By: Javi Calderon
on Wednesday, May 11, 2011
What You Should Know When Shopping Merchant Account Rates
The most common practice for a merchant or entrepreneur shopping for a merchant account is to compare the interchange rates
payment processors charges per transaction. The common (and very understandable) misconception is that the lower the rate, the more money the business owner gets to keep in their pocket.
What those rate-focused business owners fail to recognize is the multitude of expenses involved in merchant services
that merchant account rates don’t include. In fact, rate payments amount to only a fraction of overall costs. Often times, low rates come with additional fees that end up being more expensive in the long run.
Be wary of start-up fees, termination fees and the like. Ticky-tacky fees will surely add up faster than a rate that is a fraction of a cent more expensive per transaction. Companies who require you to sign into a contract are only roping you into a license to neglect you later and raise their fees as they see fit. If you are unsatisfied with their service and decide to make a change, you will be hit with a pricey cancellation fee. On the other hand, a company who operates without a contract has to perform at a high level consistently to keep your business.
The ticket to being thrifty is to shop costs, not rates. By shopping costs you are taking into account all the expenses included in processing credit card transactions, not simply the rate you will pay your payment processor per transaction. Don’t get enamored with low rates, read the fine print; consider your needs carefully, and be sure to calculate all the expenses involved with your credit card processing
In terms of calculating costs, one of the unavoidable expenses is equipment. Some companies may force you to purchase credit card processing equipment (credit card terminals, debit card keypads, etc.) specifically from them; others will offer equipment and services together as a discounted package.
Processing equipment, however, typically works with any processor, giving you the liberty to shop around for the best price for the equipment you need, so do so. If the most economical solution for your business is to buy your payment processing equipment from one provider, and your payment processing from another, so be it. Avoid leasing your equipment, as it locks you into a contract and you will be forced to give it back at the end of the lease.
Understand that there is no “standard” processing rate. Companies will have dozens if not hundreds of options to fit your specific needs, business type and qualifications. Some companies will have discounts or incentives for specific business types or merchant account types, so again, do your research to find the right option for your business.
In order to truly get the most efficient pricing for the merchant services your business requires, have a wide view of your needs and expenses and steer away from focusing simply on the rates. There is no shortcut to savings that won’t end up costing you more in the long run unless you do diligent research up front.
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