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Credit Card Processing and Merchant Account
It's difficult to find and choose a bank or financial organization to process charge card sales!
There are a number of financial services who offer merchant accounts to home based, mail order and
Internet businesses, finding the right one for your small business is a difficult task, many pitfalls
are out there, both before and after you've opened the account.
For startups, many banks won't open merchant accounts for small businesses, so you need to go through
a third party provider who secure the merchant account for you. These third party services may have different
fee structures and different, sometimes difficult rules.
It still gets more complicated. If you are processing online-orders, there are many online gateway systems
to process credit cards. The shopping cart software you use has to have a compatible interface to the
gateway of your merchant account provider. Therefore have a look beforehand if the server you choose and
the software is compatible.
Rates and Fees
Your discount rates and other fees depend on a variety of factors. Here is a small list:
- length of time you're in business
- percentage of sales over phone or internet
- type of business
- personal credit rating
- amount of money per transaction and amount of money per month
If you're a small business and/or run your business from home by accepting phone, mail and internet orders, the
discount rates are typically from 2 to 3 percent.
If any of the rate and fee factors listed above are a problem for you, the discount rate can be as high as 5 percent.
Anyway, do not agree to such a high discount rate until you have verified that no other service is offering
a lower deal.
Compare processors, the application fees and discount rates, also the initial cost of processing equipment,
transaction fees, monthly minimums, maybe address verification fees and any other fees.
If you have to open a bank account associated with your service, check all agreements and stuff like how much
money it can hold back, how often you're allowed to withdraw money and how long it will take to clear checks
from your merchant bank.
Compare prices for equipment and/or software - prices can be very different, depending where you purchase it.
Buying equipment at the start is much cheaper than leasing it and having a contract for severals year.
Read all contracts mailed to you very carefully - don't trust any salesperson on the phone. What counts is
the stuff written on the contracts. Check if there is a cancellation fee if you want to change your
processor anytime soon. If you plan to do mail orders or phone orders, check about the percentage of orders
you can process non-swiped. Also check for monthly minimums or maximums.
Some companies will send a representative to verify that you are at the location you say you are.
Some will accept a mailed photo instead of a visit.
Other things to consider/prepare
- profit and loss statement
- business license
- tax returns
- two-way access to your bank account
Last-Modified: Fri, 10 Jun 2005 12:32:11 GMT
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