Guest post by Stella Fayman (learn more about Stella at the end of this post)
When merchants begin accepting credit cards, usually they sign up for Paypal (if an online merchant). However, as business booms and revenue from credit cards grows, it may be more cost effective to switch to a credit card processor (merchant account provider). Be wary, processors are known to be tricky and take advantage of business owners who know little about their trade. Here are some tips to make sure you don’t get ripped off:
1. No cancellation fees allowed
Make sure to read the fine print from your credit card processing contract. You may be surprised to find a cancellation fee from at least $250 to several thousand dollars. This fee is a way of guaranteeing your loyalty to the processor, regardless of your satisfaction with their service. The good news is that getting rid of this fee should not be a problem: most salespeople have the authority to waive it. To avoid this problem, talk to the salesperson and make sure the fee is waived in writing either in the contract or as an amendment.
2. Only interchange plus pricing
The bulk of the processing fee goes to Visa and Mastercard—this fee is called “interchange” and is set in stone. Interchange-plus pricing is the fairest form of pricing structure for your business, meaning that you pay the interchange fee plus a constant markup which goes to the processor as a service charge. Having this structure ensures there are no tricky fees or hidden costs, unlike tiered pricing structures.
3. Comparison shop
Research shows that the best deal can be found by comparison shopping between at least 5 processors. However, make sure to compare on an apples-to-apples basis, and be sure each processor knows that you are actively shopping. You can easily make your bids more competitive by leveraging the power of comparison.
If you have any questions or want to learn more about processing, I blog about processing at the TransFS blog www.transfs.com/blog or email me at [email protected].
About the Author
Stella Fayman is a recent graduate of Northwestern University. She decided to join TransFS, a comparison shopping site for credit card processors, in order to help small business. Just like getting multiple plane tickets from airlines using Expedia, TransFS lets business owners compare top quality processors on an apples-to-apples basis and makes sure they get the best deal by not having any cancellation or hidden fees, and only interchange plus pricing. TransFS also recently launched the Credit Card Processor Directory, where business owners can rate and read reviews about processors.