If you need to get a merchant account, you need to know as much about merchant services as possible. This will ensure that you get the right account for your business and that you understand what you are being told. There is a lot of information that you need to know that can help you save money in the long-term with your merchant account.
Who Is Involved In Merchant Services?
A lot of people assume that merchant services will be between their business and their merchant account provider. However, there are a number of businesses and players that are involved in any merchant service. It is important that you know who these players are and the impact they have on the service provided.
The first player is the credit card company, and this will include MasterCard, Discover, Visa and American Express. These companies are generally the start of the merchant service as they own the cards that you will be processing. These companies will be linked to the banks which are the second player that you need to know about.
These banks will not be the general bank down the road, but specific banks that issue cards like Chase, Wells Fargo and Bank of America. There are times when the credit card companies will double as banks. The banks and credit card companies work closely together to provide a service to their customers.
The third player is the merchant or your business. When a customer looks to buy a product, the merchant is the company that they buy the product from. The merchant is generally the player who will be looking at acquiring the merchant service.
The merchant account provider is the next player and they will be in charge of the credit card processing. These providers will generally be third-party processing companies and banks. The merchant will generally have to apply to open an account with these providers.
The last player that you need to know about will be the gateways. Gateways will be used when there are online and mobile payments. Examples of gateways will be the e-commerce software for online shopping cards.
The Pricing Models
Knowing the different players is important, but you also need to know about the pricing models which are used by the merchant service providers. The pricing models are generally one of three standard credit card processing models. These pricing models are flat rate, tiered and interchange plus.
The flat rate pricing model will be used by a number of different merchant service providers. Flat rate pricing will generally be offered to businesses that have small volumes of transactions. If you have a lot of transactions going through the account, you will actually end up paying more per transaction. However, the benefit of this pricing structure is that it will be transparent and easy to understand.
Tiered pricing will be the most common pricing model and will generally feature 3 different levels or tiers. These tiers are called qualified, mid-qualified and non-qualified. The different tiers will include different types of transactions and will not always be easy to determine. It is possible to understand the pricing in general, but you will generally end up paying more for the processing.
The interchanged plus pricing is actually the best for the merchant and will generally result in the lowest fees. The term interchange in these cases will be synonymous with the wholesale costs that the credit card companies charge the processors. When you have this pricing, you will be charged the interchange price plus a fixed rate. The benefit of this that you will always be charged the lowest cost and will be able to check that you are charged the right amount.
The Ancillary Fees
The credit card processing fees will not be the only costs that you need to consider with merchant services. There are a number of ancillary fees that you might be charged, and you need to know what they are. The first fee that you might be charged is an annual fee, but this is something that should actually be waived.
Another common fee that is charged will be monthly minimum penalties. As the name suggests, this fee will be a penalty charged when you do not meet certain minimums on your account. This will generally relate to the number of transactions which go through your account. If you are going to be using a merchant account, you should avoid providers that charge this fee.
An early termination fee will often be charged if you sign a contract with the merchant provider for a set amount of time. This fee should only be part of your contract if you have been provided with free software and equipment in the exchange. If you are not getting this with your account, you should not be charged this fee as the account should be on a monthly rolling term.
The monthly service fee could also be charged, but this should not exceed a set amount of $10. Statement fees could also be included, but if you choose to have an online statement, this should be waived. Many reputable companies will not charge this fee.
The Equipment And Software
Each merchant service provider will generally have their own software and equipment that they can provide. If you have a plan which allows you to take credit-card transactions via a terminal, you will need to have up to date EMV. There are some providers that will offer you this for free, but others will have a deadline that you need to meet to in order to get this.
There are some providers that will allow you to lease the equipment from them. This is actually something that you should avoid because you will generally end up paying more for the equipment and software than if you buy it outright.
There is a lot that you should know about regarding merchant account solutions reviews. This information is important if you are going to be using any merchant services for your business.