Don’t Be Cheated By Cheap Merchant Accounts

What is a Merchant Account? It is simply a bank account that allows you, the merchant, to collect and process credit card payments from your customers. And while every business owner is looking to cut down on processing costs, making sure you understand the ins and outs of the deal you make will keep you from getting burnt down the line by a so-called bargain. There are several different ways for a company that offers merchant accounts to structure their fees. All merchant banks charge a percentage of the price of the sale. Sometimes the lowest percentage offered does not represent the most cost effective arrangement, often you have to meet a monthly minimum amount of charged sales to keep the great rate. Analyze your sales records to see what your charge history looks like, or for a new business, make an educated guess as to what you might reasonably charge per month in the future. If there is no way you will make the sales minimum, and then have to pay penalties or a higher interest rate, consider a plan with a higher percentage charge and no monthly minimums, it will be cheaper in the long term. Some banks charge a per transaction fee in addition to the percentage rate to lock in a low percentage rate. To see if this works for you, analyze your sales (or projections) for what your average charged sale amount is. If it is low, $10 - $20 for example, you might be better off paying a higher percentage of the sale and no per transaction fee. For an average sale of hundreds of dollars, you will be better off with a small transaction fee and a lower percentage rate. Most of the time you will need a transmitter, they can be bought outright or leased, and those fees will vary. If you are in a stable business, or have been in business for a long time and will be for the foreseeable future, buying outright is a better deal than leasing. Look at the way you do business and choose a transmitter that best suits your needs, there is no reason to invest in a fancy (and more expensive) wireless product if you never leave your storefront. In some cases, the merchant bank can offer you used, re-conditioned transmitters for purchase. If they come with a warranty, this is an excellent area in which to save money. When checking into an offer of no up front costs, you need to make sure you aren’t trading short-term

cash for long term pain. Again, take a look at your numbers, whether sales history or sales projections. If you expect to do a lot of business by credit card, sometimes an arrangement that requires an up front set up payment, but that locks in a lower percentage rate for a longer period of time can be more cost effective in the long term than a deal with no up front costs and a higher percentage rate. No matter what type of merchant account you choose, don’t be fooled by ad copy. Take your calculator and your sales projections out of the file cabinet and sit down and do the math. A few minutes spent comparing the costs of various offers can save you hundreds of dollars down the line.