have had the opportunity to review and use several different calculators. Every time a new one comes out I approach it with excitement and hopes that this will make my job easier. Unfortunately, this is never the case. It has been my experience that the online rate calculators are more of a marketing item designed to collect prospect data than anything else.
What I can't decide is if the creators of these calculators ever intended them to be useful tools or not. After all, there are so many variables that go into a single transaction that creating a credit card fee calculator that produced an accurate output would be nearly impossible. I find it very odd that there are hundreds of interchange categories that a transaction could be considered, yet most online calculators assume the lowest qualified rate.
With all the advances in technology it is feasible that we might someday have the luxury of an accurate credit card processing fee calculator. But until that day comes, it's best to put your trust and your credit card processing in the hands of a reputable merchant service provider.
It seems like credit card processing calculators are becoming more and more popular everyday. At first glance, the idea of these calculators seems great. They are often presented as a tool that will allow business owners to see how much they should/could be paying for their monthly credit card processing fees. But how accurate are these calculators?
Being in the industry as long as I have, I have had the opportunity to review and use several different calculators. Every time a new one comes out I approach it with excitement and hopes that this will make my job easier. Unfortunately, this is never the case. It has been my experience that the online rate calculators are more of a marketing item designed to collect prospect data than anything else.
What I can't decide is if the creators of these calculators ever intended them to be useful tools or not. After all, there are so many variables that go into a single transaction that creating a credit card fee calculator that produced an accurate output would be nearly impossible. I find it very odd that there are hundreds of interchange categories that a transaction could be considered, yet most online calculators assume the lowest qualified rate.
With all the advances in technology it is feasible that we might someday have the luxury of an accurate credit card processing fee calculator. But until that day comes, it's best to put your trust and your credit card processing in the hands of a reputable merchant service provider.
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