Credit Card Processing: How And Why Of Getting A Merchant Account
Ability to accept credit cards for payments is important for every business big or small. Customers do not always carry cash and often not enough. Studies have shown that average credit purchase is much higher than a purchase made with hard cash. People also tend to indulge in impulsive buying at businesses that accept credit cards. Why would you then not open a merchant account and accept credit cards?
Deliver good customer service and attractive payment options to customers and you ensure that customers spend more money with you than your competitors. Buyers may not always carry cash and sometimes not enough. If you acquire a Merchant account, you can enrich their shopping experience by giving them the flexibility of paying by credit cards. Consumer spending on the internet is exploding. Credit cards have also become a quick and attractive option to make payment online for your purchase.
Credit card processing companies charge per transaction fee and that could be a turn off for a small business owner especially if you are already under pressure to maintain margins. Relax! You will more than make up for the fee with increased revenue. If you accept credit cards, you become attractive to customers that are not carrying enough cash. Businesses that accept credit cards also fuel impulsive buying.
Growth in your customer base may very well depend on your choice to start a Merchant account service to accept credit card payment. It is especially necessary if your company is looking to sell over the internet.
Different forms of Credit Card Processing:
* Banks: Your obvious choice should be the bank you use for your business transactions but be sure they have a competitive rate. They typically offer multiple packages with merchant accounts. Drawback is that banks prefer to carefully screen your business finances before approving your account. This may delay approval for a merchant account.
* Third Party processors: You will not need a merchant account if you go with a third party processor. They take care of the authorization, billing, reporting and settlement, which are vital to any transaction.
* Independent Sales Organizations (ISO) are brokers for more than one credit card processor. It is easier to get a merchant account with an ISO but they charge a higher commission. Many credible companies offer good customer service, but do practice close vigilance when dealing with these service providers.
* Trade Associations: If you belong to an industry that faces difficulty in availing credit card merchant accounts, Trade Associations are a good solution for you. They provide good processing services at discounted rates.
* Offshore Merchant services: If you have a bad credit history then Offshore Merchant service providers are an alternative. They are not well regulated but have flexible terms and lower fees, and taxes.
How do I Obtain a Merchant Account?
Qualifying for a merchant account depends on the financial status of your business and your industry. Credit history of the business and that of the owners is also evaluated before approval. High charge backs are a negative and make it difficult to obtain a merchant account.
Businesses selling goods are more preferable than those selling services. In addition, businesses that immediately hand over the goods to the customer are preferred over those who have to delay the delivery for any reason. Credit card processors love businesses that accept credit cards in person. The customer would hand over the card to you and you would swipe it through the terminal and get a signature. If you accept credit card on the phone or the internet, your business is considered higher risk. If such is the case, you may not be denied a merchant account but you would certainly pay higher fees.
Things to keep in mind while establishing a merchant account.
* Pricing for a merchant account varies based on your status and your choice of the provider. Compare quotes from several credit card processing vendors before making a decision.
* You will pay several kinds of fees besides the start-up and equipment fees including annual fees, programming fees, Internet processing fees, and shipping and handling.
* Every business is different. Help the merchant account provider understand the nature of your business before signing a contract. It would ensure better pricing and service. In addition, it is okay to negotiate, do not accept the first offer.
* Get an idea about your monthly costs by comparing numbers from your worst and best months.
Obtaining a merchant account or credit card processing capability is a major decision for your business. Do your homework before making a commitment to a service that can have a serious impact, positive or negative, on your business.