Finding the Best Credit Card Payment Solution – 4 Tips for Small Businesses
In this fast-moving business world with its high volume of transactions by plastic, you may want to consider a credit card payment solution for your own business. With the sheer range of options available, here are 5 pointers for you to consider.
MOST of the world’s credit and debit card network is managed by Visa and MasterCard, and your relationship with these brands will be via a card processor. This is why, when you open a business bank account, or ask about setting up a credit card payment solution for your customers, that your bank will recommend its own service. However, be aware that you can use any processor, regardless of where you bank.
But this is an arena where you’re spoilt for choice. There is a huge range of options nowadays, with numerous sales companies trading under different card payment names, under licence from these card processors. Most of these companies employ staff on commission-only, so it’s likely that you will be approached if your business is prominently located.
So here are five key factors to consider when you’re weight up the pros and cons of a credit card payment solution that suits your business.
1. ‘Hidden’ Fees
Transaction fees, the percentage charged for processing the payment, are upfront. You need to be more vigilant for ‘hidden’ fees, including: authorisation fees on transactions; annual or monthly account fees; and fees for payments by phone. And watch out =for minimum monthly processing fees. These can be an unpleasant sting in the tail if you anticipate a slow build for your card payment facility.
Ensure also that your credit card payment solution complies with the Payment Card Industry (PCI) Data Security Standards (DSS), which help businesses with secure processing of card payments. Any reputable processor will provide advice and refer you to a partner to arrange certified compliance. Non-compliance can result in high monthly fees from the PCI.
As a result, choosing a supplier who’ll provide help and support in becoming compliant could save you a lot of money.
2. Duration of Contract
The contracts for some card terminals have durations of up to five years. The difficulty is, if you’re a small business in a fluid development situation, and you decide the facility is not suitable, you’ll be tied in or else face a substantial penalty for early termination. What you need is a card processor that doesn’t charge for cancellation or early termination. Some processors have a 30-day notice requirement, and cancellation fees of no higher than about €235 or £200. One possible compromise is to look for companies working with multiple card processors, who can switch and reconfigure your card terminal to an alternative processor for a small fee that should be no more than €35 or £30.
3. Pricing – Blended or Interchange-Plus?
The fees on each card transaction are composed of three main components: the scheme fee (which is paid to the card brand, i.e., MasterCard or Visa); the Interchange (paid to the customer’s bank to cover the risk of the transaction); and the margin (paid to the merchant). Scheme fees are a tiny percentage, while the Interchange is determined by card type, name, region and transaction method. The margin is the only component that is negotiable, and will be depend on whether the processor offers Blended or Interchange-Plus pricing.
With Interchange-Plus, the margin paid to the processor is always the same, but the total amount paid by the merchant will vary, depending on the security of the transaction, and the type of card used.
For merchants, blended pricing, by and large, is simpler and better. Merchants always pay the same rate on a transaction, because costs are priced on a few levels — consumer credit and debit cards, commercial and business cards, etc — and one rate is charge for a variety of card types on each level. Additional fees are incurred for transactions classified as not secure, not qualified, or on cards issued, for instance, outside the European Economic Area.
This is probably the most complex decision for any business considering a credit card payment solution for their company. The decision depends on the profile of your market’s card activity. For example, if you anticipate a high level of less secure transactions, or transactions where the card holder is not present, Blended is the way to go, as there is less risk for the merchant.
As with all good business, a clearly defined margin will make your evaluation of the different options much easier.
4. Customer Support
Never make the mistake of assuming that you don’t need support. Payment transactions are a vital contact point for your business. So it’s important to ensure that your processor can offer support 24 hours a day, 7 days a week, in the event of a terminal malfunction, for example. Check whether online reporting is available too, in order to keep down fees arising from posting of monthly hard copy statements.
5. Seek Independent Advice
There are numerous well established, independent companies, including your local TaxAssist Accountants, which can advise you on choosing a credit card payment solution that will be based on analysis of your specific needs, anticipated card payment volumes, and the means by which you accept payment. In addition, trade associations can provide advice to members, while online searches can provide a reasonably solid indication or feedback about the processor or third party that you may have been in contact with.