Credit Card Processing Basics: Part 1 of 2
Merchant card processing has evolved tremendously from its retail terminal beginnings, when complex wired systems were the only solution available. Technology moves fast, and thanks to WiFi and smart phones, the options for how a business can accept credit card payments have never been more flexible and user-friendly.
What is it and which type of card processing would be best for your business? Let’s take a look, starting first with what merchant card processing actually entails.
What is Merchant Card Processing?
To accept credit cards from their customers, retailers need a merchant account to accept credit card payments, which is an account with a credit card processor that allows you to deposit and move funds received, and pay any fees or charges related to taking credit card payments.
They also provide related products and services to your business, such as credit card terminals, credit card readers, point-of-sale systems and more.
How much does it cost?
Shopping for the right merchant service provider means looking at total fees (such as application and set-up fees, processing rates, account fees, monthly minimums and related fees if it is not reached, annual or monthly fees, PCI-compliance fees, charge-backs and more), not just the individual processing rate for each transaction. It’s also important to ask if there are possible fees that have not been disclosed.
Some of the most popular small business resources offer services that are significantly reduced from what a full-service merchant account provides. For instance, they may only provide a credit card reader that works off a smart phone, but can’t expand services to connect that reader to a retail store system, or network card readers together into a larger system.
Be sure to explore the difference to fully understand what you’re getting and ensure it works for your business long-term as needs change.
What questions should I ask?
In addition to the fee structure, exploring the specific hardware and software of each merchant card processor is important. You’ll want to ask detailed questions to explore what’s provided.
- Is the contract month-to-month or a long-term agreement?
- What are the contract cancellation and renewal clauses?
- How does the total cost of renting compare with a purchase?
- Is the equipment leased or purchased outright?
- If renting, does the term of the rental or lease match the term of the processing agreement?
- Is a separate data plan required?
- Is the hardware wired, wireless or cellular?
- What kind of software or app is required, and is it compatible?
- What happens if the equipment is lost or stolen? What if it malfunctions?
- What do the customer service and replacement processes look like?
- What happens if the internet or connection goes down?
- Does it read both credit card chips and the magnetic stripe?
- Can it interact with smartwatches and smartphones, if that’s important to you?
- Do you need the card reader to interact with a database?
- Is service available after hours, and will you have a dedicated account manager?
We hope you find this helpful. If you’d like more detail, you can find Part Two right here! We’ll be sharing expertise from our in-house business credit card expert.
We’re also happy to answer questions if you’d like to give us a call or stop by a branch.