Merchant Accounts: Compare and Save

If you don’t accept credit cards in your online business, your sales will surely suffer. Here’s how you can be sure you get the best deal possible on credit card processing.

If you’ve ever seen a minimum sale price for credit card purchases posted near a cash register, you know that accepting credit cards is expensive. With an ecommerce Web site, your business will suffer if you don’t accept credit card payments. Credit card companies know that you’ll gain more in sales by accepting their cards than you’ll lose in fees, so you can’t avoid them completely. But with some research, you can find the best deal for your business.

Determine Your True Costs

First, you need to analyze your products and sales method carefully to figure out which discount rate (the percentage of the sale taken by the merchant account provider) will apply to most of your sales. A typical merchant account has a three-tiered pricing system, and usually the advertised discount rate is for the lowest tier.

As an ecommerce Web site, you can pretty much count all of your sales out of that tier. The category a purchase falls under depends on a list of criteria based on its risk. The lowest rate, qualified purchases, is reserved for purchases where the credit card is physically swiped at a terminal. So, when you’re comparing costs on merchant accounts for your Web site, you can ignore the lowest rate, and look at the top two. You could spend too much if you choose a provider based on the advertised rate. Request detailed descriptions of the purchases that fall into each tier to determine the rate you’ll be paying to compare your options based on your true costs.

Look at the Fees

Some merchant accounts are loaded with fees. Usually, there is a tradeoff between the amount of fees, the discount rate and whether you have to sign a contract. Each business will have its own criteria for the best account, so look at the bigger picture before you make your decision.

For example, an established business switching providers might save more money signing a multi-year contract with a new provider to secure lower rates and fees. A business like this has tested the waters and knows where it paid too much and how to save money. A brand new Web site signing up for its first merchant account might benefit from the freedom to try one provider and switch if it’s not working out—even if that means paying more in the short term to avoid signing a long-term contract.

What Are the Typical Fees?

Here’s a list of some of the typical fees involved with a merchant account:

  • Application or setup fee (flat)
  • Per-transaction fee (flat)
  • Discount rate (percentage of each purchase)
  • Statement fee (flat, monthly)
  • Minimum monthly fee (only if you don’t post a minimum level of transactions)
  • Chargeback fees (when an item is returned)
  • Cancellation fee (if you cancel your contract early)

The list above is by no means exhaustive. Before you sign up for a merchant account, make sure you read all of the terms and conditions so you know exactly what you’re getting into and have all the information you need to make an accurate comparison among your options.

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