For many merchants, the convoluted fee structures involved in processing credit card
payments and using an
online merchant account make it seem that
affordable payment processing machines
and
services are either out of reach or just too confusing to track down. The ways fees are
calculated vary depending on the credit card payment processor, online merchant provider,
and bank, among others. But a basic understanding of the routing process that money charged
to a credit card takes on the path to the merchant’s account can help merchants navigate the
process of choosing a payment processor.
Take a typical electronic credit card purchase by a customer
on a merchant’s website. The payment will see fees deducted by at
least five players: the online payment gateway, the credit card processor
or processor hired by the merchant’s bank, the credit card interchange that does
some security checks, the customer’s credit card issuer, and the merchant’s bank.
The merchant has some choice over at least three of these players. This is why it is so important
to consider the payment schemes and fee structures as they relate to each merchant’s business size,
when choosing a payment gateway, online merchant account, credit card payment processor, and business bank account.
In general, a two percent charge plus a flat charge of less than 25 cents per swipe
is a decent rate to pay a credit card processor, but don’t forget the other players,
who will take roughly one point five to two percent more, combined. These differences can
add up quickly – a small business that does $100,000 in yearly sales could save one percent
of that per year just by doing the research to cut the rate. Of course, service is important too,
and that often costs a higher rate.
So along with shopping around for credit card payment processors that will provide affordable
payment processing machines, merchants should be sure to ask to see everything in writing from
everyone involved in the process, so they can verify what their rates will actually be,
and use that information as part of the bargaining process to ensure better service at the best rate possible.
It will take some legwork, but the time should pay off within the first two years of business.