You’ve done everything to get your business setup and now it’s time to figure out how to get paid. Finding the right merchant services provider for your POS needs is crucial to your company's bottom line. But where do you start, and how do you know you’re making the right choices?
Make sure that the person you are speaking with that will setup your account discloses ALL fees. Sometimes an unscrupulous sales person will tell a merchant that the only fee they’ll be paying is the percentage, or the discount fee. Unless you are using a program like PhoneSwipe, you will have additional fees - statement fees, downgrades (mid-qualified [keyed-in charges], non-qualified [business cards, government cards, billing address outside the US], rewards [point-based cards], etc.), per-transaction fees, etc.
Many processors also charge a PCI fee which ranges from $50/year to $500+/year. If you don’t know all of the fees and the term of your agreement (many times three years or longer), all of those extra fees will take a considerable bite out of your bottom line.
Remember, there is no such thing as a free lunch. If someone is offering you free equipment, there is going to be a catch somewhere. If a processor offers free equipment, often they'll charge an annual fee that must be paid in order to get the equipment. Many times, it is less expensive for a merchant to acquire (purchase or lease) a machine and save in the long-run.
Terminals today can be acquired directly from your sales representative or even looking at eBay or other similar sites. You just need to make sure that none of the terminals you are looking to purchase are on the “end of life” list that processors maintain.
Is your new merchant account provider secure? In other words, has your provider been the subject of a data breach? And what do they do to help you be compliant with PCI regulations and ensure that you are meeting the minimum levels of security required to keep your business and customers’ credit card information secure?
If you fall victim to a data breach, your customers will not appreciate it, and worse yet, you may be liable for damages including paying the issuing banks to send out new cards at a rate of $5 per card! So security is not only on the processor level, but it’s also on you as the merchant. Follow common sense processing security and you should be fine.
As with any major purchase, you really want to do some research on the item/service you’re purchasing. You are opening a new financial account with a provider, and they are sitting on your cash flow. What would happen if you went with a provider who couldn’t or didn’t pay you for your credit card sales? You wouldn’t like it, so research the provider and know you will get the money deposited into your bank account.
If you are not accepting credit cards, you are missing out on sales and free advertising. Those lost sales might make the difference between a good month and a really good month. Or between making a profit or a loss during a particular reporting period. Merchant accounts are known to increase your business by 30-100% or more!
Let’s look at an example, that can be applied to any level of sales or any type of business:
Monthly sales volume: $5,000
Assumed cost of goods sold (COGS): 50%
Gross profit: $2,500
Now, add a conservative 20% increase in sales (note – normally would expect 30-100% if not more) by accepting credit cards from your customers.
New Monthly sales volume: $6,000
Assumed cost of goods sold (COGS): 50%
Gross profit: $3,000
Less estimated credit card processing fees of approx. $100
New Net Profit before tax: $2,900 or additional $400 per month or $4,800 per year
By accepting credit cards in the above scenario, you’d be making an additional $400 per month or $4,800 per year—how can you possibly say no to that?
Let’s look at another example. Let’s keep some of the numbers from above, but say a 30% increase in sales:
Sales volume: $6,500 per month
estimated credit card processing fees would be approx. $150.
New net profit before tax would now be $3,100 or an increase of $600 per month/$7,200 per year.
This is not the time to be penny wise, dollar foolish. Help your business grow to be a real asset for you and your family.
Did you know that your bank is not actually handling the process of setting you up directly? They are sending your information to a third party to process the sale. Furthermore, did you know that the bank now has complete control over your sales. And if the bank ever says you owe them money, they’ll simply take the funds before depositing them into your checking account at their bank (which is a requirement of every bank when processing through their connections).
Maybe you thought that you’re getting the best deal by using your bank since you’ve been banking with them for years and may even have your mortgage through them. Not quite—since the bank is outsourcing your service, the bank is looking to be compensated for your account. And so the entity doing the sale needs to tack on a few more basis points (1 basis point = .01%) on top of their margins to be able to pay the bank for your account! Using a separate third party with no requirements to pay the bank = savings for you.
You may see a processor offering a seemingly amazing rate-a rate that is so low you wonder how they afford to offer it. But if you review the information in the deal, you'll likely find that the rate was not a clear-cut rate but rather a way to deceive the merchant and hurt future sales representatives trying to offer a better deal.
In business, there is no way to completely avoid risks, and one should certainly not believe that by accepting credit cards as a form of payment from your customer is without any risk. Just like a paper check can be stopped or bounce/drawn from a fraudulent account, so too can a credit card.
When a customer sees their credit card statement and see your store’s name on their statement, they’re either going to recognize the name of your business/store, or they’re not. If the transaction was processed fraudulently, the consumer may call up their credit card company and say that a charge should not be on their account. You will have a certain amount of time (usually ten calendar days) to respond to the “chargeback” notice before the funds are permanently credited back to the consumer.
By practicing safe processing tactics, like checking signatures on the card against the receipt or doing a bit of risk prevention on eCommerce transactions, you'll ensure you don’t fall prey to these issues in your business.
Most would usually believe that we would never need to give our personal information to anyone else, and normally that is true. However, there are a few instances where that kind of information may not seem on the surface to be necessary, but is in fact very much so.
When filling out the merchant services (credit card processing) applications, the information provided to an honest representative is only going to be used and seen by those that have a need to see it.
One might ask why it is necessary for a merchant to divulge such information. Remember the last time you went into the bank to open an account (especially after Sept. 11)? You had to provide the bank with all sorts of information, including your social security number. That requirement has been further strengthened under the US Patriot Act.
In basic terms, the Patriot Act requires all financial institutions to know their customers, and to ensure they are not related to any terror related groups. When you, as a merchant, are applying to accept credit cards, you are entering into a financial relationship with a bank, and are therefore subject to the same rules and requirements. Additionally, there are other areas of concern which include but are not limited to:
- Fraud protection: Are you really who you say you are?
- Financial Risk: Are you or your business financially solvent, and how do we know that? So how do you know we are who we say we are?
As a consumer, there are ways to protect yourself. If you are unsure about the person you are speaking with, hang up, and use the Internet, telephone book, or Directory Assistance to find the official phone number for the company you are dealing with, and call back directly. You can also ask for references or look up the business in the Better Business Bureau at www.bbb.org.
By partnering with the right merchant services provider, you’re not only going to ensure your own company’s bottom line, you’re going to get a partner who believes in your business and is willing to go the extra mile to do whatever they can to see you succeed.
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