Credit card processing fees can be very confusing. There are annual charges, monthly charges, per transaction costs and what not. The best way to go about estimating the total cost of incorporating credit card payments processing into your business is by analyzing your average credit card transaction and monthly credit card processing volumes. As credit card processing fees vary with the type of transaction, type of credit card, and sales volume, these factors make dependable yardsticks.

Why do credit card processing companies charge merchants?

Credit card processing companies charge merchants for the convenience so that small businesses can accept credit cards from consumers as a secure payment option and making funds available to the merchant on time. Typically, merchant account credit card processing companies will charge a:

1. setup fee
2. transaction fee
3. monthly statement fee
4. chargeback fee
5. and payment gateway fee (for e-commerce websites only)

Credit card processing companies also provide customer support with a guaranteed response time, access to funds, and a clear communication channel.

What type of credit cards to accept?

Merchant account credit card processing companies have different processing charges based on type of credit card used – standard, rewards and corporate card. Knowing the typical type of credit card used by your customers will give you a sense of your average monthly credit card processing costs. Your business may attract a segment of customers that are more likely to use a certain type of credit card based on your industry and type of business. Typically, standard consumer cards incur cheap credit card processing costs while corporate and small business cards tend to incur higher transaction costs.

What types of credit card transactions are most common for your business?

The credit card processing for small business becomes higher as risk goes up. Card less transactions such as telephone orders, mail orders and e-commerce transactions incur higher processing fees than physical card swipes. Sometimes, the customer’s credit card data is entered into the system manually. This can happen if the credit card’s magnetic strip is damaged. Again, this transaction incurs a higher fee. E-commerce transactions also involve the costs of accessing the payment gateways, transferring encrypted and secure customer data.

What happens if maximum merchant account limits are exceeded?

Usually, you specify a maximum credit card transaction amount and average monthly sales volume when applying to the credit card processing companies. However, you could make a sale that exceeds the maximum transaction limit. Usually, the transaction is flagged as an exception and the credit card processing company verifies the transactions’ authenticity before approving the transaction. If you expect the total monthly credit card sales volumes to exceed the maximum limit due to seasonality you should inform the merchant account credit card processing company about these eventualities before hand so that the funds are not withheld from you.

Understanding the fine print in agreement

Agreements typically specify all the credit card processing fees that are part of the deal. If you have any doubt, make sure you clarify them before you sign the agreement. There should not be any hidden costs that should surprise you later. Fixed monthly fees, variable transaction fees, and fees for different types of credit cards should be clearly specified in the merchant account agreement.

You should also verify the customer support charges (if any) and reliability of the credit card processing company by checking a few references and past records. The best credit card processing companies will ensure timely funds, clear communication and excellent service that will significantly improve the productivity and revenue streams of your business.

Tags: Credit Card Processing

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