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Choosing a Merchant Card Processor

Author: R Stell Date: May 08, 2006

It seems that everyone is selling merchant card systems these days. Merchant card sales people are not only compensated  for getting your initial business, but most are also paid commission (a small percentage) for every transaction you process. It's no wonder these sales people are so aggressive!

Locating a reputable processor and finding the best rates can seem overwhelming, but it's worth a little time to investigate your options. Here are some places to look first:

  • Trade associations. If you belong to a business association or any industry-specific trade association, check to see if they have negotiated rates with a merchant processor. For example, see NFIB's credit card processing solutions.
  • The bank where you do your business banking. This can be a good option, though not all banks will offer merchant services to brand new businesses. If you have been in business for less than a year, your bank may not be willing to help you until you are more established. Don't take it personally; it's standard practice.
  • Referrals from peers. If you know people in business in your general area, ask them who they use and if they are satisfied with the service.
  • Apply for a business license. When you get your business license, you will likely end up on mailing lists and will receive enough offers to make your head spin.

It's a good idea to get quotes and compare rates from several companies. Here are some questions you should ask:

  • What is the transaction fee and percentage for credit card purchases? Be sure to get specific rates for each kind of card including Visa, MasterCard, American Express and Discover. Each may have different rates.
  • What is the transaction fee and percentage for debit card purchases?
  • What is the monthly lease fee on the equipment?
  • What would it cost to purchase the equipment outright?
  • Are there additional monthly fees?
  • Can the system be programmed to automatically settle transactions each evening?
  • How often will deposits be made into my checking account?
  • How long is the contract term? Many will try to lock you in for three-five years. This is one point where you can negotiate a shorter term.
  • Why would I choose your company as my merchant services provider over the competition?
  • How long have you been in business?
  • What kind of customer service do you provide and what are your hours of operation?
  • Can I process cards manually in the event of a power outage?
  • You might also want to ask about gift cards and check processing if this is relative to your business. If you operate a Web site, also inquire about online processing.

Download this top ten list (PDF)Compare the answers from several providers side by side. The fees for these services can vary greatly, so it would be in your best interest to interview a variety of companies before you make a decision. I'm a big believer in gut instinct, so if you have any doubt about a company, move on to the next. There are many companies offering merchant services so you should have plenty of options.

Also ask for a sample contract. This gives you the opportunity to review the company's basic policies before you decide to sign on the dotted line. And keep in mind that everything is negotiable. If one company offers you better rates or terms than the next, you can use that as leverage to negotiate a better deal.

The bottom line is that you want to find the best offer – one that will improve your business. Don't be bullied by pushy sales people. Be prepared to negotiate and ask tough questions. Soon your sales could be soaring and your only regret could be that you didn't implement card processing sooner.

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