Processing Credit Cards

Having a way of processing credit cards is a necessity for almost any business. Today, many people don't carry cash or checkbooks around and have come to rely on the use of debit and credit cards.

Merchant Credit Card Processing

When starting a business, choosing a credit card processor (a company that processes credit card charges) can be a challenge. Many business owners are tempted to simply go with their own bank. However, not shopping around can cost a business thousands of dollars per year.
 
Processors charge an average of 20 cents to 35 cents per credit card swipe and most often charge a transaction fee of around 2 percent to 2.5 percent of each bill total. Processors have to pay around 1.65 percent per bill to credit card companies, so watch out for any processors with super-low percentage rates, as there may be hidden fees elsewhere.

Merchant Account Providers: What to Look for in a Processor

Aside from the bill percentage and the per-swipe charge, there are many other factors to consider when looking for a processing company. Compare the following:
  • customer satisfaction rating
  • customer service
  • Internet options
  • monthly cost
  • point-of-sale (POS) features
  • startup price and equipment cost.

All of these should be accounted for in the total cost of your credit card processing.

POS features will allow you to operate your business from remote locations, such as booths at outdoor fairs or other events. Most processors will also allow you to manually enter credit card information from customers if a sale is made away from the business and from Internet access, or if service is temporarily down.

Some businesses may also want to consider comparing the delay between transactions and when they actually receive the customers' money. Usually this takes anywhere from one to five days, depending on the fraud-checking capabilities and policies of the particular company.

Also, check the company's policy for terminating a contract. If it's any more than a few hundred dollars, you may want to consider another company.

Online Credit Card Processing

Payment Gateway is a service that accepts online orders for businesses and allows credit card payment online. The majority of processing companies offer this service, but not all do, so it's important to check. Gateway fees should also be considered, as they vary from company to company.

Your service provider will generally set up an online shopping cart that will allow customers to do an easy checkout and will encrypt their credit card data to avoid identification or information theft.

Funds from online purchases will be put into your merchant account, just as they would from any in-store or in-person transaction.

Chargebacks: How to Handle Them

Chargebacks can be tricky. A chargeback occurs when a customer decides that he is not responsible for a charge that has appeared on his credit card bill.
 
Generally, credit card companies will allow merchants to submit proof or evidence as to why the charge is appropriate, but, with certain companies, such as American Express, the favor is almost always given to the customer. American Express allows customers to dispute charges if they are dissatisfied with a purchase, which often means that the customer can claim dissatisfaction and avoid the charge even if they do not return the item purchased.

Choosing a Processor: More Tips

When comparing processing companies, the more information you have, the better:
  • Compare and contrast a number of different companies and ask a lot of questions.

  • Make sure you get the company to spell out any and all charges that you will be held accountable for: Surprise fees are never pleasant for any business owner.

  • Online comparisons and comments may also be helpful and may point out fees or features you haven't considered.

  • Talk to other business owners if possible and ask them what they like and don't like about their providers. This can give you an idea of what to keep in mind.

Resources

Farrell, Maureen (2007). Saving on Credit Card Processing Fees. Retrieved September 12, 2007, from the Forbes Web site: http://www.forbes.com/home/2007/02/20/ visa-americanexpress-globalpayment-ent-fin-cx_mf_0220 creditcard.html.

Network Solutions (2006). Credit Card Processing. Retrieved September 12, 2007, from the Network Solutions Web site: http://merchantaccounts.networksolutions.com/merchant_
account_credit_card_processing.php.

Paynet Systems (n.d.). Credit Card Processing. Retrieved September 12, 2007, from the Paynet Systems Web site: http://www.paynetsystems.com/credit-card-processing/.

Top Ten Reviews (2007). 2007 Credit Card Processing Report. Retrieved September 12, 2007, from the Top Ten Reviews Web site: http://credit-card-processing-review.toptenreviews.com/.