Credit card Processing – How much Should it Cost?

Expert Overview of How Credit Card Processing Works

Are you planning to incorporate credit card processing in your business? You will need the services of a good credit card processing company to start you up. With so many agencies in the market, it is hard to decide which credit card processing solution is best for your business how to start a credit card processing company. A good way to start is by comparing the fees and cost of services offered by various credit card processors. Following are some of the costs involved in accepting credit and debit cards.

Hardware is the most expensive investment. The point-of-sale (POS) credit card terminals cost anywhere between $150 and $700. Wireless models fall in the range of $500 to $1000. Higher end models with added features cost even more. The cost of the terminals depends on how useful the additional features are, such as security features, and the look of the machines.

Depending on your business plan, you may choose to buy or lease credit or debit card terminals. Investing in hardware is cheaper in the long run, but if you are unsure of your long term plans it is better to lease the machines. Leasing charges are usually in the neighborhood of $20 per month.

Many credit card processing companies include installation of POS terminals in their package, along with creating merchant accounts for the business. This may be cheaper than purchasing terminals separately. However, you also need to consider the agency’s charges for other services such as payment gateways, compatibility with an existing shopping cart application, virtual credit card processing terminals, etc.

Installing POS terminals to process credit or debit cards is a safer option than processing the card manually over the phone. The verification process takes longer on the phone and it does not assure the availability of funds when your company actually processes the charge. As the verification and processing are carried out at different points in time, there is a risk of losing money.

Credit card processing companies charge various kinds of fees. The discount fee is the main fee by which card processors make a profit. Credit card processors charge additional fees for various services, and this is where it gets difficult. Businesses have to take a call on the value of the additional fees before signing the contract.

The discount fee is the percentage of money that the processing agency charges per transaction. The percentage is decided by the agency after considering your credit history, amount of credit card sales and the type of business. Broadly, there are two discount rates – one for businesses that offer signature-less services, such as payments over the internet, and the other for businesses that process cards physically for immediate transactions. The discount rate for the first kind of business is higher, 2%-3%, as it carries more risk. Otherwise, discount rates are 1. 5% to 2% per transaction.

Credit card processing companies can charge a number of other fees such as application fee, startup fee, activation fee, statement fee, monthly minimum fee, payment gateway fee, charge back fee and termination fee. The application fees charged by some agencies are as high as $300, and non-refundable. Some processors charge a monthly minimum fee of $20. Merchants need to weigh the value of a service for their business and agree only to the ones that make sense.

Do not work with a card processing agencies that asks for an inflated fee to be paid up-front. Reputed credit processing companies make sufficient business without charging additional fees that have no value. The contract should include all the fees the agency will charge your business such as customer service fee, payment gateway fee, etc.

The processing fee is a small cost to pay for the increased sales your business will enjoy by accepting card payments. Survey the market to find a reputable credit and debit card processor than offers good value for money. Paying a slightly higher transaction fee in exchange for good and reliable services is a good deal.

Credit cards are all over the place. Earlier, a few select businesses accepted cards as payment options. Now, almost all businesses accept credit payments. How did this change come about? What is making credit cards such a popular payment option? The answer to these questions is affordable processing fees.

Extending credit to customers is an age-old policy to assure more sales. United states saw the first credit cards in early twentieth century, with oil companies and hotels being the pioneer card issuers. Processing and collection of the bills was carried out by the businesses in-house. Then, banks began to offer credit cards and took over the messy work of processing card transactions. Businesses were unburdened from having to extend credit from their own funds. The job of processing and collecting bills was transferred to banks.

As banks took on the task of processing card transactions, many businesses began to accept credit and debit cards as payment options. Visa and Mastercard appeared on the scene offering effective credit processing services and taking the tedious work out of the hands of businesses. Credit card business flourished and so did the card processing companies.

Lowering cost of hardware and software has made it possible for small companies to process electronic payments effectively, and at much lower costs than banks and giants like Visa and Mastercard. The cost of online payment gateways has also reduced drastically and many businesses have taken their products online through ecommerce applications.

As the internet makes credit and debit card processing faster and cheaper, more and more companies are jumping in to get a slice of the pie. The competition is bringing down the cost of processing fees like never before. Small businesses can easily afford the cost of processing fees, making cards a viable payment option. This also increases their total sales volume, as many customers prefer to pay with credit.

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