A Great Merchant Account Q & A
April 10, 2009 by Admin · Leave a Comment
I was answering a merchant’s question(s) today and realized that a lot of what these two individuals were asking would relate to a lot of other Merchants so, I asked if I could add their questions to my blog and they (very kindly) agreed. I did however change their names to ‘John’ & ‘Jane’ and blocked out their emails, to give privacy.
I hope you too can grab some nuggets from this Q & A. Be sure to let me know in the comment section what you think or what you learned or if there is something you still have a question about.
The Merchant is in regular text and my answers are in BOLD CAPITALS.
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Q & A Email
John & Jane,
Answers to your Q’s are below in CAPITALS.
Also, would you mind if I used your Q’s as a blog post on my website. I will not have any information that says, it’s you, but I feel that you asked very good questions that a lot of merchants in your shoes would want to know and I thought it might make a really nice conversation Q & A piece that could help other Merchants who are looking for the perfect merchant account provider.
I am in my office until 5pm today if you’d like to speak on the phone and then again (Good Friday) tomorrow from 1pm until 5pm. Have a nice Long Weekend!
Regards, Matthew
Thanks for getting this information to us so quickly! When we started taking Visa/MC a few years ago, we started with Moneris because our bank recommeded it. At first, they allowed us to keep our old fashioned hand operated machine and did not charge us in our down months. This quickly changed. Last season, the for the first time, we used a wireless/printing terminal which we leased from them. However, the fee structure kept changing. RATE ADJUSTMENTS ARE BECOMING MORE REGULAR IN CANADA NOW THAT VISA AND MC INTERCHANGE CHANGE THEIR RATES (VISA EVERY APRIL 1ST ADN MC EVERY OCT 1ST). IT’S NOT JUST MONERIS THAT ADJUSTS THEIR RATES. I FULLY UNDERSTAND HOW THESE RATE ADJUSTMENTS ARE FRUSTRATING FOR MERCHANTS AND THE LACK OF COMMUNICATION ABOUT HOW ALL THESE RATES WORK COULD BE COMMUNICATED MUCH, MUCH BETTER WITH MERCHANTS. THERE A TON OF MIS-UNDERSTANDINGS AND EVEN LAWSUITS GOING ON OVER THIS EXACT ISSUE. JUST SEE THIS SITE CALLED ‘STOP STICKING IT TO US‘. Fortunately, we were not on contract, so we cancelled last October and decided that a little research was in order! It’s certainly a confusing world though… I’ve seen quotes of 4 cents a transaction (which I don’t trust by the way) GOOD 4 CENTS IS BELOW THE BUY RATES SO THEY HAVE TO BE MAKING UP FOR SOME WHERE – SO LISTENING TO YOUR GUT IS HERE IS ‘RIGHT’… up to 25 cents a transaction. Hugely diverse set up fees, monthly statement fees… and varying contract lengths. The cost of buying a terminal outright or rent to own are often very far apart. And then there’s the discount percentages! But you know all this!!! YES I DO. AND I UNDERSTAND HOW CONFUSING IT CAN BE.
A couple of things I’m not clear on… are cellular terminals the same as wireless???NO NOT THE SAME. CELLULAR IS COMPLETELY MOBILE JUST LIKE A CELL PHONE, WHERE WIRELESS WORKS LIKE A CORDLESS PHONE ONLY SO GOOD FROM A CERTAIN AMOUNT OF METRES FROM THE PLUGGED IN BASE. I’m feeling that most people will want a receipt printed… do cellular terminals do this too??? YES THEY HAVE A PRINTER BUILT IN. We are quite new at ‘wireless’ piece of this process, given that we’ve been doing it by hand for so long. I know Moneris did not charge us air time… so I’m not sure how their system differs from cellular. IF IT WAS CELLULAR YOU PAID FOR AIR TIME, THEY USUALLY USE BELL MOBILITY AND SOMETIMES THE BILLED IS SENT FROM BELL AND NOT MONERIS. THE SERVICE PROVIDER I USE, USES ROGERS, BUT YOUR ARE BILLED FROM THE SERVICE PROVIDER AND NOT ROGERS.
We would like to be able to process Debit Cards as well as Visa/MC as they were a good percentage of our business last season. THEN YOU WILL WANT TO DO A CELLULAR UNIT, THE VIRTUAL TERMINAL WILL ONLY REALLY ALLOW YOU TO PROCESS CREDIT CARDS ONLY.
By the way… are you a company who provides sale/terminal services, or are you a broker for the best fit for your clients??? BROKER.
Thanks for now… I’m sure I’ll have a bunch more questions as we go. Oh, and we keep being deluged by hustles from Monex! Certainly their numbers are seductive, however my web research on them seems to say… “beware, beware, beware”! I guess it’s the old, “if it sounds too good to be true (or that simple!)… etc.” YES, THIS IS VERY TRUE. I TOO HAVE HEARD A MANY “BEWARE” STORIES ABOUT MONEX (I DON’T USE THEM), BUT DON’T HAVE ANY REAL EXPERIENCE DEALING DIRECTLY WITH THEM EITHER.
PART TWO – EMAIL TWO
John & Jane,
Again I’ll answer your Q’s below in CAPITALS. ALSO, FORGIVE ME IF THERE ARE ANY MIS-SPELLINGS BELOW, I AM A LITTLE TIRED SINCE I DECIDED TO ANSWER THIS LATE.
Have a nice long weekend!
Regards, Matthew Hunt
On Thu, Apr 9, 2009 at 5:54 PM, <@shaw.ca> wrote:
Hi Matthew… again, thanks for your answers!!! Of course you can use my questions as part of your blog! It reassures me when you say I’m asking the right questions! And, it seems to me, that the best way to for you to attract business, is to find a way to make this mish mash of information understandable for us poor, bewildered tiny to small business folks! YOUR EXACTLY RIGHT. MERCHANT ACCOUNTS CAN BE EXTREMELY COMPLEX, BUT I ALSO DON’T WANT THEM TO SCARE YOU INTO NOT HAVING ONE. PLASTIC IS A FACT OF LIFE AND PEOPLE LIKE TO PAY ON THEIR DEBIT AND CREDIT CARDS AND AS BUSINESS OWNERS AND ENTREPRENEURS WE NEED TO CATER TO OUR CLIENTS/CUSTOMERS NEEDS TO HAVE HEALTHY BUSINESSES. For me understanding = safety, and safety = comfort! YES, I AGREE. Anything that will help… go for it. A couple of other things that have been important for me to learn & might be helpful on your blog are these: From my research, I’m discovering although fees may seem to swing wildly from company to company, it often turns out that they are charging them under a different name… for instance, the company that claims they have no airtime fee, are in fact, burying it somewhere else!!! YES THIS IS UNFORTUNATELY TOO OFTEN THE CASE. I AM NOT SURE WHY SOME MERCHANT ACCOUNT COMPANIES THINK THAT MARKETING THEIR SERVICES WITHOUT TOTAL TRANSPARENCY IS HELPING THEM GAIN BUSINESS. MY PERSONAL OPINION IS THEY ARE STUCK IN AN OLD WAY OF SELLING WHICH IS VERY “BOILER ROOM or DEATH OF SALESMAN‘ MENTALITY – THIS WILL ULTIMATELY BE THE DEATH OF THEM BECAUSE WHAT THESE TYPES OF COMPANIES DON’T REALIZE IS THE WORLD IS EXTREMELY SMALL NOW, ESPECIALLY WITH SOCIAL MEDIA AND AS YOU HAVE ALREADY DISCOVERED A LOT OF P.O.’ED MERCHANTS ARE BLOGGING AND TALKING ON FORUMS ABOUT THEIR EXPERIENCES AND WHICH ALL GET INDEXED ON THE SEARCH ENGINES REALLY WELL, JUST SITTING THERE FOR ALL TO READ. I’m also discovering that there is such a thing as a ‘medium qualified’ or ‘non-qualified’ credit card transaction that often incurs a higher discount rate.YES THERE ARE DIFFERENT RATES FOR DIFFERENT TYPES OF:
- CATEGORIES OF BUSINESS
- TYPES OF CARDS PROCESSED
- HOW A TRANSACTION IS TRANSACTED
MOST COMPANIES BREAK THESE TYPES OF TRANSACTIONS INTO A THREE TIERED PRICING, USUALLY KNOWN AS:
- QUALIFIED
- MID QUALIFIED
- NON QUALIFIED
YOU SEE IN CANADA THERE ARE OVER 35 DIFFERENT BUY RATES FROM VISA AND MASTERCARD TO THESE CARD PROCESSOR WHICH IS CALLED INTERCHANGE. (BETTER THAN THE USA WHO HAS OVER 225 LEVELS OF INTERCHANGE) THE INTERCHANGE BUY RATES IS USUALLY POSTED ON EACH OF THEIR WEBSITES BECAUSE EACH COMPANY IS A PUBLIC COMPANY AND SO THEY SHARE WITH THE WORLD WHAT THE BUY RATES ARE.
THE REASON THERE ARE SO MANY DIFFERENT BUY RATES FROM VISA AND MASTERCARD IS DUE TO USUALLY 3 MAIN FACTORS:
1.TYPE OF BUSINESS – SOME BUSINESSES HAVE HIGHER RISK FACTORS WHEN COMES TO PROCESSING CARDS THEN OTHERS, FOR EXAMPLE A BUSINESS IS A CHIROPRACTOR HAS A DIFFERENT RISK FACTOR OVER A GROCERY STORE AND SO THERE ARE DIFFERENT BUY RATES FOR EACH CATEGORY OF BUSINESS.
2. REWARDS CARDS – THOSE SPECIAL CARDS THAT OFFER INCENTIVES FOR CONSUMERS TO SPEND MORE ON THEM TO GAIN POINTS THAT TURN INTO AIR MILES OR WHATEVER, OBVIOUSLY HAVE HIGHER BUY RATES BECAUSE THAT IS HOW THEY PAY FOR THOSE AIR MILES TO THE CONSUMER. NOW THERE ARE STATS THAT SUPPORT THE POINTS CARD USERS SPEND ALMOST TWICE AS MUCH AS NON-POINT CARD USERS AND THUS THIS A REALLY A BENEFIT TO THE MERCHANT. I HOWEVER, THINK THOSE STATS ARE NOT REALLY PURE BECAUSE I THINK POINT COLLECTING CARD USERS DO WHAT ME AND MY WIFE DO, WE PUT EVERYTHING ON OUR POINTS CARD AND PAY ONE BILL AT THE END OF THE MONTH SO WE CAN GET OUR FREE VACATION EVERY YEAR, BUT WE DO NOT SPEND ANY MORE THAN WE WOULD IF POINTS CARDS DIDN’T EXIST. WE ARE JUST BEING SMART ABOUT IT. HOWEVER, THE CREDIT CARD COMPANIES ARE USING THESE STATS TO SUPPORT HIGHER INTERCHANGE RATES, WHICH ULTIMATELY THE MERCHANT PAYS FOR AND EVENTUALLY THE CONSUMER BECAUSE AS THE MERCHANTS COSTS GO UP SO DOES THE PRICING OF PRODUCTS. ANYWAYS THAT IS A WHOLE OTHER STORY AND DISCUSSION.
3. THE THIRD REASON THERE ARE DIFFERENT RATES IS DUE TO HOW A MERCHANT TRANSACTS. OBVIOUSLY A TRANSACTION WHERE THE CARD IS PRESENT AND IS BEING SWIPED ACROSS A TERMINAL AND A HUMAN IS (SUPPOSED TO CHECK SIGNATURES) ETC. IS SAFER AGAINST FRAUD THEN LET’S SAY A NON FACE TO FACE TRANSACTION LIKE AN ONLINE TRANSACTION. SO WHEN THE TRANSACTS ARE NOT FACE TO FACE THEY TYPICALLY HAVE A HIGHER RATE ASSOCIATED WITH THEM.
NOW WHERE IT GETS CONFUSING IS EACH CARD PROCESSING COMPANY WILL TAKE THESE 35 PLUS INTERCHANGE RATES AND ASSEMBLE THEM IN EACH TIER – ONLY EACH COMPANY DOES IT DIFFERENTLY, SO ONE COMPANY’S MID-QUALIFIED TRANSACTIONS IS NOT EQUAL TO ANOTHER COMPANIES MID-QUALIFIED’S. THE SAME WITH NON’S TOO.
DID I LOSE YOU YET? 
FOR EXAMPLE,
ONE COMPANY MAY SAY ALL MANUAL KEYED TRANSACTIONS ARE CONSIDERED NON-QUALIFIED (WHICH IS NORMAL) BUT ANOTHER COMPANY MAY HAVE THE SAME BUT HAVE ALL ‘INFINITY CARDS’ BE ALSO CONSIDERED NON-QUALIFIED.
SO IT’S NOT ENOUGH TO JUST FIND OUT WHAT THE “QUALIFIED’S , MID-QUALIFIED’S, AND NON-QUALIFIED’S ARE, YOU ACTUALLY NEED TO DRILL DOWN FURTHER AND FIND OUT WHICH CARDS FALL UNDER EACH UMBRELLA.
THIS IS WHY I ONLY USE A COUPLE OF COMPANIES FOR MOST OF MY CLIENTS. I AM PERSONALLY A FAN OF SIMPLE AND TRANSPARENCY. THE RATE I QUOTED YOU ON THE CELLULAR WAS A BLENDED FLAT RATE AND IT COVERS ANY TYPE OF CARD AND/OR ANY TYPE OF TRANSACTION YOU PROCESS. FOR YOUR BUSINESS MODEL THIS WOULD PROBABLY BE BEST AND TO ALSO SUBMIT AS SEASONAL SO YOU DO NOT GET DINGED WITH MINIMUM PROCESSING FEES DURING THE MONTHS YOU ARE NOT USING IT.
DON’T GET OVERWHELMED, I WILL HELP YOU MAKE THE RIGHT DECISION FOR YOUR BUSINESS REGARDLESS OF WHETHER WE PERSONALLY DO BUSINESS OR NOT.
I’m also learning what rates are negotiable and what rates are not… and why! For instance… if the airtime comes through Rogers… the rate is theirs and is only likely to be negotiable when you are their direct client, as in a personal cell phone. Oh my, there’s so much to learn! YES SOMETIMES RATES ARE NEGOTIABLE, I USUALLY GET MERCHANTS VERY COMPETITIVE RATES RIGHT FROM THE GECKO. IT’S NOT ALWAYS THE BEST PRICE THIS IS BEST, IT’S A COMPETITIVE RATES WITH EXCELLENT SERVICES.
So for now, thank you for all of your help. We are currently sorting out, not only what our options re: POS services are, but how we will be structuring our little business this season. We have pretty much always been ‘a travelling show’ and this is a physically demanding process. My husband/partner is beginning to object!!! So, we are looking at the possibility of doing fewer events and more on-line & wholesale business. We need to decide just how viable that will be.
We’ll be in touch,
I AM HERE IF YOU HAVE ANY MORE QUESTIONS.
The Critical Canadian Merchant Services Guide – Part 6
September 26, 2008 by Admin · Leave a Comment
18 Essential Questions Every Canadian Small Business Owner Must Ask Before Choosing a Credit Card Processing Provider
Most Canadian small business owners don’t know what questions to ask Credit Card Processing Companies, resulting in many owners being shocked by the true costs when bills begin to arrive.
Fees and costs associated with debit card and credit card processing are somewhat negotiable. The best way to avoid being surprised is to ask the right questions. This section identifies 18 essential questions that every business owner will want to ask each merchant account provider.
Before you sign on the dotted line consider this:
1. What are the Credit Card Discount Rates?
Every Credit Card Processor will have this fee. Discount rates can range from as low as 1.59% right up to as high as 5.0% on low-risk merchant accounts. High-risk merchant accounts can see discount rates from 5-14%. The discount rate is really not a discount.
“Discount Rates” are a percentage of your sales that the Payment Processing Service Company charges your business to be able to offer your customers the ability to pay with credit cards.
For example: If you sold $10,000 in Visa sales in one month and your discount rate was 2.5% then you would pay $250 in fees to your Credit Card Processor that month.
Merchant Account “Rates” vary and are dependent on:
- business model
- business volume (annual sales)
- average sale per customer
- type of product and service your business offers
- the way you process orders “card present” transactions or “card not present” transactions
- how soon your customer receives a product/service after payment
All these factors can have an effect on what Discount Rates you and your business will qualify for.
Usually high-risk business will have higher discount rates (2.5%-5%). High risk businesses are ones that have:
- Higher ticket prices ($1000 plus per sale)
- Businesses that process 40% or more of their sales through Internet/E-commerce or MO/TO
- Businesses that take payment before delivering the product or providing the service
WARNING: Most payment processing companies’ agreements are for three years. Do not forget to ask: What would the termination costs be if you were to terminate your agreement early?
Most companies charge a $300 early termination fee that is retro-active from the time the agreement started. Also, most agreements state that if you do not write them within a certain period of time at the end of your agreement the agreement will then automatically renew itself for another three years.
2. Are “keyed in” Credit Card Discount Rates at a different rate then “swiped” Credit Card Discount Rates?
The two questions you want to ask:
- What will the “Qualified Rate” be?-Means card is present for the transaction (swiped)
- What will the “Non-Qualified Rate” be?-Means card is not present for the transaction (keyed in)
As well, many owners are not aware that corporate credit cards usually charge a higher rate then the “Qualified Rate,” typically 0.50% higher (but can go as high as a full 2%). Fortunately, most businesses have less then 5% of their credit card sales made with corporate cards. However, there are many businesses for which a large percentage of their sales involve a high volume of keyed transactions. This is where you really need to make sure you are also being quoted the “non-qualified” rates-and that you take into consideration the percentage of business you will be doing which will fall under that umbrella.
3. What are the Transaction Rates?
Transaction fees are sometimes called IDP transactions. Every payment processing company has at least a transaction fee for debit and, usually, for credit card transactions too. Some companies are creative and will call this fee and “item rate fee,” an “authorization fee,” or something along those lines.
It has become more common that any transaction made on your point-of-sale terminal will be considered a “transaction” and a fee will apply-whether is it is a void, debit, credit card, refund, batch close, etc. Don’t be fooled if the common “debit transaction fee” is the only one advertised! Often there are many more fees that apply to different types of transactions that take place on your POS Terminal.
Transaction fees can range from 0.07 cents up to 0.75 cents and can be different for each type of transaction, although typical Point-of-Sale Terminal transaction fees are between 0.10 cents to 0.15 cents (though I have seen Payment Processing Companies charge as high as 0.25 cents on Debit Machine transactions).
Non Point-of-Sale card processing services like IVR, PC, & E-commerce processing transaction fees are usually much higher and typically range from 0.35 cents to 0.75 cents.
4. What is the monthly cost for the Point-of-Sale Terminal?
In your business you may need to use Interac Terminals, Debit Card Machines or Credit Card Machines. In the industry they are commonly called Point-of-Sale Terminals and will be referred to from this point forward as “POS Terminals.”
Traditional Retail POS Terminals can hook up via a regular phone line (Dial-up POS Terminal) or a DSL High-speed Internet connection (IP POS Terminal); or more recently to the Wireless Data Network-making some POS Terminals wireless and mobile (Cellular POS Terminal).
Most traditional retail type businesses only need a regular Dial-up POS Terminal or an IP POS Terminal. Dial-up will work for the merchant who does under 25 transactions a day. A Merchant who does a high volume of transactions and needs to move customers through a check-out line quickly should consider using an IP POS Terminal.
Most bank-related card processing companies offer a “rental ONLY program” for POS Terminals. Rental costs can range from $20 up to as high as $100 a month depending on the type of Point-of-Sale Terminal your business requires.
Private label card processing companies usually only offer a “Lease-to-own or Buy option” program on their POS Terminals. Lease-to-own programs usually run on 48 month leases with a 10% buy-out option at the end. Lease-to-own POS Terminal prices range from $30 – $80 dependent on the type of POS terminal. Buy-out POS Terminal prices typically run from $999 – $1800 (without taxes) dependent on the type of POS Terminal.
Two very important questions to ask before buying a POS Terminal:
- What are the warranty conditions?
- Is the POS Terminal smart-card ready? (PCI & EMV compliant)
When renting, if you require a new POS Terminal it will usually be fixed or replaced at no cost to you. However, you pay rent forever! If you have been renting a POS Terminal for $40 a month for 5 years, then you’ve just paid $2400. If you have been renting a POS Terminal for 10 years at $40/month then you’ve spent $4800-and you do not have the terminal as an asset. You might want to consider owning a basic POS terminal for as little as $1000: less money spent in the long run and another asset in your business.
In terms of warranties, most private label companies will offer some type of warranty on the POS Terminal, sometimes at no extra cost, sometimes for an additional fee. There are even a few payment processing companies that offer a life-time warranty all-inclusive in the original retail purchase price. Sometimes it is better to pay more for an all-inclusive warranty on hardware with free software upgrades then to pay less with a limited warranty.
5. What are the Set-up Costs?
Every debit and credit card processing company will have set-up fees, some more then others. Set-up fees can range from $50 – $400. Usually the set-up fees are one-time only set-up fees for Visa, MasterCard, Amex, & Interac cards; usually around $25 per card. Some companies also charge an initial set-up fee for programming the POS Terminal or a fee for initial training. Set-up fees can vary greatly from company to company.
6. Are there any Application fees?
Not all payment processing companies have an application fee; however, some companies do. This is usually a non-refundable fee, whether your business is approved or not. Application fees can vary from non-existent to $300.
7. Is there a Statement Fee?
Not all payment processing providers have a statement fee; however, some do. The average statement fee is usually around $5 or free if you are willing to receive your statement via e-mail. (I am not sure if this is a nickel-and-dime fee or if companies are trying to “go green.” I let you decide!)
8. Is there a Settlement Fee?
All merchant account providers have a settlement fee. Settlement fees can range from 0.05 cents 5 dollars. The settlement is what sends your funds to your bank account.
9. Are there any Minimum Processing Fees?
All payment processing providers have minimum processing fees, ranging from $5 – $25. Often there are minimum processing fees for each type of card you intend to have processed. Basically, what this means is if you do not do enough business sales to have high enough fees you will still pay a minimum every month.
For example: let’s say your discount rate is 1.85% on Visa, you do $1000 worth of sales on Visa that month and your minimum processing fee is $10.
Well, 1.85% x 1000 = $18.50 in fees that month on Visa. Therefore, you have cleared your minimum of $10 and you have nothing to worry about.
Now, what if you take the same rate and minimum, but you only made sales of $250 that month on Visa? That would be 1.85% x 250 = $4.62 in fees that month on Visa. Therefore, you did not make your minimum and would be required to make up the difference of $5.38.
10. Is there a Gateway Fee?
Most card processing providers usually have a gateway fee, but usually only for IP POS terminals, PC and E-commerce payment solutions. Gateway fees can range from $5 to $75 a month.
11. Is there a Monthly Maintenance Fee?
Some card processing service providers have a monthly maintenance fee; others do not. If they have it, it is usually a fee that is associated with IVR, PC, & E-commerce payment processing solutions. However, some companies have it on POS Terminal solutions too.
12. Is there an Added Value Fee?
Some payment processing service providers have a monthly added value fee and some do not. This fee usually ranges from $5 – $10 a month.
13. Is there a Low Achievers Fee?
Most payment processing providers have a monthly “low achiever” fee. Low achiever fees can range from $5-$20. This is why it is important to get your monthly/annual estimate of total business volume correct on your Visa, MasterCard, & American Express applications. Most merchant account providers have 25-35% error lenience. If you are not sure it is always better to under-estimate your monthly/annual sale amounts when applying for credit card merchant accounts.
14. Is there a Chargeback Fee?
Most payment processing providers have a chargeback fee. Chargeback fees can range from $10-$50. A chargeback is when a card holder holds a dispute on a Visa or MasterCard or Amex transaction that came from your business. If the card holder wins the dispute, they will be refunded their money and you will be charged a chargeback fee, a similar fee to bouncing a cheque.
It is always the merchant’s burden of proof to prove that the card holder had used or bought the product or service from their business. This is why it is so important to check that, on credit card purchases, the signature matches the back of the card holder’s credit card, and if it does not to ask for photo ID. Here are 15 tips to prevent chargebacks.
15. What are the Technical Support Service Hours?
Most card processing companies have a help desk/technical support line. However, not all are 24/7 and some are better then others. This one is easy to test! Get a hold of the customer support number and call it several times through the week at different times, when you think you may need it. You will see exactly what type of service you will get. You may even want to go as far as to seek out references and phone them. Ask how the service is; ask if there have been rate hikes, how service is during peak periods like the Christmas holidays, and so on.
16. How soon can I have a new POS Terminal in my Business if my POS Terminal is not working & can’t be fixed over the phone?
Payment processing providers can vary on this from company to company. Some can have one to you within 24 hours, while others can take two to four weeks. The question you have to ask yourself is: how long can my business run without a functioning terminal? Sometimes it is better to pay more for better services.
17. How long does it take to initially get set-up with full services?
Most card processing companies usually take at least 2 weeks (sometimes as long as 4-6 weeks) to have your application processed, merchant accounts set-up, point-of-sale terminal programmed and shipped to your business ready to use. However, there are a few payment processing companies that can have one ready in your business in as little as five business days. Typically we can have a new POS Terminal ready to go in your business in as little as 5-7 business days.
18. What are the early termination fees?
Most card processing companies will have a minimum three-year agreement and usually have anywhere from a $200-$300 early termination fee. However, I have seen some with agreement terms as high as seven years and early termination fees as high as $1000. So it is very important that you ask this question.
The Critical Canadian Merchant Services Guide – Part 5
September 26, 2008 by Admin · Leave a Comment
Choose the ‘Right’ Merchant Service Provider by Avoiding these 3 Common Mistakes Made by Most Small Business Owners.
You learn things several ways. One way is simply going out there and doing something and learning from your mistakes. Another way is to learn what others have done wrong and make sure you don’t repeat their mistakes.
Don’t repeat these common mistakes that many small business owners had to learn the hard way.
MISTAKE # 1: PLAYING THE RATE GAME
Most small business owners lose at the rate game. Calling all the merchant account service providers in the Yellow Pages or off the internet and choosing the one that states the lowest discount rate will not necessary secure you low rates.
Would you play a high stakes one-on-one basketball game with Shaquille O’Neal?
Of course not!
You wouldn’t because he is a pro and knows all the tricks in the book to win at basketball.
Small business owners who try to negotiate debit/credit card processing fees with a merchant account sales pro are attempting the business version of taking on Shaq. Can you guess who the winner will be?
The small business owner almost always loses because they do not understand the intricacies of rate structures and how to look at the over-all payment processing service program.
MISTAKE # 2: COMPARING APPLES TO ORANGES
Not all merchant account providers are created equal. Price is not everything. Small business owners must also consider:
- Service
- Tech support
- Equipment
- Software
- Warranties
- Training on proper protocols for using services, etc.
For example, one company I know offers a very competitive discount rate program, BUT their program has major flaws. At first glance it seems like a good choice to make, but if the business owner had the knowledge to be able to dig a little deeper they would be able to pinpoint why this program would probably not be right for them.
Let’s look at this example:
This company (I can’t say the name, because I am not looking for a lawsuit) offers every business the same rates-which in itself is a sign of misleading advertising. Not all businesses can qualify for the same rates. Different businesses have different risks associated with them, and higher-risk businesses will pay higher rates. Let’s look at what this company is doing:
- 1.69% on Visa and MasterCard
- 10 cents per transaction
- $26/month POS Terminals
- $899 to purchase
Looks like a good program, right…? WRONG.
If you look a little closer you will see in the fine print that this is an introductory rate, and that after six months of processing they will give your business the real rate.
- There are a few hidden fees, statement fee, admin fee, and an annual recurring membership fee.
- That rate only applies on qualified transactions (card present transactions). Anything keyed-in, any corporate card, etc. will be charged at a much higher rate.
- Their service hours are 9am – 5pm.
- They offer no lifetime warranty on the Point-of-Sale Terminal (just the standard one year manufacturer’s warranty, which is the legal requirement in Canada)
- If the hardware does break down and has to be fixed, it needs to be shipped to Texas to be repaired-probably taking two weeks before you have a working Point-of-Sale Terminal back in your business.
How well would your business perform without a working Point-of-Sale Terminal for two weeks? How many sales would you lose? Is this still looking like a good deal…? Probably not.
LESSON OF THE STORY: Not all payment processing services are created equal.
This above example is just one of many sneaky marketing ploys that some merchant account providers have chosen to use.
MISTAKE # 3: BEING FOOLED BY LOW BALL DEALS, HIDDEN FEES, AND “FREE EQUIPMENT”
We touched on some of this in the above examples, but let’s dissect this in a little more detail.
Low Ball Deals
It’s always a wise tactic to ask yourself: is it too good to be true?
Is one company offering much lower discount rates then any other company-if it is, then it’s probably not cheaper. Remember, don’t compare apples to oranges. Some companies will offer low introductory rates to capture business only to raise rates once they have secured your business into a contract.
It really isn’t that hard to figure out. Remember, a good merchant account broker knows the wholesale buy rates that credit card processors pay (as I mentioned earlier, it’s called interchange) and if a credit card processor is offering lower rates than what it costs them, its business would not be profitable. How long do you think a business will last losing money? They are either going to raise your rates or they are off-setting the lower rates with back-end hidden fees.
Hidden Fees: What you do not know can hurt you. Many payment processing companies are very good at creating an illusion of being competitive, but make up for it many times over by sneaking in tons of nickel & dime fees on the back end. These could consist of:
- Monthly warranty fees
- Monthly minimum processing fees
- Administration fees
- Monthly/Yearly membership fees
- Added value fees
- Monthly system access fees
- Monthly maintenance fees, etc.
These merchant account companies can be very creative when it comes to naming bogus monthly fees. Of course, it is almost impossible to avoid getting dinged with some fees, and some are perfectly legitimate. Paying $10-$15/month in additional admin-type fees is acceptable, but anything beyond that and the odds are you are paying too much.
Free Equipment: Let’s keep this one short. Nobody gives anything away for free. Enough said, right?
Choosing a Payment Processing Provider is a serious decision, and you want to make sure you have crossed all your “t’s” and dotted all your “i’s” before committing to an agreement. Most Companies’ volume runs through Debit/Credit Card Payment Processing and most payment processing costs are 2-5% of that volume (when all said and done), so making a good decision is important.
Therefore, in order to evaluate the cost effectiveness of any Debit/Credit Card Payment Processing Provider, you need to consider ALL the fees and charges, not just the discount rates. You are most likely starting to see the huge benefit that a solid merchant account broker can provide.
