Tips For Choosing A Merchant Account
 By Greg C. Horn

Once merchants had to be persuaded that accepting credit cards would increase sales. If you’re still of that mind-set, you’re well behind the times – and probably in dire need of a credit card merchant account.

Also, not long ago your own bank might have balked at providing you a credit card merchant account for accepting charges online. But today there are many opportunities for obtaining such a capability. And not just for your Web site sales, but also for telephone and even cell phone charge processing. You can even get the latest portable state-of-the-art card swiping devices for mobile point-of-sale transactions.

Just as availability and capabilities have multiplied, so too have factors to consider to get the right type of credit card payment system for your business.

Here are some issues to consider when shopping for the best credit card processor to meet your company’s specific needs, whether directly through your bank or from a merchant account provider.

Understand The System
The ultimate backer is a bank, and your ability to accept charges is, in effect, like the bank granting you an unsecured, open-ended line of credit.

That’s why startups, mail order and online businesses posing relatively greater risks have not been favored over the years as have conventional brick-and-mortar businesses.

Restaurants, for example, have few customers disputing bills after a sale. Consequently those businesses may pay lower fees than an online clothing store where returns and charge-back disputes are more likely.

Understand where your business ranks on the risk scale. It will affect the price you pay.

Know Your Needs
Talk with your banker or prospective card processor to discuss out-of-the-box solutions. Not every solution’s suitable for every venue. So, think through in advance how, when and where you stand to benefit by credit card sales. Some examples:

• Do the offers for online service come packaged with turnkey shopping cart systems? If so, does the processor scrimp on that software to keep the cost down? It’s not worth saving a few pennies per transaction if your online shopping cart is so cumbersome it chases off customers before closing sales.

• Could your business benefit from new wireless processing, which works anywhere a cell phone signal can be received?

• Along that line, should you consider regular telephone processing that can be performed on any touchtone phone? There may be little sense in considering a point-of-sale terminal if you don’t have a storefront operation.

Understand The Fees
Your principle cost will be the interchange rate, which can vary from less than 1 percent per transaction to about 3 percent. This rate is largely dictated by the business risk factor, but it is negotiable, and can vary significantly among vendors.

Mail order businesses may pay an additional fee, often a flat rate such as 35 cents per transaction. You also may be required to pay another fee of a few pennies for address verification on buyers. Some card processor companies charge periodic service fees to cover the costs of support and issuing statements.

Depending on the nature of your business, there may be other fees, although not all providers charge them. Some processors tag on:

• An annual fee

• Set up fees

• Maintenance fees

• Fees to cover the cost of software, such as a Web shopping cart

Comparison Shop
If you’re beginning to think there’s a lot of wiggle room in credit card processing agreements, you’re right.

The key is to find a provider whose fees are competitive, who has a track record with businesses like yours, who has been in business for a healthy period of time and who doesn’t ding you extra for every incidental cost.

Application fees, for example, can range from $75 to $125, but some companies don’t charge a dime.

You’ll benefit from identifying upfront the range of expenses appropriate for your business, then comparing offers for these categories. Eliminate providers who charge for every facet of your relationship. Then among the remaining qualified vendors, comparison shop, comparing apples to apples.

In this competitive field, you may be able to win additional concessions – or additional services – by agreeing to longer-term commitments.

Common sense counts. Steer clear of fly-by-nighters and offers that sound too good to be true. For nominally larger monthly bills, you may find long-term piece of mind and better service.

How AFS Can Help
AFS Members have access to affordable credit and debit card processing from Total Merchant Services.

You get support for all major credit cards, flexible leasing options and competitive rates. For AFS Members, the standard enrollment fee of $295 is waived. And statement fees are a low $7.50 per month.

Find out more at the AFS Web site, www.afswebsite.org.

(Posted October 2007)

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