Are you planning to incorporate credit card processing in your business? You will need the services of a good credit card processing company to start you up. With so many agencies in the market, it is hard to decide which credit card processing solution is best for your business. A good way to start is by comparing the fees and cost of services offered by various credit card processors. Following are some of the costs involved in accepting credit and debit cards.
Cost of hardware
Hardware is the most expensive investment. The point-of-sale (POS) credit card terminals cost anywhere between $ 150 and $ 700. Wireless models fall in the range of $ 500 to $ 1000. Higher end models with added features cost even more. The cost of the terminals depends on how useful the additional features are, such as security features, and the look of the machines.
Depending on your business plan, you may choose to buy or lease credit or debit card terminals. Investing in hardware is cheaper in the long run, but if you are unsure of your long term plans it is better to lease the machines. Leasing charges are usually in the vicinity of $ 20 per month.
Many credit card processing companies include installation of POS terminals in their package, along with creating merchant accounts for the business. This may be cheaper than purchasing terminals separately. However, you also need to consider the agency's charges for other services such as payment gateways, compatibility with an existing shopping cart application, virtual credit card processing terminals, etc.
Installing POS terminals to process credit or debit cards is a safer option than processing the card mainly over the phone. The verification process takes longer on the phone and it does not insure the availability of funds when your company actually processes the charge. As the verification and processing are handled out at different points in time, there is a risk of losing money.
Cost of processing fees
Credit card processing companies charge various kinds of fees. The discount fee is the main fee by which card processors make a profit. Credit card processors charge additional fees for various services, and this is where it gets difficult. Businesses have to take a call on the value of the additional fees before signing the contract.
The discount fee is the percentage of money that the processing agency charges per transaction. The percentage is determined by the agency after considering your credit history, amount of credit card sales and the type of business. Broadly, there are two discount rates – one for businesses that offer signature-less services, such as payments over the internet, and the other for businesses that process cards physically for immediate transactions. The discount rate for the first kind of business is higher, 2% -3%, as it carries more risk. Otherwise, discount rates are 1.5% to 2% per transaction.
Credit card processing companies can charge a number of other fees such as application fee, startup fee, activation fee, statement fee, monthly minimum fee, payment gateway fee, charge back fee and termination fee. The application fees charged by some agencies are as high as $ 300, and non-refundable. Some processors charge a monthly minimum fee of $ 20. Merchants need to weigh the value of a service for their business and agree only to the ones that make sense.
Do not work with a card processing agencies that requests for an inflated fee to be paid up-front. Reputed credit processing companies make sure business without charging additional fees that have no value. The contract should include all the fees the agency will charge your business such as customer service fee, payment gateway fee, etc.
The processing fee is a small cost to pay for the increased sales your business will enjoy by accepting card payments. Survey the market to find a reputable credit and debit card processor than offers good value for money. Paying a slightly higher transaction fee in exchange for good and reliable services is a good deal.