The majority of businesses today use at least one if not more payment processing services. The processing services deal with orders done through credit cards via the Internet. It is quite easier to set up a merchant account with the payment processing company because this removes the whole activity of visiting an ATM. The transaction is done directly through merchant services. In fact, third party services handle all payments including credit cards, checks, and wire transfers. For this purpose, they charge a small fee, but many processing services are affordable, and they will increase your customer’s base and respectively your revenues.
Before signing with a payment processing company, you must learn all details concerning the contract including the “Terms & Conditions.” Many people omit this important information, and then they wonder why they have to pay hefty fees.
Always read the payment holding time, processing day, signup fee, payment cycle, chargeback fee, and transaction fee. Ask the salesman when you don’t understand some of the terms and conditions. They must explain to you everything in details.
The payment cycle is the time taken when an order is awaiting payment. At the end of this period, the merchant will receive his payment. The time required can be weekly, monthly or bimonthly.
Payment Holding Time is the amount of time the payment is on hold. All companies put the money on hold for a specific amount of them. They can keep the cash even when the payment cycle is over. This amount of time can be added to the payment cycle, which often means that you must wait for months to receive your finances.
Payment Processing Day is when your payment cycle ends, and your money will be calculated.
Some companies charge new merchants with signup fee upon starting work together. This fee is nonrefundable in most cases. You will be charged with a small fee and a percentage of fixed value upon every transaction. The company will take the amount of the order back and charge you with a fee when a client wants a refund.
You must get to know every fee, before signing a contract with payment processing company. Compare with rivals to find the most affordable to use.
E-commerce Mistakes to avoid with payment processing services.
Back in the days when e-commerce was presented it was quite expensive and complicated to setup. Not to mention the fact that the customers weren’t interested in such service. It also quite difficult for Visa & MasterCard to accept payments this way.
However, now things are different, and various e-commerce solutions make selling online affordable. Nowadays, banks and credit card processor no longer recognize online shops as a high risk.
As a merchant, you must enter into a processing agreement with such company only when you know what you are getting into. Read further to learn about the deceptive practices employed by some processors in this industry. This, however, is not reflective of the sector as a whole due to the fact that many payment processors are ready to go the extra mile for their clients.
Read the T&C of the Merchant Agreement
When you decide to get a merchant account, you will have to wait for approval. The terms and conditions are a crucial document, and they will dictate your relationship with the processor.
These documents are quite complicated, and they involve terminological language, and you must examine it in depth. If anything comes up that concerns you, you must ask them before proceeding.
2. Interchange Downgrades & Rate Fluctuations. Also known as hidden fees.
Many merchants sign a deal only to realize that they don’t receive the pricing promised by the salesman. This can happen if the salesperson tries to be deceptive and you as a business owner have not reviewed the contract.
The price you pay depends on the type of card used because the “interchange” cost varies from one type to another. Nowadays, it is quite uncommon to find a processor who offers flat pricing even thought that they exist.
You must be careful of a shady salesperson who will try to lure you with an incredibly low rate, but they don’t tell you that the price can fluctuate.
Contact Term & Cancellation Fees
Every major payment processor has a contract term, which is formed upon signing a processing agreement. Opening a merchant account requires a lot of efforts, and it might cost a lot. The processor must make a check on your company’s history, which involves some substantial costs. That’s why processors sign a contract to keep businesses from running away after the background check. This is due to the fact that they must keep you for a while before they generate a positive revenue. Commonly, the term lasts between 3 and five years.
The cancellation fee is based on a percentage of the monthly fee, which is often the cost of one month multiplied by the number of months left. These charges are crucial due to the fact that not all businesses work out and they should be negotiated before entering the agreement.
Volume commitments are often included in these agreements, and they state that you must make a certain amount of money each month. If the merchant doesn’t meet this particular criteria, penalties can be applied. This is typical for US card, and it’s almost non-existent in most parts of Europe and Canada.
Competition works as an advantage
If you have received a “too good to be true” offer, you can discuss your offer with the second provider and use it as leverage to negotiate the best agreement possible. Of course, you must not show the real document, but you can share a verbally quoted price, and this might make you a way through the best agreement.