Deciding On A Merchant Card Processor

Writen by Stephanie Chandler

If your business isn't accepting credit cards, there is a good chance that it should be. More and more people are taking advantage of the convenience of ATM and credit cards. The credit card companies continue to find innovative ways to improve convenience such as offering key-chain sized cards, mileage credits and cash back bonuses. As a result, consumers have less incentive to pay with cash or checks.

Some business owners find it difficult to accept the idea of giving away a percentage of each sale, which is what you have to do when you process a sale on a credit card. Each merchant processor has different rates in fees but in general you will have to pay a monthly fee for the processing terminal, along with a fee for each transaction. But these fees equate to the cost of doing business and offering the convenience of paying by credit card can potentially improve your cash flow.

Benefits of Accepting Credit Cards

*In most cases, the merchant processor will automatically deposit money collected directly into your checking account each night which equates to improved cash flow and fewer trips to the bank to make deposits.

*Your average transaction could actually increase since credit cards make it easier for consumers to spend more at checkout. If they aren't carrying enough cash or don't have enough cash in their checking account, a credit card makes it easier to spend.

*If your competitors are accepting credit cards, you could be losing sales if you aren't offering the same service.

*If you are worried that the transaction fees will negatively affect your bottom line, you could increase your prices slightly or offer an incentive discount for those who pay cash.

*Add-on services such as the ability to verify checks or sell gift cards can also improve your business. Offering gift cards can be very lucrative for all kinds of businesses and most processors offer these on their menu of services.

Locating Merchant Card Processors

It seems that everyone is selling merchant card systems these days. I've been processing cards for several years at my bookstore and not a week goes by without a visit from a sales person. Merchant card sales people are compensated not only for getting your initial business, but most are paid commission (a small percentage) for every transaction you process. It's no wonder these sales people are so aggressive!

Locating a reputable processor and finding the best rates can seem overwhelming, but it's worth a little time to investigate your options. Here are some places to look first:

*The bank where you do your business banking. This can be a good option, though not all banks will offer merchant services to brand new businesses. If you have been in business for less than a year, your bank may not be willing to help you until you are more established. Don't take it personally; it's standard practice.

*Trade associations. If you belong to your local Chamber of Commerce or any industry-specific trade association, check to see if they have negotiated rates with a merchant processor.

*Referrals from peers. If you know people in business in your general area, ask them who they use and if they are satisfied with the service.

*Apply for a business license. When you get your business license, you will likely end up on mailing lists and will receive enough offers to make your head spin.

Interviewing Processing Services

It's a good idea to get quotes and compare rates from several companies. Here are some questions you should ask:

*What is the transaction fee and percentage for credit card purchases? Be sure to get specific rates for each kind of card including Visa, Mastercard, American Express and Discover. Each may have different rates.

*What is the transaction fee and percentage for debit card purchases?

*What is the monthly lease fee on the equipment?

*What would it cost to purchase the equipment out-right?

*Are there additional monthly fees?

*Can the system be programmed to automatically settle transactions each evening?

*How often will deposits be made into my checking account?

*How long is the contract term? Many will try to lock you in for 3-5 years. This is one point where you can negotiate a shorter term.

*Why would I choose your company as my merchant services provider over the competition?

*How long have you been in business?

*What kind of customer service do you provide and what are your hours of operation?

*Can I process cards manually in the event of a power outage?

*You might also want to ask about gift cards and check processing if this is relative to your business. If you operate a website, also inquire about online processing.

Compare the answers from several providers side by side. The fees for these services can vary greatly so it would be in your best interest to interview a variety of companies before you make a decision. I'm a big believer in gut instinct so if you have any doubt about a company, move on to the next. There are many companies offering merchant services so you should have plenty of options.

Also ask for a sample contract. This gives you the opportunity to review the company's basic policies before you decide to sign on the dotted line. And keep in mind that everything is negotiable. If one company offers you better rates or terms than the next, you can use that as leverage to negotiate a better deal.

The bottom line is that you want to find the best offer—one that will improve your business. Don't be bullied by pushy sales people. Be prepared to negotiate and ask tough questions. Soon your sales could be soaring and your only regret could be that you didn't implement card processing sooner.

Stephanie Chandler is the author of "The Business Startup Stephanie Chandler is the author of "The Business Startup Checklist and Planning Guide" (Aventine) and "From Entrepreneur to Infopreneur: Make Money with Books, E-books and Information Products" (Wiley, Dec. 2006). Visit http://www.BusinessInfoGuide.com to access hundreds of resources for entrepreneurs.