April 2012
How to find a good credit card merchant processor
27/04/12
Finding a credit card merchant processing company can be frustrating. For those of you that have gone through the process, you know that it can be an eye-opening experience that can be overwhelming. For many, what you heard from the salesperson, is not what you see on your statement. Unfortunately, the industry has attracted some employees of questionable character. This always seems to be the case when dealing with a commodity of such high demand. Car salesman and insurance companies come to mind.
First, it's important to understand that what you are seeking is above all else, a convenience. As a business, taking credit card payments allows you to get your money very quickly. The only faster option is cash. Unfortunately, no one has cash anymore, especially in this economic climate. Taking checks might appear to be faster but it isn't. The check you take has to be routed through your bank to the check writer's bank and then the funds are transferred back to your bank and deposited into your account. The entire process can take several weeks. In the meantime, you are usually given a good faith deposit against that check but the money is not yours yet. Don't think for a second that your bank will not take those funds away (with fees) if the check is bad. The difference with credit cards is that you are essentially getting approved funds on the spot, with the actual deposit to follow in a few business days. This is not a free service. There are obvious advantages to your business. If you don't think so, stick with cash or checks. The huge amount of customers that go somewhere else will forget about you in days if not sooner.
Keeping in mind that the banks are going to make some money on you, as we established in the previous paragraph, your goal should be focused around two things; good service and reasonable rates. I know there are those of you that think all you need is the best rate you can find and you don't care about paying for service. All it takes to change your mind is one customer with a chip on his shoulder to file a complaint with Visa, Mastercard or if you're really unlucky, American Express. The dispute can be bogus. It doesn't matter. You will still spend hours dealing with the claims paperwork and providing proof of delivery. In the case of American Express, the burden of proof usually lies on the merchant and you have to earn that money back. Have fun. Now imagine going through all of this with a company that outsources their support to Dirkdirkastan and the person on the other end, usually "John" or "Bill," is not someone you can get back on the phone once you hang up.
When asking about rates and fees there are several things to remember:
First, it's important to understand that what you are seeking is above all else, a convenience. As a business, taking credit card payments allows you to get your money very quickly. The only faster option is cash. Unfortunately, no one has cash anymore, especially in this economic climate. Taking checks might appear to be faster but it isn't. The check you take has to be routed through your bank to the check writer's bank and then the funds are transferred back to your bank and deposited into your account. The entire process can take several weeks. In the meantime, you are usually given a good faith deposit against that check but the money is not yours yet. Don't think for a second that your bank will not take those funds away (with fees) if the check is bad. The difference with credit cards is that you are essentially getting approved funds on the spot, with the actual deposit to follow in a few business days. This is not a free service. There are obvious advantages to your business. If you don't think so, stick with cash or checks. The huge amount of customers that go somewhere else will forget about you in days if not sooner.
Keeping in mind that the banks are going to make some money on you, as we established in the previous paragraph, your goal should be focused around two things; good service and reasonable rates. I know there are those of you that think all you need is the best rate you can find and you don't care about paying for service. All it takes to change your mind is one customer with a chip on his shoulder to file a complaint with Visa, Mastercard or if you're really unlucky, American Express. The dispute can be bogus. It doesn't matter. You will still spend hours dealing with the claims paperwork and providing proof of delivery. In the case of American Express, the burden of proof usually lies on the merchant and you have to earn that money back. Have fun. Now imagine going through all of this with a company that outsources their support to Dirkdirkastan and the person on the other end, usually "John" or "Bill," is not someone you can get back on the phone once you hang up.
When asking about rates and fees there are several things to remember:
- If it sounds too good to be true it probably is. Something drastically different than the other quotes you've received does not come without a catch. There are no free lunches. Throw out any quotes that are way better. Seriously.
- Rates are quoted in several ways. We'll save that for another article because it's VERY confusing and sales reps often spend days or weeks in training learning how to do it. There's the two tier method, three tier method and cost plus, which is Interchange plus basis points. You'll never be able to keep up. Salespeople know this. You can see a good rate for "Visa" on paper and think you have them. What you don't realize is there are many, many different types of Visa cards. Rewards, business or commercial, and debit just to name a few of the most common. If you have a statement go look at all the different line items under Visa. You are not taking every one of those at the same rate. The type of rate structure you need really depends on the type of business you have and how you operate.
- Any rate you are quoted requires you to follow the rules. If you don't you just earned yourself a higher, "non-qualified" rate. This can happen if you don't settle the transaction the same day, you don't complete address verification, you are not PCI compliant, or you have an old terminal, just to name a few.
- The best way I have found to get what you need is by referral. Ask your friends. Ask businesses you respect. Ask your salesperson how long they've been doing this. If they have been screwing people, word will travel. Ask them for some referrals and then ask THAT referral if they know of anyone else using Johnny or Sally's processing service. Someone that has been in the business for a while is much more likely to be on the level. I have been in the industry for over 10 years. I have seen many come and go. The ones that are still around are by and large good people. DO NOT just walk in to your bank and ask for a card processing account. You are considered a captive audience and they know they can squeeze you for a little more. It's not necessary to do business with the same credit card processor that you bank with. There are very few advantages, if any.
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