If you own a business and accept credit card payments from customers – or would like to be able to – a credit card transaction processor is a vital partner. Selecting one with the right terms and conditions that are acceptable to you is equally important to the success of your business. That’s why it helps to know what pitfalls to avoid when picking a credit card processor for your business transactions.
Here are five types of fees you could incur by accepting credit card payments.
Just like the credit cards you carry in your wallet, credit card processors charge certain fees for their services. However, some of those charges may not be obvious unless you dig deep into the agreement. Your processor may require a contract for a certain length of time, for instance, just like most cell phone companies do when you sign up for a data plan. Cancel your service before that time is up and you could get hit with an expensive cancellation charge. There are also processors available that allow you to use their service from month-to-month. Choose the one that’s right for your business.
Some processors will hit you with fees for transferring funds into your bank account, or for issuing you an itemized monthly statement. Just as banks do with checking accounts, a processor may charge a monthly maintenance fee or add a fee to your account if you don’t carry a high enough balance in terms of the dollar amount of your monthly transactions. You may be entitled to discounts or lesser fees if you do a high volume of credit card transactions.
Alternatively, you may have to pay more in fees if you don’t have a lot of credit card transaction activity. These charges and fees can add up very quickly, so it’s important to make sure you’re aware of all the stipulations up-front. Here are eight hidden fees to look out for.
Teaser Rates & Terms
On the other hand, a credit card processor may offer you cheaper rates or waive your fees during a special introductory period. It’s very important to know when that period ends and what changes take place once it expires, otherwise you could see a sudden and unexpected rise in your credit card processing expenses for your business.
Rates May Vary
The particular type of plastic your customer uses, which is typically a factor outside the business owners control, can also impact how much you pay in processing fees. You may pay one rate for transactions with an American Express card, for instance, and a different rate for processing a Discover, Visa, or MasterCard credit card. Similarly, you may be charged one rate if your customer hands you their card in person, and charged a different rate if you manually input the credit card info (in situations like when the card reader breaks, for instance). Be sure to ask questions with your rep to find out how everything works before you partner up with a processing company.
What happens if a customer returns an item and you need to give them a refund on their credit card purchase? You guessed it – some processors will charge you a fee for processing the refund, so the more refunds you do the more money your business loses. As a merchant, you will also typically be charged a fee just to access the processor’s site or software. Determine exactly how much that is because it may add an additional 20 or 30 cents per each refunded credit card transactions.
For most merchants, credit card processing fees are a necessary evil. The bottom line is that it’s very important to ask questions and pay attention to all the fine details of your proposed contract before you sign. This will ensure you’re using the right credit card processor for your business. Start your search by checking out the best credit card processors of 2015.