Everything you Need to Know about Accepting Credit Cards

rnYou’ve put a lot of thought into your business. You’ve explored the market, assembled a business plan, and maybe even sought (or received) startup capital. Now that it’s time for your business to leave the launching pad, there are several other details you must address, such as hiring employees, marketing your products or services, and incorporating your business. And don’t forget to set up a way for your business to accept credit card payments. In almost every industry, credit card payments are the most widely accepted way to conduct transactions. So you will need to obtain what is called a merchant services account. Just like a bank account lets you withdraw or deposit money and take advantage of services like ATMs, loan officers and financial management advisors. A merchant account lets you access the network of institutions, processors, service providers and networks that allows you to receive money from credit card users. Types of Accounts Let’s begin by discussing the different types of merchant services accounts that are available. Each one is tailored to suit a specific type of business, so it is up to you to determine which one will be ideal for your company. * Retail: As the name implies, this account caters to businesses who sell products from a traditional storefront. Almost all of the credit card transactions involve a face-to-face encounter between a customer and one of your employees. * Internet: If your business is primarily or completely an e-commerce entity, then you will need an account which allows your customers to enter their credit card information and pay for their purchases online. This means that your business will either have to acquire its own software to process such transactions, or contract with a third party that is already set up to handle e-commerce. * Mobile: Businesses that send employees into the field will benefit from this type of account. Using a wireless swipe terminal, laptop or other similar equipment, your employees will be able to authenticate and accept credit card payments on site, without having to record information and take it back to your business headquarters for processing. * Card Not Present: Once known as a MOTO (which stands for Mail Order Telephone Order) account, this type of account is preferred by businesses who do not actually see the customer and his or her credit card (or utilize the Internet for e-commerce). Companies who receive orders through the mail, by fax or over the telephone are the primary users of this account type. * Seasonal: Simply put, this account serves companies which only operate during certain times of the year. Halloween costume rental shops, ski resorts, and Christmas light hanging companies are examples of businesses that use this type of account. Cost structures Though merchant services accounts can vary, most of them operate under the same cost structure. These entities make money either by taking a percentage of each transaction amount or by assessing a flat fee each time a payment is processed (or both). Also, they charge various fees, penalties or surcharges to their customers depending on the type of business arrangement. The two most important values to ascertain when deciding on a merchant account are the periodic rate and transaction fees. A transaction fee is the fixed amount (usually anywhere from a few cents to a dollar) that your business will pay every time it accesses the processing network – no matter how big or small the actual charged amounts are. The periodic rate is the percentage of each transaction amount (usually between 1% and 5%, though it could be higher) that will be earmarked for the merchant services provider – where the number of different transactions does not matter. Many times, merchant accounts will incorporate a transaction fee anda periodic rate (such as a 15 cent transaction fee and a 3% periodic rate) in a given cost structure. And like consumer bank fees, businesses are subject to various types of additional fees, surcharges, or penalty charges – many of which can add up quickly, depending on the business’s behavior. Some of these include monthly charges simply for having access to the account, or minimum balance penalties if you do not process a certain number of credit card charges each month. The most serious of these additional fees are those levied for chargebacks, which occur when a credit card transaction is disputed by the customer. Merchant accounts may charge businesses a flat penalty fee each time a chargeback is recorded; and if the business incurs a certain number of chargebacks in a given time period, its periodic rate may rise. So it is vital that businesses read their merchant agreements and take the steps necessary to avoid these additional fees. You should check out a few merchant services providers before deciding on which one is best for your company. The goal is to acquire a merchant account that is affordable, secure, and easy to use. Ideally, your merchant services account should operate so seamlessly that you barely know it’s there!