Payment Processing - 17 Key Questions Every Business Owner Must Ask!

Every Credit Card Processor will have this fee. Discount rates can vary on from as low as 1.59% right up to as high as 5.0%. The discount rate is really not a discount.

“Discount Rates” are a percentage of your sales that the Payment Processing Service Company charges the business owner to be able to offer their customers 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 & 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 above can all have a affect 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 3 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 date of time at the end of your agreement the agreement will automatically renew itself for another 3 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]

Also, many Owners are not aware that Corporate Cards also are usually charge a higher rate then the “Qualified Rate”, usually 0.25% higher, but can be as high as a full 1%. Fortunately, most businesses have less then 5% of their credit card sales be made with Corporate Credit Cards.

3. What are the Transaction Rates?

Transactions fees are sometimes called IDP transactions. Every payment processing company has at least a transaction fee for debit and usually also for credit card transactions too.

It is become more common that any transaction that is 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.

Transaction fees can range from 0.05 cents up to 0.50 cents and can be different for each type of transaction, although typical Point-of-Sale Terminal transactions fees are between 0.08 cents to 0.15 cents.

Although, I have seen Payment Processing Companies charge as high as 0.17 cents to 0.25 cents, in which case, you may want to ask for a rate review or search for a new Payment Processing Provider.

Non Point-of-Sale card processing services like IVR, PC, & E-commerce processing transaction fees are usually much higher ranging from 0.35 cents to 0.50 cents.

4. What is the monthly cost for the Point-of-Sale Terminal?

Point-of-Sale Terminals are known as: Interac Terminals or Debit Card Machines or Credit Card Machines, but in the industry they are known as a 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) , and more recently to the Wireless Data Network making some POS Terminals wireless and mobile (Cellular POS Terminal).

Most Traditional Retail type business’s 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 right 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 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 type of POS terminal. Buy-out POS Terminal prices, typically run from $999 - $1800 (without taxes) dependent on type of POS Terminals.

Two very important questions to ask before buying a POS Terminal:

* What are the warranty conditions? * Is the POS Terminal smart-card ready?

When renting a POS Terminal if you require a new POS Terminal is usually will 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 just paid $2400. If you have been renting a POS Terminal for 10 years at $40/month then you just spent $4800 & no asset in your business. You can own a basic POS terminal for as little as $1000 and now have 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 - $300. 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 greatly vary 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. Applications 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 coming to you via e-mail. (I am not sure if this is a nickel and dime fee or if it is companies 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. Is 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 say your discount rate 1.85% on Visa and your do a $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 if you take the same rate and minimum, but you only made sales $250 that month on Visa. Well, 1.85% X 250 = $4.62 in fees that month on Visa. Therefore, you did not make you minimum and would be required to make the difference up 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 burden of proof to prove that the card holder had used or bought the product or services from your business. This is why is so important to check that on credit card purchases that the signature matches the back of the card holders credit card and if it does not to ask for photo ID.

15. What are the Technical Support Service Hours?

Most card processing companies have a help desk/technical support. However, not all are 24/7 and some are better then others. The best thing to do is to get the help desk number and give it a call a few times through out a day to see what kind of service you would get.

16. How soon can you have a new POS Terminal in my Business if my POS Terminal is not working & can be fixed via the phone?

Payment processing providers can vary on this from company to company. Some can have one to you within 24 hours others can take 2-4 weeks before they have a new POS terminal to you. The question you have to ask yourself is how long can your business run without one in your business? 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. These are usually private label payment processing companies.