Credit-card processing is big business, and the acceptance of credit cards is almost universal among businesses. However, when deciding on merchant accounts there are a number of questions a business owner needs to ask before deciding on the best option for them and their business.
One of the most important questions to ask is the type of pricing structure used by the merchant account. The three types are tiered, enhanced recover reduced and interchange plus. Tiered pricing usually results in large surcharges, while ERR has hidden charges made up of differences between the target interchange and the qualified rate and interchange plus passes charges straight to a business with a fixed markup.
The next question is will the account have a daily or monthly settlement? While to some this may not sound important, in reality it can provide a business with a much better cash flow. Merchant accounts can be set up as daily or monthly settlements. Daily settlements have fees removed prior to the business receiving the funds, while monthly settlements have gross deposits made all month with one lump sum of charges and fees taken at month’s end. Most experts agree monthly settlements are best because they allow a business to keep the money longer, leading to a better cash flow.
When inquiring about credit-card processing, ask if the equipment will be leased to the business or bought outright. The general rule is to not lease any credit card equipment unless there is no other alternative. Credit-card processing equipment can be bought brand new for less than $300, while leasing locks a business owner into an agreement of usually four years or more with equipment markups being as much as 1500 percent. If a credit card provider is determined to lease equipment to a business, it’s best to look elsewhere for another company.
Asking about fees including annual and cancellation fees can also help in making the right decision. Cancellation fees are only applicable if an owner has signed an accounts contract. Experts state there are no benefits to signing a contract, except for the person selling the contract. Annual fees are part of most merchant accounts, but can usually be waived if a business owner demands it as part of purchasing equipment from the company.
By taking the time to ask key questions, any business owner can find the right merchants account for themselves and their customers.