How to Still Make Money When Owed Money

The popularity of credit card usage seems to be going hand-in-hand with the popularity of online commerce. Tying in with this fact is the prevalence of business-to-business transactions that are conducted via credit cards. Most businesses these days would not have to think about the convenience of using credit cards, but others are a bit hesitant, especially if they have not engaged in this aspect of the business before.

Giving Credit when its Due

Most of the time, a business can bank on the success of invoicing their customers. For businesses entertaining the notion of using a merchant service, a negative thought may stem from the fact that the service takes a portion of their sales. If your business has enough money to temporarily sacrifice the money that would be coming from temporary non-paying customers, then maybe you do not need the service of a merchant service.

Relying on a merchant service would, however, save your business the headache of keeping tabs on tardy payments and utilizing credit cards would transfer to your bank account in less than a week; which is beneficial for smaller businesses with smaller budgets to work with.
Accepting credit cards would expand your customer base and customers would have more options as far as method of payment. If your business services are available on the Internet, accepting credit cards should be precedent.

Credit Card Processors

Banks: The bank used for your usual business finances would be the first go-to-guy for credit card processing. Know that most banks do not process the card transactions, but use an outsource business to conduct these matters. The negatives of taking this route include frequent refusals and intense scrutiny by the bank to evaluate your business.

Third Party Processors: These processors strictly handle credit card processing. They will tackle the business of authorization, billing, reporting, and settlement.

Independent Sales Organization: These businesses are essentially registered credit card merchant brokers who represent one or more third party credit card processors. They establish and aid credit card merchants, but do not engage in the actual processing. The good and the bad on them is that they are not as meticulous as banks as far as accepting your application, but they are not as strictly regulated, so it is wise to be most prudent when considering them.

Financial Service Provider: MasterCard and Visa insist you to set-up a merchant account through intermediaries, but Discover and American Express allow you to apply directly to them.

Association: Small businesses and trade associations often offer credit card merchant processing at discount prices. If it is the nature in your business to have difficulty acquiring credit card merchant status, then this may be the right road for you to take.

Qualification

Merchant service providers will want to make sure they are not shaking hands with scoundrels, so they will in the very least start a basic background check. They will meticulously scan credit history of the owners and/or offices on the application and expect credit references from at least two or three suppliers. The merchant service providers are going to inspect if there is a high probability of a high rate of charge backs (a reversal of a sale).

Businesses that provide tangible products rather than services are more attractive to merchant services, as well as businesses that deliver goods immediately in exchange for payment. Providers are going to ponder the type of credit card transactions your business performs. Card-present transactions are more attractive than ones that take place over the phone, by mail, or Internet. If most of your transactions will not have your customers present and physically swiping their card, this does not mean that you will not be granted a credit card merchant account, but it may mean that you will be paying them more money due to the higher risk factor.

Systems Pricing

If your business is going to conduct card-present transactions, one of the most expensive costs you will have to consider is the terminal fee (the machine that the cards are swiped through). Basic terminals fees cost $150 to $300, those with printers $200 to $400, and wireless terminals can run $600 to $1,000.

If your business engages in card-absent transactions, terminals will not be required. Software that will verify transactions usually are priced around $150. Some providers will support card verification via phone messaging. Some providers will stamp you with application fees that can range up to $200 and could be non-refundable. Other ancillary costs include setup and account activation fees.

The providers main source of fee will be the small percentage they will collect from each transaction. This fee will be variable depending on your businesses evaluated risk, average sales ticket, transaction type, and total charge volume. Lets look at another difference between card-present and card-absent transactions. Card-present transactions carry a rate of about 1.5% to 2%, while card-absent is at 2.2% to 3%. Some merchants will try to get more money out of low-volume businesses by charging a monthly minimum rate of $20 to $35. Another fee tacked on per transaction can range from $0.20 to $0.30 for card-present transactions and $0.30 to $0.50 for card-absent transactions.

There could be a multitude of other costs coming from your service provider. Consider a fee to cover the cost of issuing monthly credit card transaction summaries (about $10), annual fees, programming fees, Internet processing fees, shipping and handling, customer support fees, etc. Make sure that you and the potential provider have clearly discussed all fees that your business will be charged before doing business with them.

Negotiation

Know the nature of your business. If you are not expecting to charge more than a few thousand dollars each month, attempt to lower the set-up and monthly fees coming from the service. For larger credit card volumes, reducing per-transaction costs is a large priority. Be attentive to long-term contracts with early termination fees; you should be able to get out of the relationship if you are unhappy with it. Another ruse is low introductory rates that skyrocket after a few months. While all providers reserve the right to higher their monthly fees, this should not be something initially contractual.

The Process of Choosing

Finding a good price that fits the budget and nature of your business will immediately come to mind when considering a service provider, but this is just one factor. As in any business that works directly with the public, excellent customer service will be essential. Just as they will need credit referrals from you, ask for previous and current referrals from them. You want to see if your customers are going to have to wait several minutes before reaching a customer support representative. You want to see that your customers needs are met efficiently. You will want to see how the provider handles charge backs. Also look into the providers level of support- Do they have staff 24/7? Do they charge per incident?

You will be dealing with customers important information for card-absent transactions. See how secure the providers systems are (SSL or secure sockets layer is a standard web security system). Make sure to thoroughly check out the business to ensure they are legitimate (check with the BBB) and if you are contacting them via Internet, get a physical address.

Shopping Insights

- Different providers differ on the longevity of time it takes for funds to be deposited to your account. Card-present transactions will more quickly get to your account than card-absent transactions (they take longer to clear).

- Check on variable fees per provider. Such fees include set-up, cancellation, and monthly minimums.

- Once you clearly delineate all fees expected to come from the provider, do some research on your own end comparing total costs ranging from your best to worst recent months of business.

- Again, clearly understanding ALL of the fees you will be expected to pay cannot be stressed enough. Make sure that you are not going to be surprised by any hidden fees.